Deford v. Hewlett

Stewart, J., delivered the opinion of the Court. A petition having been filed against the appellee in bankruptcy, he made a proposition for composition with his creditors, in pursuance of the 17th sec. of the Act of Congress of 1874, ch. 390, to wit: that the proceedings, in bankruptcy be suspended, and that they should receive in full satisfaction and discharge of their claims of every kind against him, twenty-five per centum of the same,— three per ct. in cash, payable 10 days after a resolution, accepting this offer, shall be confirmed by the Court, and ordered to he recorded ; and the balance to he paid in money, in three equal instalments in six, twelve and eighteen months, from the date of the recording of such resolution, with interest, to be secured by his promissory notes to be delivered to the creditors, their attorneys or assigns, within ten days after the recording of the said resolution—his assets, in the meantime to be placed in the custody of George J. Appold—the dividends of the same when collected, to be applied to the payment of the said three per cent, and said promissory notes, as they respectively fall due. This proposition was duly accepted by his creditors, at a meeting called for the purpose of considering the same, by resolution to that effect. ⁶¹ The appellants holding his two promissory notes, each for the sum of $1786.87—being present and voting, and proving their claim in the bankruptcy proceedings. This resolution, according to the appellee’s proposition, was passed by the Court, and recorded.

In accordance with the terms of the composition, the appellee paid in cash the three per centum, of the claims against him, including the appellants’, and delivered to his creditors, including the appellants, his promissory notes for twenty-two per cent, of their claims ; and transferred to Appold, as required by the resolution, all of his assets of every description, as security for the payment of the promissory notes. The three per cent, in cash and the first instalment under the composition, being paid, but the second unpaid, the appellants brought suit for recovery on the original notes. Under this state of facts, disclosed by the pleadings, the substantial question presented for our review, is, whether the appellants can maintain this suit, for recovery on the original notes. A preliminary question of practice has been argued by the counsel for the appellants, who insists that the plea of the appellee is defective, because it sets up, as he alleges, three distinct facts, constituting three distinct defences in one plea, to wit: 1st, the recording of the resolution in bankruptcy—2nd, the fact that the appellants were present and voted, and 3rd, the pendency of the proceedings in bankruptcy.

The detail of facts and proceedings consisting of the averment of the composition and its acceptance, and its performance by the payment in money and delivery of the promissory notes of the appellee to the appellants ; the fact of the appellants being present and voting, the recording of the resolution and the pendency of the proceedings in bankruptcy, was necessary to a clear understand ⁶² ing of the defence, and does not come within the scope of the rule against double pleading. The statement of a multiplicity of facts constituting the defence and material to its conclusiveness, even if there was surplusage, affords no ground for demurrer on that account. Code, Art. 75 secs. 2 and 3. If the appellants can, notwithstanding the facts averred and admitted, collect their claim in this form, the object of the bankrupt law and its amendments, to wit: the discharge of the bankrupt from his debts under the terms provided, and the fair distribution of his assets amongst his creditors, is defeated—the proceedings in bankruptcy are nugatory, and the race for precedence amongst his creditors is open to a general scramble—not only the Federal, but the State Courts are at their command.

Bankrupt laws, it is well understood, discharge the contract, contradistinguished from insolvent laws, which only liberate the person. 4 Wheaton, 194 . Whilst the bankrupt is going through the process provided for the discharge of his debts, under the direction of the only jurisdiction that can discharge them, is it possible that the State Courts can intervene and enable the creditors to pursue their remedies as if no such proceeding had taken place ? The 17th sec. of the Act of 1874, ch. 390, provides, that in all cases in bankruptcy, ivhether an adjudication in bankruptcy shall have been had or not, the creditors of the bankrupt at a meeting called, under the direction of the Gourt, may resolve, that a composition proposed by the debtor, shall be accepted in satisfaction of the debts due them. With some modifications hereafter referred to, this provision is taken from the 126th sec of the English Bankrupt Act of 1817, 32 and 33 Viet., ch. 71.

Under that statute, the creditors of the bankrupt, may, without any proceedings in bankruptcy, resolve, that a composition shall be accepted in satisfaction of their debts. ⁶³ Without the intervention of the Court, the requisite number of the creditors can determine whether he shall be discharged, and the registrar is to make registry of the resolution, if satisfied that it passed in pursuance of the statute. Under our law, the composition is an incidental proceeding in bankruptcy. Proceedings in the Court of Bankruptcy commence upon the filing of the petition for an adjudication in bankruptcy, either by the debtor, in his own behalf, or by a creditor against him. Section 4991 of the Revised Statutes.

The jurisdiction of that Court is exclusive, except where otherwise provided by statute. U. S. Revised Statutes, secs. 563, 629, 630, 639, 711, 4972, sub. 2 and 4, 4979, 5105, 4991; ch. 390, sec. 2, of the Act of 1874. There is a broad and well defined distinction between the arrangement of the Courts in England, in regard to jurisdiction, and between our Federal and State Courts. Under the constitution of our Courts growing out of the form of our government made up of State and Federal authority, the bankrupt laws clearly provide for the exclusive jurisdiction of the Federal Court over matters of