Haxtun v. Corse

4 Edw. Ch. 585 | New York Court of Chancery | 1844

The Vice-Chancellor :

The demurrer is well taken : 1. Because, by operation of law, on the defendant being decreed a bankrupt, all his rights of property which the original bill and this supplemental bill were designed to reach, were divested and eo instanti vested in the assignee: see § 3 of the Bankrupt Act. The bill does not allege that the defendant has become entitled to any property subsequent to the decree declaring him a bankrupt.

2. Because the complainants elected to go in under the bankrupt proceedings and prove their debts; and, although they afterwards succeeded in defeating the defendant’s application for a discharge, they are, nevertheless, precluded by the provisions of the § 5 from maintaining any suit at law or in equity for their debt and their judgments are to be deemed surrendered thereby : Prentiss, J. in 5 Law Reporter, 165 ; and Ware, J. Ib. 227, 228.

3. This § 5 does not involve an absurdity. Creditors may or may not come in and prove their debts. But, if they come in and prove, they become parties to the proceedings ; and although they may defeat or prevent the bankrupt’s discharge, they can only obtain or claim payment of their debts under and by virtue of the proceedings in bankruptcy. In case they do not prove their debts, they can still come forward as “ other persons in interest” and contest the right of the bankrupt to a discharge or, in other words, show cause why his discharge and certificate should not be granted : § 4. If his discharge be refused or denied, the creditors who do not choose to prove and come in under the proceedings for a dividend may pursue their legal remedies against the debtor and compel payment when they can out of his future earnings or acquisition of property.

4. The complainants in this cause are not at liberty to allege that they proved their debts only for the purpose of opposing the discharge and not for the purpose of claiming or receiving dividends. The law gives them no such privilege. It does not allow them to prove their debts conditionally or under protest or qualification or with any reservation : Story, J. 5 Law Reporter, 447, 452.

For these reasons, I am of opinion that the complainants are precluded, by the decree in bankruptcy, which has vested all right of property in question in the assignee from pursuing the particular property in controversy in this court or elsewhere for their own benefit; and have, moreover, precluded themselves from having any remedy whatever against their bankrupt debtor.

Demurrer allowed, with costs.