In re the General Assignment of Stowell — 13 N.Y. St. Rep. 199

Majority

p. 199

In the Matter of the General Assignment of John Stowell et al. to Samuel W. Perry for the Benefit of Creditors.

(Supreme Court, General Term, Fourth Department,

Filed November, 1887.)

Headnote

1. Bankruptcy—Effect of composition.

In 1878 Stowell Bros, were duly adjudged bankrupts on their own petition. They also duly made a composition with their creditors under the provision of the bankrupt act which was duly confirmed by the court. The Stowells paid all their creditors within the time as provided in the final order, except one firm who refused to receive the amount provided in the composition which was tendered them. Held, that the composition of Stowell Bros, with their creditors, under the regulations and supervision of the bankruptcy court, absolutely discharged the debts of all their creditors whose names and debts were placed in the statement produced at the meeting of creditors, and no other discharge was needed.

2. Same—Composition discharges debtor from personal liability.

A resolution of composition duly ratified confines the secured creditor to his security and discharges the debtor from personal liability for the secured debt.

'8. Same—Right of creditor.

By the assignment the creditors of Stowell Bros, acquired the right to' have the assigned property applied by the assignee to their debts pro rata. That right was absolute. The assignor could not deprive any creditor of that right, nor could one creditor deprive another.

4. Same—Effect of compromise on—Right of creditors not accepting.

The firm which refused to accept the amount due them under the terms of the composition in no way succeeded to the rights of the other creditors. On the final accounting they were only entitled to the proportion they, in common with all the creditors, would have received of the assets had no composition been made.

On the 9th of June, 1876, Stowell Brothers, who were partners, made a general assignment for the benefit of their creditors, without preference, to Samuel W. Perry, who duly qualified as such assignee. Their debts amounted to $79,756.34.'

In February, 1878, Stowell Brothers were duly adjudged bankrupts, on their own petition. They also duly made a ■composition with their creditors under the provision of the

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bankrupt act, the final order being made by the United States district court for the northern district of New York, and entered April 26, 1879. It provided for the payment of twenty cents on the dollar in cash to all their creditors within thirty days, and further provided, that upon such payment being made, the assignee should transfer to the said assignors all assets remaining in his hands.

The said court duly confirmed the compromise proposed by the said Stowells and accepted by their creditors, and. ordered the same to be recorded. The Stowells paid all their creditors within the thirty days, as provided in said final order, except Fraser, Bell and Loughran. A tender was made to them of the amount their due under said final order, but they refused to receive the same. Their names, address, and amount of their claim, appeared properly in the statement of the creditors of such bankrupts, in the composition proceedings in the bankruptcy court, and they had notice thereof, and of the bankruptcy proceedings, but did not appear in said proceedings in any manner. Their claim against the Stowells amounted to $889.38.

; On the 10th day of April, 1879, at the instance of said Frazer, Bell and Loughran, the said assignee was required by the county court of Chemung county to account as such assignee, and he made, and filed an account. Thereafter, he was required to file a further account, but before such account was filed, he died, and the above named respondents became his executors, and were duly substituted in his stead herein. They, as such executors, filed a further account. by which it appeared that at the time said assignee turned over to the assignors the property of the assigned estate, pursuant to the order made in the bankruptcy .proceedings, the trust property belonging to the creditors of such assignee, amounted to $17,054.12, which he turned o^er to .said assignors, pursuant to said order. The debts proved against said estate pursuant to notice to present claims .duly published bv the assignee, amounted to $79,756.34.

On the accounting before said county court, it was adjudged that the assignee was chargeable with the sum of $17,054.12; that the total amount of the debts proved, was $79,756.34; that the amount of the plaintiff’s debt was $889.33; that the percentage payable to the appellant thereon was 21.38 per cent; that the amount to which the appellants were entitled when the property was returned to the assignors, was the sum of $190.15; that the interest from that time until the date of such final decree at six per cent was the sum of $79.35; that the total sum to which the appellants were entiled was the sum of $270. And it was ordered and decreed by said court that the

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respondents should pay to the appellants, or their attorney, the sum of $270, upon the service of a copy of such order or decree. From this decree the appellants appealed.

Boswell B. Moss, for app’lts; G. L. Smith, for resp’ts.

The composition of Stowell Brothers with their creditors, under the regulations and supervision of the bankruptcy court, absolutely discharged the debts of all their creditors, whose names and debts were placed in the statement produced at the meeting of creditors, and no other discharge was needed. Re Bechet, 2 Woods, 173 ; 12 Bank. Reg., 201. A resolution of composition duly ratified confines the secured creditor to his security and discharges the debtor from personal liability for the secured debt. Re Lytle, 14 Bank. Reg., 457: Matter of Stowell 16 Abb. N. C., 94 .

The appellants have no debt against the assignors. ' Their only existing claim rests upon such rights as they acquired under the general assignment of Stowell Brothers. By that assignment their creditors acquired the right to have the assigned property applied by the assignee to their debts pro rata. That right was absolute. The Stowells could not deprive any creditor of that right, nor could one creditor deprive another. Matter of Stowell, 26 Hun, 260 .

The appellants claim to be entitled to their whole debt notwithstanding the fact that the assignee, under the direction of the bankruptcy court, surrendered the whole assigned estate to the assignors, upon their composition with their creditors; and notwithstanding the further fact that when such composition and surrender were made they were entitled under the assignment to only about twenty-one per cent of their debt. Their contention is that the county court should have charged the respondents with all the assets that came into the hands of the assignee, and then based its order of distribution on the debts existing at the time of the distribution. We do not think these claims can be sustained.

As we have already seen, there were no debts of the assignors at the time the order of distribution was made. They had been discharged, and her ce the court could not make them a basis of an order of distribution. When. Stowell Brothers made a composition with their creditors, the appellants’ interest in the trust fund extended only to-their pro rata share. Their debts did not survive the composition. Their then acquired interest in the trust fund alone survived. The measure of the assignee’s liability to them was the interest of the appellants in that fund at the time of the composition. All the other creditors consented

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that their interest should be transferred to the assignors in consideration of their composition with their creditors. That transferred nothing to the appellants. They in no way succeeded to the rights of the other creditors. The appellants, on the final accounting, were entitled only to the proportion they, in common with all the creditors, would have received of the assets had no composition been made. Matter of Orsor, 10 Daly, 26 .

The decree appealed from awards to the appellants all they were entitled to; it was proper and should be affirmed, with costs against the appellants.

Hardin, P. J., and Follett, J., concur.