Assignee in bankruptcy

“ In other words, treating the allowance of the composition as having, so to speak, irrevocably stereotyped the rights of the parties in conformity with the bankrupt law, and to the end that its purposes might be carried out, the bankrupt holding under the composition was treated for such purposes as but an assignee in bankrupt cy, and therefore, so far as set-off was concerned, as having no greater right under the composition than existed in the bankruptcy in favor of the estate at the time the composition was made. ”

“ The charge for the preparation of the assignment properly may be proved as an unpreferred debt of the bankrupt. The services to the voluntary assignee may be allowed so far as they benefited the estate, and, inasmuch as he would be allowed a lien on the property if he had paid the sum allowed, the appellants may stand in his shoes, and may be preferred to that extent. No ground appears for allowing the item for services in resisting an adjudication of bankruptcy. ”

“ We see no reason why the same principle should not apply to the transfer made by a bankruptcy proceeding. The Bankrupt Act expressly provides that the assignee may prosecute or defend all suits in which the bankrupt was a party at the time he was adjudged a bankrupt. If there was any reason for interposing, the assignee could have had himself substituted for the bankrupt, or made a defendant on petition. If he chose to let the suit proceed without such defence, he stands as any other person would on whom the title had fallen since the suit was commenced. ”

“ A trustee was duly chosen, who has taken possession of the assigned assets of the bankrupt.
' (3.) The appellants filed a claim against the bankrupt estate for professional services rendered the bankrupt in preparing the said deed of general assignment, and the assignee thereunder in advising and counseling him in respect of his duties, and in defending a suit brought to wind up the corporation in a state chancery court, and for services rendered the assignee in resisting the adjudication of bankruptcy. ”

“ The nullity of the lien claimed by the appellants by process of law in the State court, commenced and carried on after the act of bankruptcy, results from the relation of the rights, titles, powers, and authorities of the assignee to the time of Brandon's bankruptcy, committed on the 6th day of April, enacted by the third section, and the system of equality among all the creditors of the bankrupt established by the fifth section. ”

“ The equitable distribution of the bankrupt's assets, or the equitable adjustment of creditors' claims in respect of those assets, by way of reorganization, may therefore be regulated by a bankruptcy law which impairs the obligation of the debtor's contracts. Indeed every Bankruptcy Act avowedly works such impairment. ”

“ Any other rule would leave the bankruptcy court powerless to deal in an effective way with those holding property for the bankrupt who, pending the bankruptcy proceedings, willfully dispose of it by placing it beyond the reach of the court. ”

“ By this section, if the "person" in custody who files a declaration of insolvency shall be a trader, subject to the laws of bankruptcy, it only operates as an act of bankruptcy—upon which the creditors may proceed, or not, as they please. ”

“ If the bankrupt, at the time of bankruptcy by disenabling himself from performing the contract in question, and by repudiating its obligation, could give the proving creditor the right to maintain at once a suit in which damages could be assessed at law or in equity, then the creditor can prove in bankruptcy on the ground that bankruptcy is the equivalent of disenablement and repudiation. ”

“ We agree with the conclusion of the Circuit Court of Appeals that the claim for interest on interest should not be permitted to share in the debtor's assets, but disagree with the reasons given for that conclusion.
A purpose of bankruptcy is so to administer an estate as to bring about a ratable distribution of assets among the bankrupt's creditors. What claims of creditors are valid and subsisting obligations against the bankrupt at the time a petition in bankruptcy is filed, is a question which, in the absence of overruling federal law, is to be determined by reference to state law. ”

“ Under that act all persons may be adjudged bankrupt, whether they be traders or not. A person becomes a bankrupt when adjudged so by the court, upon the petition of a creditor having a liquidated and unsecured debt of not less than £50, or of several creditors having like debts to that amount. But before such petition can be presented, the debtor must have committed some one of the acts of bankruptcy specified in the statute, which are: 1, making a general assignment of his property for the benefit of creditors ”

“ The Bankrupt Act had a very different purpose. It was to secure equality of distribution of that which insolvents have when proceedings in bankruptcy are commenced, and of that which they have collusively with some of their creditors attempted to withdraw from ratable distribution, with intent to prefer some creditors over others. ”

“ The Act of 1898 allows any one except a corporation to become a voluntary bankrupt. Practically any insolvent debtor can be thrown into involuntary bankruptcy, except wage earners, farmers, incorporated banks, or business corporations owing less than $1,000. This is so even if a State court of insolvency has already taken charge of his affairs; and if that has occurred it is of itself a sufficient reason for bankruptcy proceedings.
Petitions in bankruptcy are preferred to a District Court of the United States. Each bankrupt estate is put in charge of one or more trustees. ”

