15 F. Cas. 1297 | D.N.J. | 1874
A petition in bankruptcy in this case was filed by creditors against the bankrupt, May 10th, 1873. After adjudication, but before the appointment of the assignee, to wit, May 22d, 1873, upon representation made to the court, on behalf of the creditors, that the personal property of the bankrupt was of a perishable nature, and deteriorating in value, an order was entered directing the marshal in charge to make sale of the same, and to pay over the proceeds thereof to the assignee, when he should be appointed. The assignee has received from the marshal, and holds for distribution, the sum of two thousand one hundred and sixty-six dollars and seventy-four cents, which is claimed by T. Edgar Hunt, the landlord of the bankrupt, for rent due to him from the bankrupt, at the date of adjudication, for the premises on which was the personal property, at the time of the sale. By the contract between the parties the amount of rent for one year to May 1st, 1873, due to the claimant, was two thousand seven hundred dollars and seventy-seven cents, for the payment of which he claims a lien and preference upon the fund in the hands of the assignee. The bankrupt at the date of the adjudication occupied the premises as a manufacturer, and was engaged in the manufacturing business. He had in his employ a number of operatives, to whom he was indebted in various sums for labor. It is also claimed that these operatives are entitled to a preference in the payment of their demands against the estate. First, by virtue of the first section of the act, entitled, “An act to secure to operatives in manufactories, and other employees, theirwages,” approved Marchl3th, 1850; and, second, by the provisions of the twenty-eighth section of the bankrupt act, subject, however, to the limitations in both of these acts.
It also appears in the evidence that the claimant has had conversations, not only with the marshal at the time of the sale, but with the assignee at various times since his appointment, in reference to a lien which he had, or ought to have upon the goods, for the payment of this rent; that these conversations, however, were rather suggestions on his part that he should have a lien, than a claim that he had such right. He testified, that except these general talks on the subject, he never claimed of the assigneeany preference as landlord, until after he employed Mr. Shreve, as counsel, in October, 1873. It further appears that there is nothing in the case which in the slightest degree impeaches the good faith of Dr. Hunt. He seems to have acted throughout, in ignorance of his privilege, as landlord, and this ignorance arose either from his not making the proper inquiries in regard to his rights, or from being misled by those upon whom he relied for information. Under the circumstances, it becomes an interesting question, whether, in deference to the claims of the unsecured creditors, the court must hold these acts, or omissions, of the claimant to be a waiver of his security, or whether he should now be permitted to withdraw or amend his proof, and take the fund in satisfaction of his claim, as the landlord of the-bankrupt.
The general rule of law unquestionably Is,, that a proof of debt by a secured creditor, without reference to the security, and without apprising the court of its existence, is a waiver and relinquishment of the security. Stewart v. Isidor, 5 Abb. Prac. (U. S.) 68; In re Bloss [Case No. 1,562); Wallace v. Conrad, 3 N. B. R. 10; In re Stansell [Case No. 13,293). This result is supposed to spring necessarily from the nature of the transaction, and because the creditor, by such proof,, perpetrates a fraud upon the rights of the general creditors. The object of the proof is-to enable him to have a voice in the selection-of an assignee, and to participate in the dividends of the estate. A secured creditor cannot vote, nor can he share in the dividends, until the value of his security or lien has been ascertained, and he has proved for any excess of his demand above its value. By proving for his whole debt, and concealing his security, he puts himself in a position to have-equal dividends with the other creditors, although he may also receive payments, in whole or in part, from the property on which he has his lien. But it is a familiar principle that, when the reason of a rule ceases, the rule itself does not apply. Was any such fraud intended, or could it result in the present case? The claimant does not insist upon his-lien, and at the same time asks that his proof may stand. As soon as he is advised that a mistake has been committed in putting in his proof, he asks to withdraw or amend it, in accordance with the requirements of the act. Why should he not be allowed to do so? Who has lost any rights by his mistake, or been misled by it? His lien existed when the petition in bankruptcy was filed, and the-petitioning creditor knew, or ought to have known, that the interests of the general creditor in the estate were in subordination to his claim for rent, as the landlord of the premises. The only privilege resulting to the claimant, by filing his proof without referring to the-lien, was, that he took part in the election of an assignee. My first impression was, that this ought to preclude him from being allowed to amend his proof. But there is no evidence that he gained any advantage thereby, or that the other creditors have been in any wise prejudiced in consequence of it, or that the claimant was influenced by any fraudulent intent in thus proceeding. In the-absence of proof, it is the duty of the court to presume that none existed.
The general rule above stated that a proof of claim, without naming the security, is an implied waiver or relinquishment of the security, has long been recognized in the ad
Without multiplying authorities, I am of the opinion, that there is no proof of fraud on the part of the claimant, that should constrain the court to refuse to allow him to amend his proof in conformity with his rights in the estate at the time of the adjudication, and that his mistake in the premises ought not to be held to discharge his lien. But the case does not end here. The net proceeds of the sale of the goods and chattels amounted to two thousand one hundred and sixty-six dollars and seventy-four cents. The rent due to the claimant is ascertained to be two thousand seven hundred dollars and seventy-eight cents, which will more than absorb the fund in the hands of the assignee. It appears that there is also due to the laborers and operatives, for work and labor in the manufacturing establishment of the bankrupt, about eighteen hundred dollars; and the counsel of the as-signee insists that by the twenty-eighth section of the bankrupt act they are entitled to a preference over the landlord. But I think he has misapprehended the provisions and intent of the section. It creates preferences in the distribution of the bankrupt’s assets, and states the order of payment to be observed by the assignee. It does not refer to any part of the estate derived, as in the present case, from the sale of property, on which creditors may have a specific lien. If the assignee has any distribution to make to the general unsecured creditors, .he must take notice that this section enumerates five classes of creditors, who are to receive their claims in full, in the order stated, before any dividend is declared; the fourth class being to operatives, clerks, or house-servants, who are to be paid an amount not exceeding fifty dollars, for labor performed within six months next preceding the first publication of the notice of the proceedings in bankruptcy.
It is further insisted that the operatives and employees are entitled to be paid out of this fund, to the extent of one month’s wages, in preference to the landlord, by the provisions of the first section of “the act to secure to operatives in manufactories, and other employees, their wages,” passed by the legislature of New Jersey, and approved March' 13th, 1856. The first section provides, that no goods or personal property, belonging to any manufacturer, or other person or corporation, shall be liable to be removed by virtue of any execution, attachment, or other process, unless the party at whose suit the process was issued, shall first cause to be paid to the operatives, mechanics, and other employees, of the manufacturer, person, or corporation, the wages then owing
In the absence of repealing words, and where an apparent conflict arises between the new law and the old, it is the duty of the court, if possible, to give such a construction to their provisions, that both may stand. This can only be done in the present case by holding that the legislature intended to give to the operatives and the landlord a preference over all other creditors, and at the same time to put them on an equal footing as to each other; and where the goods and chattels are not of sufficient value to pay both of these classes in full, to allow them to share the proceeds pro rata.
It is therefore ordered that a reference be made to the register to ascertain the amounts due to the operatives, not exceeding in any case one month’s wages, and not allowing interest after the date of adjudication, and that the assignee distribute pro rata the fund in hand to the claimant and to them, according to the proof of their respective demands. As no diligence has been manifested, either by the landlord or the workmen, to assert their lien upon the goods and chattels in question, and as the bankruptcy proceedings have been carried on by the as-signee, in ignorance of their intention to claim a preference, it may be proper to first deduct from the fund, at least a portion of the costs and expenses of the proceedings. But no order can be made in the matter until the court is better advised respecting the condition and assets of the bankrupt estate.