Penniman & Wicks vs. Norton

Penniman & Wicks vs. Norton. Where, upon an application by the complainants, in a creditor’s suit, for leave to proceed against the surviving defendants, after the death of a co-defendanf, it was shown by affidavit that all the judgment debtors were insolvent at the time the bill was filed; Held that this afforded no excuse for proceeding in the cause without bringing before the court the representatives of a deceased defendant; and the assignee in bankruptcy of some of the other defendants, who had been decreed to be bankrupts subsequent to the commencement of the suit. Held also, that if the surviving defendants had no property, or-efiects, which could pass to their assignee in bankruptcy, subject to the complainant’s lien thereon, or if the deceased defendant had no interest in any property, which could pass to his personal representatives or heirs, subject to such lien, the fact should be distinctly shown, by affidavit; in order to excuse the complainants from bringing such assignees, or representatives, before the court. Tf a person declared a bankrupt, against whom a creditor’s bill had been previously filed, has an interest in any property, at the time the decree in bankruptcy is made, it passes to the assignee, subject to the complainant’s claim thereon. And if such suit is to be further proceeded in, for the purpose of settling the complainant’s right to satisfaction out of such property, the assignee in bankruptcy is a necessary party. A suit upon a creditor’s bill cannot be further proceeded in against a defendant, after he has obtained a regular discharge as a bankrupt; unless the complainant intends to contest the validity of such discharge, for the purpose of obtaining a personal decree against the bankrupt. And where the complainant wishes to contest the validity of the discharge, his proper course is to file a supplemental bill; stating the commencement of the original suit, the subsequent decree in bankruptcy, the discharge of the bankrupt, and the facts upon which the discharge is claimed to be void and inoperative; and making the assignee in bankruptcy, as well as the bankrupt himself, a party to such bill. But if the complainant merely wishes to proceed against the property, which has passed to the assignee in bankruptcy subject to his prior claim thereon, he must revive the suit against the assignee alone; stating the discharge of the bankrupt as a ground for proceeding no further in the suit against him, as a party. Where the assignee in bankruptcy has sold all his interest in the subject matter of the litigation, before the commencement of the proceedings to revive and continue the suit, that fact should be shown; and the purchaser should, in that case, be made a party to the suit, instead of the assignee in bankruptcy. This was an application, on the part of the complainants, for leave to proceed in this suit against the surviving defendants, notwithstanding the death of McNeil, one of the original defendants. The bill was filed in 1840, against Norton, Bartle and McNeil, three of the defendants, as the judgment debtors of the complainants, and against Dickinson and Halliday, the other two defendants, as fraudulent assignees of such judgment debt ors; to obtain satisfaction of the complainant’s judgment out of the property of such judgment debtors which could not be reach ed by execution, and to set aside the assignment, as being fraudulent as against the complainants. After the putting in of the answer of the defendants, and the filing of a rep] ication to the same, McNiel died; and Norton and Bartle, the other two judgment debtors, were duly discharged under the bankrupt act. A receiver had been appointed in another suit, in September, 1840, to whom the judgment creditors had made a general assignment. And subsequent to the death of McNeil, and after the decree in bankruptcy as to the other two judgment debtors, a decree was made, in a third suit, against the surviving defendants; by which decree the assignment to Dickinson and Halliday was declared to be void, and a receiver was directed to be appointed, as to the assigned property in their hands. W. D. White, for the complainants. N. Hill Jun., for the defendants. The suit has never been revived against the assignees in bank- upt.-y; and we hold that further proceedings cannot • be had in the cause until that is done. To avoid this objection the complainants, in their affidavits, state that these defendants, in 1840, made an assignment to a receiver in another suit. This does not obviate the difficulty. For the defendants still retained an interest in their property, although it was assigned to a receiver; and that interest, when they were declared bankrupts, vested, by reason thereof, in their assignees in bankruptcy. The assignees being vested wi'h the property, should be made parties. Again; the suit should be continued against the heirs and personal representatives of McNeil; because a portion of the property which these complainants are seeking to reach belonged to McNeil individually, and that cannot be reached by the