“ Conflict-of-law problems have a beguiling tendency to be made even more complicated than they are. Therefore, they are often, as now, fitting occasions for observing the classic admonition to begin at the beginning. The business of bankruptcy administration is to determine how existing debts should be satisfied out of the bankrupt's estate so as to deal fairly with the various creditors. The existence of a debt between the parties to an alleged creditor-debtor relation is independent of bankruptcy and precedes it. ”

“ This state statute is not opposed to the policy of the bankruptcy law or in contravention of the rules and principles established by it with a view to the fair distribution of the assets of the insolvent. It is only state laws which conflict with the bankruptcy laws of Congress that are suspended; those which are in aid of the Bankruptcy Act can stand. ”

“ An adjudication in bankruptcy is not essential to the jurisdiction. The subject of bankruptcies is nothing less than 'the subject of the relations between an insolvent or nonpaying or fraudulent debtor, and his creditors, extending to his and their relief.' [12] This definition of Judge Blatchford, afterwards a member of this Court, has been cited with approval here. ”

“ Such an obligation would take from the right the character of a privilege, and confer on it that of a burdensome and, often, ruinous duty. It is, in its essence, involuntary bankruptcy. But the initiation in this kind of bankruptcy is, by the statute, given to the creditor, and is not imposed on the debtor. And it is only given to the creditor in a limited class of cases. The argument we are combatting goes upon the hypothesis that there is another class given to the creditor by inference, namely, where the debtor ought himself to go into court as a bankrupt and fails to do it. ”

“ It is well settled that assignees in bankruptcy are not bound to accept property which, in their judgment, is of an onerous and unprofitable nature, and would burden, instead of benefiting, the estates, and can elect whether they will accept or not after due consideration and within a reasonable time, while, if their judgment is unwisely exercised, the bankruptcy court is open to compel a different course. ”

“ As it was the effect of the judgment of the state court to deny this plea of res judicata, it will be necessary to consider somewhat the nature of the proceeding.
Compositions in bankruptcy are provided for by the bankruptcy act of 1898 [30 Stat. at L. 544, chap. 541, Comp. Stat. 1913, § 9585] . By § 12 of the act, the bankrupt is permitted to offer a composition after he has been examined in open court or at a meeting of his creditors, and after he has filed in court a schedule of his property and a list of his creditors. ”

“ The question is whether the bankruptcy act has established principles inconsistent with these fundamental rules, although the business of such an act is, so far as may be, to preserve, not to upset, existing relations. It is true that by § 1, the word 'person,' as used in the act, includes partnerships; that by the same section, a person shall be deemed insolvent when his property, exclusive, etc., shall not be sufficient to pay his debts; that by § 5a, a partnership may be adjudged a bankrupt, and that by § 14a, any persons may file an application for discharge. ”

“ If a state desires to participate in the assets of a bankrupt, she must submit to appropriate requirements by the controlling power; otherwise, orderly and expeditious proceedings would be impossible and a fundamental purpose of the Bankruptcy Act would be frustrated. ”

“ The bankruptcy rule, it is said, is commonly so called because enforced by bankruptcy courts in the exercise of their 'peculiar' jurisdiction, and the courts which refuse to apply the rule generally declare that it arose from express provisions in bankrupt statutes requiring a creditor to surrender his collaterals, or deduct for their value, before proving against the estate. ”

“ Bankruptcy exists to provide relief for an overburdened debtor. If a creditor beats the debtor into court, the debtor is nevertheless entitled to his exemptions." H.R.Rep. No. 595, supra, at 126-127, U.S.Code Cong. & Admin.News 1978, pp. 6087-6088.
One factor supporting the view that Congress intended § 522 (f) (1) to thwart a rush to the courthouse is Congress' contemporaneous elimination of § 67 of the 1898 Bankruptcy Act, 30 Stat. 564. Prior to its repeal, § 67 (a) invalidated any lien obtained on an exempt interest of an insolvent debtor within four months of the bankruptcy filing. ”

“ Matter of People (Union Guarantee & Mortgage Co.) , supra, 285 N.Y. at page 343, 34 N.E.2d 345; Matter of Lawyers Title & Guaranty Co., 287 N.Y. 264, 272, 39 N.E.2d 233, we are unable to say that the rule laid down is other than one of state law governing the relative rights of claimants in a state liquidation. Nothing decided in Erir Railroad Co. v. Tompkins, supra, requires a court of bankruptcy to apply such a local rule governing the liquidation of insolvent estates. The bankruptcy act prescribes its own criteria for distribution to creditors. ”

“ Therefore said claim was not an unliquidated claim upon an express contract absolutely owing at the time. It was a contingent claim, and as such not provable, and therefore not affected by the bankrupt principal's discharge.'
If the doctrine announced by the court below and maintained here by counsel is correct, a discharge in bankruptcy may have very small value for the luckless debtor who has faithfully tried to secure his creditors against loss; and, in effect, a demand against him may be kept alive indefinitely, according to the interest or caprice of his surety. ”