In re WIENER & GOODMAN SHOE CO.

In re WIENER & GOODMAN SHOE CO. (District Court, E. D. Pennsylvania. May 17, 1899.) No. 3. 1. Bankruptcy — Provabbk Duets — Rights or Assignee. Whore, under the law of the state, the assignee of a. nonnegotiable judgment note takes it subject to ail equities and defenses available against it in the hands of the assignor, lie will not bn entitled to prove it as a claim against tlie estate of the maker in bankruptcy, unless the assignor could have done so. 2. Same - -Objections to Proof — -Unpaid Subscription to Corporate Stock. Where a creditor of a corporation is also a subscriber for its corporate stock, and his subscription has not been fully paid, he will not he allowed to prove his claim against the estate of the corporation in bankruptcy until he has paid the balance remaining due on his subscription. In Bankruptcy. Appeal by Simon Wiener, as a creditor of the bankrupt corporation, from an order of the referee in bankruptcy disallowing his claim against the bankrupt. One Albert Wiener, being a subscriber for capiial stock in the corporation, paid into its treasury one-half the par value of the stock subscribed for; and about a month later he received from the corporation a sealed instrument in the form of a nonnegotiable promissory note, payable to himself, for the same amount, which he assigned to his brother, the present claimant. The referee held that the note was without consideration, and was not a provable debt against the corporation in bankruptcy, in the hands of an assignee. Charles J. Hepburn, for claimant. John W. Wetzel and James F. Campbell, for creditors. Wilbur F. Sadler, for bankrupt. [MAJORITY — McPHERSON, District Judge.] McPHERSON, District Judge. We agree with tbe conclusion of tbe learned referee. Under tbe Pennsylvania law, Simon Wiener took tbe judgment note in controversy subject to all tbe equities and defenses that would have been available against it if it bad remained in the. bands of bis brother, Albert. In addition to tbe cases cited by tbe referee, we may add Reineman v. Robb, 98 Pa. St. 474; Theyken v. Machine Co., 109 Pa. St. 95; Geiger v. Peterson, 164 Pa. St. 352, 30 Atl. 262; and Bank v. Roessler, 186 Pa. St. 431, 40 Atl. 963. This rule does not apply in its fullness to tbe assignee or indorsee of overdue negotiable paper, but tbe restriction in favor of such paper is obviously not applicable to tbe sealed instrument now under consideration. One defense to the note in tbe bands of Albert Wiener was tbe fact that be still owed tbe company upon bis contract of subscription to tbe capital stock. This defense is now at tbe service of tbe other creditors, for it certainly cannot be endured that a creditor, who is also a debtor, of an insolvent, and is therefore withholding money to which bis fellow creditors are entitled, shall be allowed to take away from them part of the other assets of tbe bankrupt. He cannot be permitted to diminish a fund that be is under obligation to increase, and thereby deprive tbe other cred-' itors of money that it would be bis duty immediately to return. If tbe company bad continued to be solvent, it might or might not have been at liberty, under all circumstances, to set off his subscription against its liability on tbe note. That point is not now involved, for the fact of insolvency has supervened, and this creates a situation in which tbe rights of other creditors must also be considered. It would be highly inequitable to allow him to apply a part of tbe assets for bis own benefit, until be has put into tbe fund the money that be justly owes. He must cease to be a debtor before be can enforce bis claim as a creditor. Tbe appeal is dismissed, and tbe action of tbe referee is confirmed.