complainants through the survivors of McNeil. By continuing the suit against the survivors only, they have not all the parties, in whom the fund is vested which they are trying to reach in this suit, before the court. The suit should not continue against the survivors of McNeil only; because a portion of the fund, sotight to be reached, belonged to him individually, and therefore his heirs and personal representatives are necessary parties; the fund consisting of real as well as of personal property. [MAJORITY — The Chancellor.] The Chancellor. Although it is stated, in the affidavit upon which this application is based, that all the judgment debtors were insolvent when the bill in this cause was filed, that affords no excuse for proceeding in the cause without bringing before the court those who have subsequently succeeded to their rights, in the property which they had at the commencement of the suit. If the defendants Norton and Bartle had no property, or effects, which could pass to the assignee in bankruptcy, subject to the claim of the complainant's to an equitable lien thereon, by the previous commencement of this suit, or if McNeil had no interest in any property or effects which could pass to his personal representatives or heirs, subject to such lien, the fact should have been distinctly stated in the complainants’ affidavit; "to excuse them from bringing the assignee in bankruptcy before the court, in the one case, or the representatives of McNeil, in the other. For if the person declared a bankrupt, against whom a creditor’s bill had been previously filed, has any interest in property at the time the decree in bankruptcy is made, that interest passes to the assignee; subject to the complainants’ claim. And if the suit is to be further proceeded in, for the purpose of settling the complainants’ right to satisfaction out of such property, the assignee in bankruptcy appears to be a necessary party to the suit. Nor can the suit be further proceeded in against tlie bankrupt himself, after he has obtained a regular discharge; unless the complainants intend to contest the validity of such discharge, for the purpose of obtaining a personal decree against the bankrupt for so much of the debt and costs as cannot be obtained from the property which he had before the decree in bankruptcy was made. For the assignee in bankruptcy, in such a case, has the right to resist the complainant’s claim to the property, which has passed to him, under the decree in bankruptcy, subject to such claim; and to make such defence to the suit as the bankrupt himself could have made previous to such decree. And as the bankrupt may claim the benefit of his discharge, in opposition to the complainant’s allegation that it has been fraudulently obtained, the proper course for the complainant is to file a supplemental bill; stating the commencement of the original suit, the decree in bankruptcy by which the interest of the judgment debtor became vested in the assignee, subject to the complainant’s claim, the subsequent discharge of the bankrupt, and the facts upon which that discharge is claimed to be void and inoperative. And the assignee, as well as the bankrupt, should be made a party to such bill. Or if the complainant merely wishes to proceed against the property which has passed to the assignee in bankruptcy subject to his prior claim thereon, he should revive the suit against the assignee alone; stating the discharge of the bankrupt as aground for proceeding no farther in the suit against him as a party. And where the assignee in bankruptcy has sold all his interest in the subject matter of the litigation, before the commencement of the proceeding to revive and continue the suit, that fact should be stated. And the purchaser should in that case be made the party to the suit, instead of the assignee. If the judgment debtors, in the present case, had no property whatever at the time of the commencement of this suit, and the whole object of the suit was to reach the property which had been fraudulently assigned to the defendants Dickinson and Halliday, the complainants would probably have the right to proceed against those two defendants alone; upon a proper supplemental bill, stating that fact, in connection with the previous proceedings in the suit, and the subsequent death of one of the defendants and the discharge of the other two under the bankrupt act, and also stating the fact that the property assigned to Dickinson and Halliday was wholly insufficient to pay the previous liens thereon. Such statements would show that neither the judgment debtors, nor those who had succeeded to their rights, could in any event be entitled to a part of the assigned property, under the clause of the assignment which provided for a re-assignment of the surplus of the assigned property, if any there should be. The complainants’ application must be denied, with $10 costs ; but without prejudice to their right to file such a bill, to revive and continue the proceedings, as they may be advised is proper under the circumstances of this case, and the facts as they actually exist. .