Court Opinion

ID: 9298976
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:05:35.016879+00
Date Added: 2024-06-11T17:13:36.421972
License: Public Domain

WASHINGTON, Circuit Justice.
The first question to be decided on principle, as the bankrupt law is' silent upon this subject, neither permitting nor forbidding the assignment of notes due from the bankrupt, after a commission has issued against him. It would be unreasonable that such an assignee should not be allowed to prove under the commission, since the debt would most certainly be barred by the certificate, being a debt due at the time of the bankruptcy, and such a one as might have been proved under the commission. It can produce injury to no person, as it can make no difference to the assignees, whether the debt be proved as due to A. or to his assignees; and as they ought not to be injured, so they ought not to derive a benefit from this change, not of the debt, but of the creditor. It will be perceived that the very principle upon which this first point is decided, decides the second. It struck me, at first, that if the plaintiff’s counsel were right as to the first question, they must be wrong upon the second. If by the assignment the assignee would take the debt discharged of offsets, or of any equity attached to it in the hands of the assignor, it would furnish a decisive objection to the right of the assignee to prove under the commission. It is true, that in general, a negotiable instrument passes to a fair bona fide assignee, discharged of any equity attached to it, of which the assignee had not notice; for having paid value for it, his equity is equal to that of the debtor, and he has the law in his favour. If payments have been made, or mutual demands exist between the parties, and they do not accompany the instrument, a fair purchaser ought not to be injured by the omission of the parties to endorse such offsets, and thus to give notice of their existence. The assignment therefore passes a right to the entire sum appearing due on the face of the instrument. But the bankrupt law declares, that where mutual debts have existed between the bankrupt and any other person, at any time before he became a bankrupt, no more .shall be paid than the balance due after an adjustment of the accounts. By force then of this law, a creditor of the bankrupt can assign, and the as-*876«ignee can purchase, no more than the bal-unce due from the bankrupt after all credits are admitted. The rule therefore may be laid down to meet the present case, that where a creditor of the bankrupt assigns a negotiable paper, or one payable “without defalcation,” under the laws of the state, after a commission has issued against the debtor; and the assignee may come in under the commission, but he must allow all just offsets existing at the time the debtor became bankrupt, and which must have'been admitted if he assignment had not been made.
The jury found according to the charge. Referees were appointed to settle the accounts.