Penniman v. Norton , 5 Sarat. Ch. Sent. 50 ( 1845 )

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. .