55 Minn. 509 | Minn. | 1893
In and prior to December, 1892, Ludwig Kahn was a merchant, residing and doing business at Duluth, in this state. Alfred Kahn, his brother, was a merchant residing and doing business at Eau Claire, Wis. Ludwig was indebted to Alfred in the sum of $0,750, on three promissory notes, — one for $3,000; one for $2,500; and one for $1,250 — all past due on the 5th of December; and on that date, at Duluth, Alfred demanded payment from Ludwig, and was informed by him that he could not pay them, or any of them, and thereupon, as found by the court below, (and the evidence sustains the finding,) it was agreed between them that Lud
The appellant contends that, inasmuch as the title to the property did not vest in Alfred until delivery by the carrier to him at Eau Claire, the transfer was a Wisconsin transaction, and, as our statute can have no extraterritorial force, it must be j udged by the laws of that state. If this were an action against Alfred to recover the property or its value, the question would be presented whether it was legal and valid in the place where the transaction was had. But in that case, as the agreement for the preference was made in
The appellant also contends that the payment, by transfer of the goods, on the indebtedness evidenced by the several notes, was general, and the creditor could apply it upon any of the notes he chose, and, having applied it to extinguish the $2,500 and $1,250 notes, and only $106.68 on the $3,000- note, the last note is tainted with the illegality only to the extent of the $106.68. As between debtor and creditor, when a payment is made upon account of several debts from the former to the latter, if the former do not apply the payment to any particular debts, the latter may ordinarily do so. But he cannot, by doing so, affect the rights of third persons. If we are to adopt the theory that a preferential payment taints the debt on which it is made, then, as this payment was made generally on the whole debt of $6,750, it tainted that whole debt, and no subsequent agreement or act of the parties, or either of them, could affect the rights of other creditors, growing out of it. We do not, however, wish to decide that the debt itself is tainted. If a creditor who has accepted a preference may be excluded from proving a claim, on the ground of such preference, it is not because the claim is tainted or affected, but because the creditor has diminished the assets of the insolvent in a way contrary to the intent and spirit of the insolvent law. That being so, he may be excluded, whether the preferential payment was made on the claim presented for al
If Alfred could not prove the debt, and claim a distributive share of the insolvent funds, he could not, by transferring the note after maturity, place the transferee in any better position than himself.
And this brings us to the main question in the case: Could the assignee and the court having charge of the insolvency proceeding refuse to allow Alfred to prove the claim, and share in the distribution, except on condition that he restore to the assets the property he withdrew from them, or its value, so that in the distribution there should be equality among the creditors? The appellant contends that, in case of a preferential payment, the act gives the assignee no other remedy than an action against the preferred creditor to recover the property or its value, or to set off or counterclaim the value against the debt presented for allowance. To set off or counterclaim only the amount of money paid, or only the value of the property transferred in payment, would, in effect, ratify the preferential payment, and give the creditor the full benefit thereof. To remit the assignee to an action would give a creditor out of this state, and who .has taken the property out of this state, an advantage over preferred creditors living in this state, and within the jurisdiction of its courts. The act (Laws 1881, ch. 148) does not in express terms, as most bankrupt laws have done, authorize the disallowance of a claim, except on condition that the creditor restore to the assets what he has received as a preferred payment. The only express authority given in respect to such payments is in sec-, tion 4: “And the assignee may, by action or other proper proceedings, have all such conveyances, payments and preferences annulled and adjudged void, and recover the property so conveyed, or tbe value thereof, and recover the payment so made, and convert all proceeds into money, as provided in this act.” An action may be inadequate, or the assignee may be practically unable to bring it, as where the property and the creditor cannot be reached by the process of our courts. What, then, would be other proper proceedings to bring the property or its value into the hands of the as-signee? If the creditor and the property cannot be reached by process to commence an action, or an action for any reason might
The court, in the insolvency proceeding, cannot operate on the person of the creditor; that is, it cannot render an affirmative personal judgment against him. It can operate only on the ■claim he presents for allowance, and whatever direction it may make with reference to the creditor restoring withdrawn assets must expend itself upon the claim. There is no way such a direction may be made to operate on the claim, except by way of condition precedent to its allowance, — just the condition the court below imposed.
Judgment affirmed.