Streeter v. Sumner

| Superior Court of New Hampshire | Jul 15, 1855

Bell, J.

The principal question, presented by this case, relates to the effect of the assignment of the plaintiff’s property under the bankrupt act, upon the contract declared on in this case. It is contended by the defendants that all right and claim under this agreement was divested from the plaintiff, and vested in the assignees, and, consequently, that they alone can maintain the action. If that is a correct view of the law, as it is expressly found that the assignee does not assent to nor encourage this suit, the plaintiff has no right of action.

By section 3 of the bankrupt law, it was enacted “ that all the property and rights of property, of every name and nature, and whether veal, personal or mixt of every bankrupt, (except as is hereinafter provided,) who shall, by a decree of the proper court, be declared to be a bankrupt within this act, shall, by mere operation of law, ipso facto, from the time of such decree, be deemed to be divested out of such bankrupt, without any other act, assignment or other conveyance whatsoever; and the same shall be vested by.force of the same decree, in such assignee as may be from time to time •appointed by the proper courts for this purpose. * * * And the assignees so appointed, shall be vested with albthe rights, titles, powers and authorities to sell, manage and dispose of the same, and to sue for and defend the same, subject to the orders and directions of said court, as fully, to- all-, intents and purposes, as the same were vested in, and might be exercised, by such bankrupt before or at the time of his bankruptcy, declared as aforesaid.”

This statute provision is very broad, embracing all property and rights of property» If the contract, which is the subject of this suit, is property, or a right of property, within the meaning of this act, it has been by law divested from the plaintiff and vested in the assignee, and the plaintiif cannot maintain this action upon it.

As the general rule, contracts to be performed to a party, and his rights of action, are deemed property ; and such contracts and rights of action pass, by the operation of the bankrupt law, to the assignee, for the benefit of the creditors. But to this general rule, we conceive, there must be many exceptions ; some from the nature of the contracts and some from the nature of the interests involved. "While others cannot be deemed property, because they subject a party to what may more properly be regarded as a burden than a privilege, where the assignee, from the conditions of the contract, can derive no benefit for the creditors, and may subject the estate to loss, if he assumes the contract.

Of the first class may be instanced the ease of a contract of a lady to marry the bankrupt. Such a contract may be very desirable, and, in one sense, very valuable to the bankrupt, but is in its nature personal, and incapable of assignment. It cannot be sold like a note or bond, at auction or at private sale, and a purchaser thereby be enabled to enforce its performance for his own benefit. The creditors cannot derive any benefit to themselves from the legal transfer of such a contract, to their representative, the assignee. And, therefore, it seems to us not property, nor a right of property in the sense of the law. Moore v. Jones, 23 Vt. (8 Wash.) Rep. 744.

The case of apprentices seems to be of the same class. The equivalent for the services of the apprentice is the instruction of a skilful workman, a personal service of the bankrupt master, which a purchaser often could not render at all, and where the attempt to transfer the indenture, without the assent of the apprentice, would merely annul the contract.

Of the same kind would probably be a contract of the bankrupt to render his personal services, where the employer has stipulated in advance for his compensation. Such a contract cannot be transferred by the party himself, much less by his assignee, because the consideration for the pay is exclusively personal, and, in many instances at least, could not be performed by another, and the employer may accept the services of another or not, at his election.

Pensions granted by the government for military services, would probably not be divested from the pensioner, as they are made by statute inalienable. The law in England seems otherwise.

Of the second class would be the case of epntracts respecting trusts, where the nature of the interests of the bankrupt and others, in the property affected, would prevent any advantage accruing to the creditors from divesting the property from the bankrupt, or vesting it in the assignee. In such case, it would be inconsistent with any useful purpose, or with any purpose contemplated by the bankrupt act, to hold that the property passed to the assignee. Eden on Bankruptcy 244; Winch v. Keeley, 1 D. & E. 619; Carpenter v. Marnell, 3 B. & P. 40; Ex parte Chion, 3 P. W. 187; Shaftsbury v. Russell, 1 B. & C. 666; Farr v. Newman, 4 D. & E. 629; Howard v. Jemmet, 3 Burr. 1369.

In Scott v. Suman, "Willes 402, Willes, C. J., says: “ Assignees, under a commission of bankruptcy, are not to be considered as general assignees of all the real and personal estate, as heirs and executors are of the estate of their ancestors and testators, but that nothing vests in these assignees, even at law, but such real and personal estate of the bankrupt in which he had the equitable as well as legal interest, and which is to be applied to the payment of the bankrupt’s debts.” Gladstone v. Hadwen, 1 M. & S. 517; Eden Bankruptcy 244; see Arden v. Watkins, 3 East 317.

Of the remaining class spoken of, that which cannot be regarded as property, because it is, from the character of the stipulations and the relations of the values concerned, a burden rather than a benefit, may be named the case of leases upon unfavorable terms. As where, for example, the rent equals or exceeds the real as well as the market value of the property. It may be a desirable lease for the bankrupt, while in business, because of his own wants, or those of his family, but it cannot be sold or assigned, so as to contribute any thing to the payment of the debts of the bankrupt. So a lease may be on such terms as to prove a burden and loss to the creditors, if the assignee is compelled to take it. Such a lease cannot be considered as property for this purpose. In England, the assignee is allowed a reasonable time to ascertain the value, and is allowed an election in behalf of the creditors, to accept the assignment or to refuse it. An actual transfer is required by the law there, which cannot be effectual without an acceptance, real or supposed, by the assignee. Copeland v. Stephens, 1 B. & A. 593; Thomas v. Pemberton, 7 Taun. 206; Hanson v. Stephenson, I B. & A. 303; Hope v. Booth, 1 B. & A. 505, and other cases, 1 Har. Dig. 919; Eden Bankruptcy 237.

