4 A.2d 143 | Pa. | 1939
There are three appeals from the decree distributing the property left by Samuel Emlen who died April 20, 1936, insolvent. The appeal at No. 356 is by the Germantown Trust Company in its own right; at No. 424 by the same appellant, as trustee under the will of Warren R. Shriver; and at No. 368, by the Land Title Bank and Trust Company.
The court recognized that it would be inequitable to allow a creditor, holding property of an insolvent as security, to participate in the distribution of the insolvent's property without surrendering the collateral for the benefit of all. But the court went further. By requiring the claimant to surrender the collateral or allow credit of $15,000 the court, in effect, required the secured creditor to contribute to the insolvent's property for distribution among his creditors the sum of $7,500 which did not belong to the insolvent and which his creditors could not have taken in execution; in short, the secured creditor was required to make a gift of one-half of his security, in addition to surrendering his debtor's pledge, or crediting its value, as a condition of proving his claim. It is clear that if equity can so require the property of another to be contributed to the insolvent's creditors, subrogation will also be required and create a new claim against the fund in favor of the owner of the collateral. See Bristol CountySavings Bank v. Woodward,
The learned court below relied on its earlier decision,Alexander's Estate, 31 Pa. D. C. 17, in which a distinction between the provisions of the National Bankruptcy and *243 the State Insolvency laws was taken. We think that on the point under consideration the two statutes mean the same thing, and, considering the nature and history of the subject, were necessarily intended to mean the same thing.
In the United Security Trust Company Case,
The National Bankruptcy Act, section 1(23), 11 USCA section 1(23), provides: " 'Secured creditor' shall include a creditor who has security for his debt upon the property of the bankrupt of a nature to be assignable under this title, or who owns such a debt for which some indorser, surety, or other persons secondarily liable for the bankrupt has such security upon the bankrupt's assets." Section 57(e), 11 USCA section 93(e), provides: "Claims of secured creditors . . . shall be allowed for such sums only as to the courts seem to be owing over and above the value of their securities . . ."
The Insolvency Act of June 4, 1901, P. L. 404, section 28,
We think the provision in the state statute recognizing the creditor's "right to surrender his security, and take a dividend on his whole debt" provides, in effect, the same thing as the federal statute; each act creates a class of "secured creditors" composed of those holding insolvent's property as security. The use of the word "surrender" instead of the word "assign" or some similar word, shows that the legislature intended to deal with a title derived from the debtor (which could be the subject of surrender to his representative) and not with the property of some surety, which would require assignment to pass title to the insolvent's representative, and forthwith bring in subrogation.
In Merrill v. National Bank of Jacksonville,
Having always been an element in the rule, its legislative recognition, as stated, brought it into the body of our law governing distribution of property of insolvents generally. The learned court was therefore in error in requiring that claimant credit more than $7,500, the admitted value of the insolvent's interest in the security.
For the same reasons the claim on the bond of $70,000, reduced by payments to $48,900, should be allowed.
The decree is reversed and the record remitted with instructions to enter a decree not inconsistent with this opinion, costs to be paid out of the fund for distribution.
"On May 5, 1934, in pursuance of a writ of sci. fa. sur mortgage, [claimant] . . . caused judgment to be entered against the decedent in the amount of $70,245 . . . [and] caused execution to be issued on this judgment, in pursuance of which the mortgaged premises were sold by the sheriff . . . on June 4, 1934, for $75. Title was taken from the sheriff by H. Leroy Webb in *247 behalf of [claimant]. . . . Title to part of the premises formerly mortgaged is now held by Max Hexter, by Deed from H. Leroy Webb of April 3, 1936, . . . and the remainder is held by H. Leroy Webb. The amount received from Max Hexter was $14,362.60.
"The full claim of Land Title Bank and Trust Company on this bond with interest to the date of the decedent's death is $78,333.50. The value of the decedent's undivided interest in Awbury was at the decedent's death, and still is $3,354.59. The value of the mortgaged property at Broad and Cayuga Streets was at the decedent's death, and still is $16,000."
Before the insolvent's death, claimant had received on account of the debt, as stipulated, the sum of $33,717.19, for which the learned court below required appellant to allow credit.
The debtor's interest in the property originally pledged, had been acquired by the claimant in its foreclosure proceeding; the security had been foreclosed pursuant to their contract. It was done in the debtor's lifetime, in fact, nearly two years before his death. During that period claimant was the absolute owner. When the claim was presented in the court below, claimant held no security, and therefore nothing that could have been surrendered.6 The debtor could not, after the foreclosure, have required his creditor to satisfy the judgment or to allow credit on the ground that it had bought the property at a nominal bid at the execution sale. On that point a number of cases from Lomison v. Faust,
It is necessary that some time be agreed upon when creditors' rights shall be regarded as fixed for the purposes of title and distribution. The general rule is that they are fixed as of the date of appointment of receivers, or, as of the date of the assignment for the benefit of creditors (United Security TrustCompany Case,
The decree must therefore be reversed, and the record remitted for the purpose of allowing the claim, costs to be paid out of the fund for distribution.
To those facts, we should add that "the mortgaged premises were conveyed to William J. Roney by the decedent and Marion H. Emlen, his wife, and therefore not owned by them at the time of the institution and completion of the foreclosure proceedings."
The learned court below allowed the claim for the difference between the full amount and the agreed upon value of the mortgaged land.
For the reasons stated in the appeal of the Land Title Bank Trust Company, No. 368, the decree must be reversed and the record remitted for purposes of appropriate decree, costs to be paid out of the fund for distribution.
"The ground and the limits of the rule in bankruptcy were clearly stated by Lord Chancellor Lyndhurst in Plummer's case, above cited, in which a partnership creditor was allowed to prove a partnership debt against the separate estate of each partner, without surrendering or realizing security held by him from the partnership. The Lord Chancellor said: 'Now what are the principles applicable to cases of this kind? If a creditor of a bankrupt holds a security on part of the bankrupt's estate, he is not entitled to prove his debt under the commission, without giving up or realizing his security. For the principle of the bankrupt laws is, that all creditors are to be put on an equal footing, and therefore, if a creditor chooses to prove under the commission, he must sell or surrender whatever property he holds belonging to the bankrupt; but if he has a security on the estate of a third person, that principle does not apply; he is in that case entitled to prove for the whole amount of his debt, and also to realize the security, provided he does not altogether receive more than twenty shillings in the pound. That is the ground on which the principle is established; it is unnecessary to cite authorities for it, as it is too clearly settled to be disputed. . . .' "
See also Bank of Searcy v. Merchants' Grocer Co.,
The Century Dictionary defines Surrender, inter alia, "To give back; . . . restore";
The New English Dictionary, among many other definitions, gives the following, with illustrations: "SURRENDER — 1. Law. a. The giving up of an estate to the person who has it in reversion or remainder, so as to merge it in the larger estate;e. g., the giving up of a lease before its expiration; spec. the yielding up of a tenancy in a copyhold estate to the lord of the manor for a specified purpose; transf. a deed by which such surrender is made. . . .
"d. The giving up by a bankrupt of his property to his creditors or their assignees; also, his due appearance in the bankruptcy court for examination as formerly required by the bankruptcy acts."