100 F. 627 | D. Mass. | 1900
McGuire, Wordell, and Dillon were partners. The partnership was dissolved by mutual consent. Dillon purchased the stock of the firm, and agreed in writing to assume all the firm debts, liabilities, and obligations, and to save McGuire and Wordell harmless from all loss, costs, and damages of any kind on account of said debts, liabilities, and obligations. None of the creditors of (he old firm released the retiring partners. Subsequently Dillon was adjudicated bankrupt on his own petition. Doth McGuire and Wordell were then severally indebted to bim for goods sold after ihe dissolution of the partnership. Wordell and McGuire severally paid to Clafiin & Co., a creditor of the partnership, sums.
In equity, the relation of McG-uire to Dillon concerning the debts of the old firm was that of surety. By his contract with McGuire, Dillon made himself primarily responsible for the payment of the firm debts. As regards Claflin, McGuire remained primarily liable, together with Dillon; but, as regards Dillon, McGuire was only a surety. That the relation between the two former partners is that of principal and surety is recognized in bankruptcy. Lindl. Partn. (6th Ed.) 453; Ex parte Young, 2 Rose, 40; Lowell, Bankr. §§ 173, 183; Fisher v. Tifft, 127 Mass. 313 (which must be regarded as greatly modifying Morton v. Richards, 13 Gray, 15); Crafts v. Mott, 4 N. Y. 603; Fernald v. Clark, 84 Me. 234, 24 Atl. 823. As to the bankrupt’s estate, therefore, McGuire stands as a surety who has paid the debt of his bankrupt principal subsequently to the adjudication. At the time of adjudication the claim of McGuire against Dillon was but a contingent liability. As was said in Re Ells (D. C.) 98 Fed. 967, 969, there is difficulty in holding that the present bankrupt act allows the proof of- contingent claims in general, but the contingent claims of sureties are especially provided for by section 57i, which reads as follows:
“Whenever a creditor whose claim against a bankrupt estate is secured by the individual undertaking of any person, fails to prove such claim, such person may do so in the creditor’s name, and if he discharge such undertaking in whole or in part he shall be subrogated to that extent to the rights of the creditor.” ,
This provision differs in form from the corresponding provisions of the bankrupt act of 1867, §§ 19, 27, the material parts of which read as follows: .
“Sec. 19. * * * Any person liable as bail, surety, guarantor, or otherwise for the bankrupt, who shall have paid the debt, or any part thereof, in discharge of the whole, shall be entitled to prove such debt or to stand in the place of the creditor if he shall have proved the same, although such payments shall have been made after the proceedings in bankruptcy were commenced. And any person so liable for the bankrupt, and -who has not paid the whole of said debt, but is still liable for the same or any part thereof, may, if the creditor shall fail or omit to prove such debt, prove the same either in the name of the creditor or otherwise, as may be provided by the rules, and subject to such regulations and limitations as may be established by such rules.”
“Sec. 27. * * * Provided, that any debt proved by any person liable, as bail, surety, guarantor, or otherwise, for the bankrupt, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable, and the share to which such debt would be entitled may be paid into court, or otherwise held for the benefit of the party entitled thereto, as the court, may direct.”
See, also, General Order 34, promulgated in 1874.
The provisions of the two acts, though quite differently worded, yet reach in most respects the same result. Under both acts the surety can get nothing by way of - dividend unless he pays the original debt in whole or in part. If he discharges the whole debt, then, under the first clause above quoted of section 19 of the act of 1867,
Here it may be that this opinion should conclude, but the question of McGuire’s right of set-off was argued before me at considerable length, and was, indeed, almost the only question discussed at the argument. Without deciding that question, it may not be improper- to suggest certain considerations bearing upon it, inasmuch as a determination of that question is apparently necessary to the decision of the real controversy between these parties. Although McGuire, if he seeks to prove against Dillon’s estate, must prove in the name of Claflin, yet it does not follow that the payment made Claflin gives McGuire no right of set-off against Ms debt due to Dillon. It is laid down in text-books on bankruptcy, without regard to the provisions of particular statutes, that a surety paying the debt of his principal after bankruptcy may set off the amount so paid against his debt to the bankrupt. See Lowell, Bankr. § 282; Collins v. Jones, 10 Barn. & C. 777; Ex parte Barrett, 13 Wkly. Rep. 559; Marks v. Barker, Fed. Gas. No. 9,096. The language of the dif