Upon the same principle, the assignee must be understood to have an election as to contracts of every kind, to repudiate and reject the assignment, if the contracts, by their continuance, seem likely to subject the available estate to future losses.

By the late bankrupt law, no assignment, in fact, is required ; every thing which can properly be deemed property, passed to the assignee by force of the law; but, we think, this circumstance makes no difference. The English assignee rejects agreements likely to prove onerous in future, because they are not property, within the intention of the law, but merely incumbrances upon th© available assets of the bankrupt. Here the contract should be held not to pass to the assignee, not to be divested from the bankrupt, because it is not property available for the payment of the debts. Scott v. Surman, before cited.

In some cases, the burdensome character of contracts, as leases, for example, may be at once obvious. In others, it may be a matter of doubt and uncertainty, requiring careful inquiry and consideration ; the statute operates upon all property, ipso facto, upon the decree of bankruptcy, and at once, but for the assignee to determine the question whether the contract is property or only a charge upon the other estate, may, and often must, require time. But whenever it appears that a contract must prove a burden in future, if the assignee assumes the obligations' of the bankrupt, it must be regarded as not being property within the meaning of the bankrupt law.

In cases of doubt, the assignee, if called upon to perform the bankrupt’s obligations, accruing after the bankruptcy, may be required to show that he was not bound to accept the property, and that he had rejected it.

Where the right of the bankrupt himself is involved, as where a claim is made upon him for neglecting, after the bankruptcy, to perform his stipulations, or where the bankrupt brings an action for the neglect of the other party to perform his part of the contract, such direct evidence may not be in the power of either party, but either may be compelled to rely on such evidence as the case admits of, to show that the contract was worthless to the assignee and to the creditors.

Of such evidence, none would usually be more satisfactory and convincing than the fact that the assignee, being fully aware of the contract, has closed up the settlement of the estate, without in any way intermeddling with the'contract. If the evidence also showed that the contract was one from which the creditors could probably have derived no benefit, and by which they might be exposed to loss, the conclusion would be much strengthened.

In the present case, the contract was unavailable to the assignee and to the creditors, first, because it was a stipulation for the personal services of the plaintiff and his family. It had no assignable value, because the defendants were not bound to accept the services of any other man, or of any other family, in exchange for his, because any payment to be made depended upon himself and his family continuing, for the period of five or six years, to live in that place, and board certain people, &c., which the assignee had no right to require them to do, nor funds to persuade them, because the amount to be paid depended upon the discretion of the plaintiff, as to the nature and kinds of improvement he would choose to make; a discretion not to be exercised by any other in his stead, and because the compensation was to be merely an equivalent for the services, from which a third person could derive no advantage; a very poor and hard bargain, at best, to say nothing of the probability, from its loose character, of a troublesome litigation, before any thing could be realized.

The assignee seems wisely to have left such a contract to the parties themselves.

The two cases, cited in the defendant’s argument, (Akhurst v. Jackson, 1 Swanst. 85, and Hillary v. Morris, 5 C. & P. 6,) show nothing against the view we have presented.

So far as appears, the first was a perfect contract, entirely completed on the part of the bankrupt, who had done all he agreed, and nothing remained to be done but the payment of the money. The other was a case where the bankrupt had performed all he was to do, before his bankruptcy occurred, though it was then contingent whether a bargain would be closed, until which he was not entitled; but a bargain being subsequently closed, the money became due, and the assignees, under the English statutes, clearly became entitled to receive it. The only point of this decision seems to be, that a mere disclaimer of all right to a debt will not revest in the bankrupt a right to maintain an action.

The case of Schondler v. Wace, 1 Camp. 487, the case of a policy on a life, where there were considerable arrearages, has no analogy to the present. A policy has often, perhaps generally, a value upon a surrender, and is always assignable, because the premiums may be paid by any one.

These cases may be available to show that if the contract, in this case, once vested in the assignee, his assent to the bankrupt’s remaining on the place would not revest the contract in him.

The cases of Herbert v. Sayer, 5 Ad. & El. N. S. 965, and Stone v. Hubbard, 7 Cush. 597, do not reach the point involved in this case. The first holds that,.in case of a contract, entered into by a bankrupt after a fiat, he may sue in his own name, and his bankruptcy is no objection, unless the plea shows that the assignee has interfered. The present is a case of contract before bankruptcy. Upon the ground assumed, that here was a renewal of the contract between the bankrupt and the defendants, resulting from their acts and apparent common understanding, it is an authority to the point that the bankrupt might sue on such new contracts, unless the assignee interferes.

The other holds that suit may be brought by the assignee in bankruptcy, or by an assignee before bankruptcy, in the name of the bankrupt. The right of the defendants cannot be prejudiced by such suit. The court speak of the English decisions, that, after bankruptcy, no action can be brought in the name of the bankrupt, upon a contract entered into before his bankruptcy. They are said to be founded on the language of the English statute, by which assignees are empowered to sue in their own names, and it is provided that “ neither the bankrupt, nor any person claiming through or under him, shall have power to recover the same.”

There is no such negative provision in the bankrupt law of the United States. This provision explains the decision in Hillary v. Morris, as well as the want of English eases on the general subject. Drury v. Vannevar, 5 Cush. 442, is full to the point, that an assignee of the bankrupt’s assignee may sue in the name of the bankrupt.

The other points raised are answered by the finding of the auditors, except that relating to a new contract, which is susperceded by our view of the case.

Objections to report overruled.