Berthelon v. Betts — 4 Hill & Den. 577

Majority

p. 577

Berthelon vs. Betts.

Headnote

Where a debtor is-proceeded against by warrant under the third and subsequent sections of the non-imprisonment act, (Sess. L, of ’31, p, 396,) and obtains a discharge pursuant to the seventeenth section, the assignment enures only to the benefit of the creditor on whose application the proceeding was instituted, and not to the benefit of creditors generally. Per Cowen, J.

A decree of bankruptcy in cases of voluntary application does not relate back so as to affect a previous transfer of the bankrupt’s property made in invitum to satisfy an individual debt; and this, though the transfer took place after the filing of the petition.

That part of the act authorizing a debtor to be thus proceeded against is not an in, solvent law, and therefore was not suspended by the act of congress in relation to bankruptcy passed August 19th, 1841.

Accordingly, where the petition was filed on the 25th of August. 1842, and five days afterwards the petitioner was ordered to make an assignment under the seventeenth section of the non-imprisonment act, which he accordingly did on the same day, and obtained a decree for his discharge as a bankrupt in September following; held, that the creditor in the non-imprisonment proceeding was entitled to have his debt satisfied out of the proceeds of the property assigned therein, notwithstanding the claim of the assignee in bankruptcy.

Bankbupt act. On the 28th of July, 1842, the plaintiff instituted proceedings against the defendant, before the recorder of the city of Albany, to obtain satisfaction of a judgment in the manner prescribed by the non-imprisonment act. (Sess, Laws of 1837, p. 396, §3 et seq.) An execution had been previously issued and returned unsatisfied. After a hearing before the recorder, he directed a commitment of the defendant unless he complied with the provisions of the 10th section of the act; and a bond was thereupon given, conditioned that the defendant would, within thirty days, apply for an assignment of his property &c. A petition was afterwards (August 25th,) presented to the recorder, in conformity to the condition of the bond, and, on the 30th of August, 1842, a general assignment of all the defendant’s estate was ordered to be made to one Valentine. An assignment was accordingly made on the. same day, under which the assignee realized more

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than sufficient to satisfy the plaintiff’s judgment and the costs of the proceedings before the recorder. A motion was therefore now made for an order that the assignee pay to the plaintiff’s attorney a sum sufficient to satisfy the said judgment and costs.

In opposition to the motion it appeared that, on the 22d of August, 1842, the defendant signed and verified his petition for a discharge under the “ act to establish a uniform system of bankruptcy throughout the United States,” passed August 19th, 1841; that the petition was presented to the district judge on the 25th of August; that a decree of bankruptcy was made on the 19th of September following ; and that a discharge was granted on the 6th of February, 1843. The assignee in bankruptcy claimed that he was entitled to all the effects of the defendant at the time of presenting his petition to the district judge.

JP. Gansevoort, for the motion,

cited Sess. Laws of 1831, p. 398, § 10, subd. 4 ; id. p. 400, § 18, 19; 1 R. S. 789, 791, § 15, 2d ed.; Pract. Directions, &c. under the Non Imp. Act, Pamph. p. 15 ; 2 R. S. 803, § 36, sub. 4, 2d ed.; The People v. Abel, ( 3 Hill, 109 .)

A. Taber, for the assignee in bankruptcy,

said the decree related back to the time of filing the bankrupt’s petition, and entitled the assignee to all the property belonging to the bankrupt at that time. (Dictum of Conkling, J. in Matter of Rust, MS. decided Dec. 1842.) The defendant had not, up to that time, any lien on the fund in question, admitting the existence of a right to proceed as the plaintiff has done since the bankrupt act was passed. But this act suspended the right to proceed under all state insolvent laws. (Fames’ case, 5 Law Reporter, 117, and the cases there cited.)

By the Court,

The bona fides of the proceedings before the recorder and the assignment of the 30th of August

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are not questioned. Indeed, so far from these being intended as a fraud against .the proceedings in bankruptcy, the inference would rathér be that the main design of resorting to the latter was to defeat the plaintiff’s remedy under the non-imprisonment act. Therefore, if the law under which the plaintiff assumed to proceed be a subsisting one, and the doctrine of relation does not apply, the motion should be granted.

