177 A.D. 176 | N.Y. App. Div. | 1917
Lead Opinion
The facts in this case are so fully and fairly stated in the opinion of my brother Justice Laughlin, filed herewith, that it is not necessary to restate them in this opinion. I will proceed at once, therefore, to an expression of my views upon the questions presented.
In Remington on Bankruptcy (Vol. 1 [2d ed.], § 757), in discussing guaranteed allowable claims, it is said: “ There should be no deduction for the amounts paid in on the debt by the surety. The creditor should prove for the entire debt as if no part thereof had been paid by the surety; and if the dividend plus the payments made by the surety exceed the total amount due, then the creditor holds the excess in trust for the surety.” That rule seems also to be laid down in section 756. The Bankruptcy Act especially provided that where there is a secured claim the value of the security must be deducted from the claim before proof. (30 U. S. Stat. at Large, 560, § 57.) But a secured claim as there mentioned is defined to be a claim secured by a lien upon the bankrupt’s property. (Id. 545, § 1, subd. 23.) A claim secured by the surety bond or by an
If this be the rule I am unable to see how it is possible that this surety, upon paying to the bankruptcy creditors $25,000, is entitled to subrogation. If the surety pays the claim in full, then the creditors have no claim against the bankrupt but the surety is subrogated to their rights. When, however, the creditors are entitled to dividends upon their entire claim in addition to their rights against the surety, that makes subrogation impossible. There is nothing to which the surely can be subrogated.
It does not follow, however, because the surety cannot be subrogated to the rights of the bankruptcy creditors that it has no claim for the moneys paid on the surety bond. The Carnegie Trust Company gave its indemnity agreement covenanting to make good to the surety company any moneys which that company should be compelled to pay under its bond. The surety company thus has become the creditor of the Carnegie Company to the extent of ihe required payment, and its right to its dividend cannot be impaired by the fact that the claim arises upon a payment of a deficiency .upon another debt of the Carnegie Company which has already had its full dividends. To hold otherwise would hold nugatory the indemnity agreement. The authorities holding that one debt of a bankrupt cannot create two liabilities against the estate apply only where a creditor is thus seeking an undue proportion of the assets of the bankrupt. No such result can be here reached, and the surety’s claim here arises, as any other claim might arise, out of a contract which itself contemplates the possible inability of the debtor to pay a certain debt in full.
It is not necessary to determine whether or not the claim of the plaintiff can be allowed in such a way as to diminish the dividends which would otherwise accrue to the bankruptcy creditors. It is contended that such effect cannot be given, because it would violate the spirit of the guaranty. The Special Term has so held, and has made full provision for the
I recommend, therefore, that the judgment be affirmed, with costs.
Clarke, P. J., and Shearn, J., concurred; Laughlin and Dowling, JJ., dissented.
Dissenting Opinion
Pursuant to the Bankruptcy Act of 1898 (30 U. S. Stat. at Large, 562, § 61), the United States District Court for the Southern District of New York duly designated the defendant as a depository for the money of bankrupt estates; but security was required by statute and on the 31st day of May, 1907, the plaintiff executed a bond in the penal sum of $25,000, conditioned that the defendant should well and truly account for and pay over, as provided by the statute and the rules, orders and decrees of the court, all moneys so deposited with it. The defendant evidently made a formal application in writing to the plaintiff to execute the bond, for that is recited in an agreement in writing, of the same date, made by the defendant with the plaintiff, wherein it is also recited that in consideration of the execution of such bond and of one dollar, defendant agreed, among other things, that it would at all times indemnify and save the plaintiff, in effect, harmless; and would reimburse it for all sums of money it might be obliged to pay by reason of the execution of the bond; and would notify the plaintiff of the commencement of any proceeding or action with respect to the fund so deposited. It was further provided in the agreement that the plaintiff should have the right at any time to call upon the defendant to account and to procure its discharge from liability under the bond, and that plaintiff should have the right “to look to and rely upon the property of the depository,” its income and earnings, and to follow and recover out of its property for anything due or to become due to the plaintiff under the agreement; and that the acceptance of the agreement should not abridge or limit the right of the plaintiff to be subrogated to any right or remedy, or limit any right or remedy which it might otherwise have, acquire or
On the 7th day of January, 1911, the Superintendent of Banks took charge of the defendant. At that time there had been deposited with the defendant, pursuant to its designation as such depository and remained undrawn, funds to the extent of $180,000. A trustee and a receiver in bankruptcy claimed a preference and brought actions against the defendant to have a preference declared as against the other creditors of the defendant; but it was held by the Court of Appeals, reversing this court (Henkel v. Carnegie Trust Company, 154 App. Div. 596), that the claim made by the trustee and receiver in bankruptcy was not entitled to preference. (Henkel v. Carnegie Trust Company; 213 N. Y. 185.) The receiver in bankruptcy thereafter claimed the penalty of the bond from the plaintiff and brought an action ag-ainst the plaintiff thereon in the Federal court in behalf of all creditors of bankrupts similarly situated, and, pursuant to an order made in that action on the 26th day of May, 1915, the plaintiff paid the penalty of the bond and six per cent interest from the date of the commencement of the action. The plaintiff thereupon presented a claim to the Superintendent of Banks for reimbursement, and on its being rejected brought this action, alleging these facts and that the defendant has funds applicable to the payment of the claim-in excess of the amount thereof. The answer alleges, as a separate defense, in effect that the claims of depositors of the bankrupt estate funds were filed with the Superintendent of Banks and allowed as unpreferred claims; that thirty-five per cent dividends, amounting to $67,192.50, have been duly allowed and paid thereon by order of this court, and the same percentage of dividends was likewise allowed and paid on all other unpreferred claims. The judgment demanded by the plaintiff is that its claim be allowed in full and that it be declared that it is entitled to receive from the Superintendent of Banks its distributive share of the assets of the plaintiff. By the judgment it is ordered, adjudged and decreed that the plaintiff has a good and provable claim against the assets of the defendant and that the Superintendent of Banks be directed
It is claimed in behalf of the appellant that the effect of the judgment is to duplicate the claims against the defendant to the extent of the plaintiff’s claim for reimbursement and to reduce the future dividends to the other creditors proportionately. If that were its effect, manifestly it could not be sustained. It is not entirely clear what is intended by the judgment. It is contended that the plaintiff’s claim is prediated on the indemnity agreement and not on subrogation to the rights of the bankruptcy creditors to the extent that their claims were reduced by the payment made by the plaintiff on the bond. If the plaintiff had paid the penalty of the bond before the bankruptcy creditors filed their claims they would have been entitled to prove their claims only in the amount thus reduced, and the plaintiff would have been entitled to file and prove a claim, in them right by subrogation or if it saw fit, under the indemnity agreement, as it claims here. There would then have been no duplication of claims, and while the plaintiff’s claim might have been in excess of the amount by which the claims of the bankruptcy creditors were reduced, owing to the costs and expenses of the action to collect plaintiff’s liability on the bond, still the bankruptcy creditors would have valid claims for the balance unpaid on the deposit account, after applying the proceeds of the collection on the bond; and the plaintiff likewise would have a valid claim under the indemnity agreement to the extent of the entire amount which it was obliged to pay on the bond. The bankruptcy creditors, however, filed and proved their claims in full, and when they were allowed by the Superintendent of Banks the plaintiff, not having paid its liability on the bond, had no provable claim. It is to be inferred from the answer that this was the situation
I am of opinion, therefore, that the judgment should be reversed and motion denied, with costs to appellant to abide the event.
Dowling, J., concurred.
Judgment affirmed, with costs.