3 F. 391 | U.S. Circuit Court for the District of Western Missouri | 1880
This is a case growing out of proceedings in the district court in the matter of WTlliam Jamos, bankrupt. The defendant was a creditor of said bankrupt, and proved its claim, which was upon a promissory note amount, ing, with interest, to $5,000. The note was secured by mortgage, but after exhausting the security there remained a balance due against the bankrupt’s estate of $2,803. The said note was usurious, and the assignee of said bankrupt, the present plaintiff, recovered judgment against the defendant for the statutory penalty for violating the usury law of Missouri in the sum of $620. This judgment was recovered some
1. I am of opinion that this proceeding is properly instituted under the provisions of section 4986 of the Revised Statutes of the United States, which gives to the circuit court general superintendence and jurisdiction of all cases and questions arising in the district court when sitting as a court in bankruptcy.
2. The case upon the merits must turn upon the construction of section 5073 of the Revised Statutes, which is as follows :
“Section 5073. In all cases of mutual debts or mutual credits between the parties the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid; but no set-off shall be allowed in favor of any debtor to the bankrupt of a claim in its nature not provable against the estate, or of a claim purchased by or transferred to him after the filing of the petition.”
The defendant bank held an unsecured claim, duly proved, against the estate of the bankrupt, and the asssignee of the bankrupt held a judgment against the defendant bank for $620, for penalty incurred by the violation of the statute against usury. Were these “mutual debts” within the meaning of the statute ? In order to make a proper case for set-off, under the statute, the debts must be mutual; must be in the same right. Sawyer v. Hoag, 17 Wall. 610, 622. If it be conceded that a judgment for this penalty, recovered by the bankrupt before his bankruptcy, would have been a debt, within the meaning of the statute, which could have been set off against the balance due on the bank’s claim, does it follow that a judgment obtained by the assignee after the bankruptcy
I am of the opinion that the “mutual debts” and “mutual credits” which may be set off under the act are such as existed at the time that the bankruptcy proceedings were commenced. It is expressly declared, in the section above quoted, that “no offset shall bo allowed of a claim in its nature not provable against the estate.” What claims are provable? This question is answered by the statute: “All debts due and payable from the bankrupt at the time of the commencement of the proceedings in bankruptcy * * '* may be proved against the estate of the bankrupt.” Rev. St. § 5067.
And the same rule governs in determining what are assets of the bankrupt. These include “all the estate, real and personal, of the petitioner; all debts due him, or any person for his use; all his rights of action for property or estate;” and “any cause of action which lie has against any person arising from contract,” etc.; but do not include any cause of action founded in tort. The “mutual debts,” then, to which the statute refers, are debts in favor of and against the bankrupt at the time of commencement of proceedings in bankruptcy. The judgment in question does not come within this definition. To hold otherwise, woul d, as it seems to me, amount to a practical discharge of the bank from its liability for a violation of the usury law. Its claim against the bankrupt’s estate is certainly not worth its face, and probably worth little or nothing. Let us suppose a case where the assets are exhausted, and the estate is worthless. If such is not the
The demurrer to the bill is overruled, and if the defendant stands upon its demurrer there will be decree for plaintiff, reversing the order of the district court, and directing proceedings in accordance with this opinion.