Whether the non-imprisonment act (§ 10 subd. 4) be an insolvent law within the meaning of Eames' case, (5 Law Re porter, 117,) and other cases referred to on the argument, depends upon the purpose and object of the statute. When the learned judges of the United States say that the bankrupt law has effaced or suspended all state insolvent laws, they certainly cannot mean a statute for the more effectual appropriation of a debtor’s property to satisfy an individual debt. Such a construction would subvert all judgments and executions for debts, which are always against insolvents, and are creatures of an insolvent law, if these words be taken in their broadest sense. (Vide 2 Bell’s Comm. 162.) Clearly, therefore, our insolvent laws are no farther suspended than they seek, upon notorious grounds, to seize and distribute the effects of the debtor among his creditors generally. Such is not the effect of that branch of the non-imprisonment law now in question. It refers to Art. 6th of the revised statutes concerning voluntary assignments by imprisoned debtors, following out, in the main, such details as are there prescribed, and finally, it is true, directing a dividend; but this cannot, in the nature of things, nor indeed by the provisions of the statute, be extended beyond the particular creditor or creditors by whom the debtor is pursued. We have always understood the provisions in question as no more than a statute execution against choses in action and other effects not tangible by the ordinary fi. fa. The statute gives the creditor or creditors certain process by which he or they may coerce the payment of a debt or debts for which the debtor has been prosecuted. (The People ex rel. Noble v. Abel, 3 Hill, 109 , 112 ; Pract. Directions, &c. under the Non Imp. Act,

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Parnph. p. 15.) We accordingly, at the last January term, on a prisoner béing brought up for discharge under the 6th article, granted the motion, notwithstanding the objection that our insolvent laws are all suspended. Looking at the United States statute as we should to a state insolvent law—and, when applied to voluntary applicants, it is no more—we then have a general cessio bonorum indeed ; but one which, in its own nature, and according to the general, not to say universal rule of construction, can have no effect as of a time prior to the decree by which it was effected. Such a construction would leave the assignment to Valentine untouched. Nor do I perceive that the doctrine of relation declared in 13 Eliz. ch. 7, § 2, and continued in the subsequent bankrupt laws of England, is expressly enacted by the U. S. bankrupt law. If applicable, however, whether by enactment or construction, it is decisive against the present motion. (See Balme v. Hutton, 1 Cromp. Sf Mees. 262, 269, 270 ; Cooper v. Chitty, 1 Burr. 20, 30, 31, 1 Keny. Rep. 395, 417, 418, S. C.; Price v. Helyar, 1 Moore fy Payne, 541, 552, 4 Bing. 597, S. C.)

Here was neither a right of lien in the plaintiff, nor was the interest of the defendant divested until the assignment of the 30th of August made pursuant to the order of the recorder. Five days before, (August 25th,) the petition in bankruptcy was lodged in the U. S. district court. This was, no doubt, an act of bankruptcy ; perhaps the only act which can be recognized as such under the voluntary branch of the statute. (See St. 6 Geo. 4, ch. 16, § 6.) Upon the best consideration, however, which I have been able to give the question, I have failed to discover any principle in our statute of bankruptcy, or in the nature of the case, by which the legislature can be understood to have intended a relation covering property of the bankrupt which he did not own at the time of the bankrupt assignment, excepting such as he might have fraudulently transferred contrary to the express provisions of the second section, or, at most, voluntarily transferred within the time there mentioned, the transfer being bona fide. Independently of

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these provisions, I understand the act as indicating quite clearly that the bankrupt assignment shall have no greater effect than any other general transfer. That it is a bankrupt act, certainly implies no relation. This is plain, not only from the necessity of expressly declaring the doctrine in the English statutes; but from the well known construction which has always been given to our insolvent laws. These are, effectually, but bankrupt laws under another name. In this view of the matter too, I find myself confirmed by Mr. Bicknell, (Bickn. on Bankruptcy, p. 38 2d ed.) and the observations of Judge Battle. (Ex parte Ziegenfuss, 2 Iredell's N. Car. Rep. 463, 468, 9.) Wo .case was cited on the argument as holding the contrary. In the absence of a clear decision by the United States court declaring that a transfer of a debtor’s property in invitum,, made to satisfy his debt and made bona fide, prior to a decree declaring the debtor a bankrupt, shall be overreached by such a decree, I feel no serious, difficulty in saying that the former transfer should prevail. The result is that this motion must be granted.

Ordered accordingly.