Court Opinion

ID: 6408225
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:37.139727+00
Date Added: 2024-06-11T15:51:17.017206
License: Public Domain

Dewey, J.
The first objection to the allowance of the claims of the appellees is, that the same were barred by the statute of limitations. The position assumed by the assignees is, that though six years had not elapsed since the cause of action accrued, computing the time with reference to the publication of the proceedings in insolvency and the appointment of the messenger to take possession of the goods and effects of the insolvent ; yet as it had elapsed before the time of the meeting of the creditors, at which the demands were presented, it is a good statute bar to these demands. It seems necessary only to state the proposition, to show that it cannot be sustained. By force and effect of the appointment of a messenger, and the publication thereof conformably to the statute, the property of the insolvent debtor is sequestered for the benefit of all the then existing creditors. After such publication, a suit by a creditor would be of no avail, as the property is all transferred to an assignee, and the body of the debtor is to be discharged from arrest on execution. The debts presented for allowance against the insol vent are to be considered with reference to their validity at the date of the publication by the messenger. If they are found to be barred by the statute of limitations at that period, it would of course be competent for the assignees to object to their allowance, but not to compute the six years with reference to the time of the meeting of the creditors. A different rule would do manifest injustice. Take the case of a creditor, who has a debt which will be barred in thirty days. He knows that by law he has until the last of those thirty days to institute his suit, and intends to do so ; but in this state of things, the debtor, upon his voluntary application, goes into insolvency under St. 1838, c. 163 ; the incipient proceedings are all regularly taken ; but no meeting of the creditors is held for proving their debts, unti thirty days have elapsed. Is the debt of this creditor to be re *352jected, as barred by the statute of limitations ? Clearly not But the principle contended for by the assignees would lead to that result, in the case supposed.
The true rule is doubtless that already suggested, namely, to compute the six years with reference to the time of publication of the notice of proceedings in insolvency. A similar principle is adopted in cases in bankruptcy. J5» parte jRoss, 2 Glyn & Jameson, 46, 330. The motion there was to reject certain demands presented for allowance, by reason of the statute bar of six years’ limitation. The Vice Chancellor said, that “ after a commission' issued, the statute of limitations does not run against a creditor; that the commission was a trust for the benefit of all the creditors, and it was a known principle that the statute did not run against a trust.” On appeal to the Lord Chancellor, he asserted the same doctrine. The case of Dewdney, ex parte, 15 Ves. 479, was cited at the hearing before the Vice Chancellor, but was not considered as an authority for the contrary doctrine. That case, as I understand it, was one where the demand had been barred by the statute of limitations, before the institution of any proceedings.
The second objection taken, and one applicable to all the claims, is, that they ought to be rejected, because the debtor had, at a date prior to the presentation of these claims to the master in chancery for allowance, been declared a bankrupt under the bankrupt law of the United States, and had in fact received his certificate of discharge. The petition to be declared a bankrupt, the decree thereon, and the discharge, were all long subsequent tti the institution of the proceedings in insolvency,, under St 1838, c. 163, but prior to the time of filing the claims which are now the subject of controversy. The assignees contend, that the discharge under the bankrupt law operated, to all purposes, as a full discharge of the debtor from all his debts, and particularly from debts like the present; they having accrued prior to the St of 1838, c. 163.
It is true that the discharge in bankruptcy releases the debtor from all further personal liability for the payment of his debts But it leaves unimpaired all independent securities or other means *353held by the creditor, from which the debt may be realized. Prior to these proceedings in bankruptcy, the debtor, by his voluntary application as an insolvent, had caused all his property to be sequestered for the payment of his debts pro rata; and these creditors, by virtue of those proceedings, had acquired a right to claim their proportional dividend to be paid from the assets of the debtor in the hands of his assignees, on filing and proving their debts according to the provisions of the statute. The distribution of the estate of the insolvent is to be made among all who are creditors at the time of the publication of the insolvency by the messenger. The right to such distribution attaches, in reference to the state of the demand and the relation of debtor and creditor at that period. The proceedings under the insolvent law having been instituted before the bankrupt act was enacted, they could not be superseded by the application, under the bankrupt law, for the insolvent’s discharge as a bankrupt. All the rights of the creditors as to the assets of the insolvent, which had accrued to them by virtue of the insolvent law, were continued to them notwithstanding the discharge of the debtor under the bank rupt act.
The third objection taken to the allowance of these demands by the master in chancery is, that it was not competent to present and prove claims, as creditors of an insolvent debtor, at a fifth meeting of the creditors. The first, second and third meetings of the creditors are undoubtedly more specially designed for the purpose of affording an opportunity to prove debts against the insolvent; St. 1838, c. 163, §§ 2, 7, 12; but provision is made in this statute for a fourth, and subsequent meetings, whenever the state of the assets requires and authorizes it; and it is ex pressly provided by § 13, that “ at any regular meeting of the creditors, those who have not before proved their debts shall be allowed to prove the same; ” confining the distribution among such creditors to the funds remaining unappropriated in the hands of the assignees.
All the exceptions taken to the allowance by the master in chancery are overruled, and his report, allowing the demands of the appellees, is confirmed.