Lowry v. Morrison , 11 Paige Ch. 327 ( 1844 )

The Chancellor.

It does not appear by this plea, which was put in fifteen months after the filing of the complainant’s bill, what proceedings had taken place in the suit, to obtain an equitable lien upon the property or effects of the defendant C. B. Morrison, before the institution of the proceedings in bankruptcy against him; or whether a receiver had or had not been appointed in this suit before he was decreed a bankrupt. The question discussed by Judge Conklin in the Matter of Allen, (5 Law Rep. 362,) does not therefore arise upon this plea. I shall proceed to consider the validity of the plea, upon the supposition that the complainant had acquired a lien upon the property, in controversy in this suit which was valid, under the bankrupt laws, to the extent of the complainant’s debt and costs.

Assuming that to be the case, there is no other way for the complainant to enforce that lien, so as to make it available as against the assignee in bankruptcy, but to prosecute this suit to a successful- termination. But the bankrupt is entitled to protection, against a personal decree for any deficiency upon the judgment, if he has obtained a legal discharge from his debt under the law which was in force when the proceedings in bankruptcy were instituted. I am satisfied, however, that a plea of his bankruptcy and discharge, in bar of the suit generally, cannot be sustained. For the effect of allowing such a plea would be to have the bill dismissed; so that the suit could not be revived and continued, by a supplemental bill, against the assignee in bankruptcy, or his grantee; who has succeeded to the rights of the defendant, in reference to his interest in the property upon which the complainant is supposed to have acquired a lien, by the proceedings in this suit, before the filing of the petition in bankruptcy. The bankruptcy or insolvency of a defendant, and the transfer of all his interest in the property in litigation, by operation of law, is substantially an abatement of the suit; so far as the right to that property is concerned. And the suit cannot be further prosecuted in this court, in reference to that property, without bringing the assignee in bankruptcy, or the person to whom the bankrupt has conveyed his interest in the property, before the court; by a supplemental bill. (See Russell v. Sharp, 1 Ves. & Beam. Rep. 500.) In such a case, the proper course for the defendant whose property has been thus assigned, appears to be to apply for an order, that the complainant proceed and bring the assignee before the court, by a supplemental bill in the nature of a bill of revivor, within such time as shall be prescribed by the court, or that the bill be dismissed ; and that in the mean time all proceedings in the suit against such defendant be stayed. And if the complainant wishes to continue the proceedings in the suit against the bankrupt, to contest the validity of his discharge, the order should require that he be made a party to such supplemental bill. That will enable the complainant to insert in the supplemental bill facts to test the validity of the defendant’s discharge, if he wishes to contest it. And will enable the defendant, by plea or answer, to set up his discharge in bar of the suit; so far as he is continued a party to the same, by such supplemental bill.

The order of the vice chancellor, overruling this plea, must therefore be affirmed with costs; but without prejudice to the right of the appellant to apply to the vice chancellor for the proper relief in the case; and to compel the complainant to revive the proceedings against the assignee in bankruptcyor against the grantees of such assignee if he has sold the bahk-rupt’s interest in the property in litigation.