In re the Attachment against the Estate of Bonaffe

Sutherland, J. The two principal questions in this case are, 1st. Whether, irrespective of the French bankrupt proceedings, the foreign creditors are entitled to share or participate ratably with "the domestic or local creditors in the distribution of the fund in the hands of the trustees; 2d. Whether the creditors who became parties to the French bankrupt proceedings by joining in or signing the concordat, or by receiving dividends under it, thereby forfeited or barred the right which they otherwise would have had, to participate or share in the fund. The first question is evidently simply a question as to the construction of the statute under which the proceeding against the estate of the Bonafies as non-resident debtors was commenced in this state. ¡No doubt the legislature of this state had power to direct the non-resident debtor’s property or its proceeds to be divided or distributed exclusively among the domestic or local creditors. The question is not one of power, but of intention. Did the legislature intend that the fund in the hands of the trustees should be distributed among all the creditors, foreign as well as domestic, or exclusively among the domestic creditors ? The provisions of the statute (2 R. S. 46, §§ 32, 33) are — 474 — to the effect that the trustees after paying all debts due to the United States &c., shall distribute the residue of the moneys in their hands “ among those who were creditors at the time of issuing the first warrant of attachment,” and who shall 'have exhibited their claims, &c. These provisions are broad enough to include all creditors, foreign or non-resident, as well as domestic or resident; and finding no other provision or provisions of the statute, incon- ■ sistent with a construction which gives the same or equal rights to all creditors, foreign as well as domestic, I think equity and international courtesy demand such construction. If this question of construction was not decided by the court of appeals, in the matter of the attachment against Coates & Hillard, yet I am satisfied with the reasoning of Mr. Justice Johnson on this point, in that case, and believe the court would have sustained his views had a decision of the point been necessary. The 2d question is as to the effect of the French bankrupt proceedings. Whether those creditors who were parties to - the concordat, or who received dividends under it, are entitled to participate or share in the fund in the hands of the trustees, is a- question of more difficulty; yet it is quite plain to me that the decision of the trustees on this point also was right. It will be carefully noted that the question is not whether the French bankrupt proceeding as to the French creditors and those who became parties to it, discharged their debts, so that they could not institute any action or proceeding for the collection of their debts, as against either the persons or property of the debtors, whilst the concordat was in force, and until it should be annulled by a direct proceeding; but that the question is, whether the property of the debtors, at the time of the confirmation of the concordat by the tribunal of commerce, was discharged or intended to be discharged from the debts of such creditors. The fund in question, in the hands of the Uew York trustees, is the proceeds of prop — 475 — erty of the debtors, at the time the concordat became obligatory on the creditors by its confirmation by the tribunal of commerce ; and the question is, whether the creditors who joined in the concordat or received dividends under it, are creditors as to that fund; not whether they remained or are creditors of the Bonaffes. The question is not, whether the effect of the concordat and its confirmation was to discharge the debtors; but whether the effect of the concordat and its confirmation was to discharge the fund in question. The proceeding under the Mew York statute by attachment, may be said to be instituted, and until the appointment of trustees to be, for the benefit of the attaching creditor and such other creditors as make themselves parties to it under the statute; for until the time fixed for the appointment of trustees, the debtor may at any time appear and have the attachment discharged, by either paying or securing such creditors in the manner prescribed by the statute; but upon the appointment of trustees, the proceeding becomes in fact, (by relation back from the time of issuing the attachment,) an administration of all the property of the non-resident debtor within the state, by the state or government fowrfbe^ benefit of all his creditors. " In this case, then, the fund in question, the proceeds of all the non-resident debtor’s property in this state, is!i4 t$he^f' hands of the trustees as public officers or administrators of the debtor’s property. Mow in the voluntary distrilmtléjfthis fund by the government, the question is, whetiid3$=|he ^ creditors who were parties to the concordat, or who have'" received dividends under it, should be considered as having thereby forfeited all right to participate in the fund. The question is not as to the right of these creditors, or of their commissioner, or liquidator under the concordat, to enforce any right in or to the fund in question. It may be conceded that the French-bankrupt proceeding would not be recognized by the courts of this state as giving a right to institute or maintain any action or legal proceeding whatever in this state; — 476 — and yet I do not see how that affects the question whether these creditors should be'paid their distributive shares or portions of the fund. Had there been no attachment proceeding, and the local law had permitted Auguste Bonaffe as the liquidator or administrator'for the creditors under the French bankrupt proceeding, to administer the property here as well as elsewhere, and he had done so, creditors residing here, who had presented and verified their debts, would have been entitled, by the French law, to share ratably in all the assets, or proceeds of all the assets of the debtors, as well in the assets or proceeds of the assets in France and other places out of this state as in the assets or proceeds of the assets in this state. Then, as there was an attaching creditor here, and, as a consequence, the local law has given the administration of the assets here exclusively to the trustees or local authorities here, why should not the French and other creditors who were parties to the concordat, or who received dividends under it, who have presented and verified their claims here, he entitled to share ratably in the assets or proceeds of the assets here ? It is plain that equity and international comity require that they should, unless the effect of the" concordat was, not only to free and discharge the persons and ah future acquisitions of the debtors from the debts of these creditors, but also their property in this state and elsewhere at the time of their failure; and whether such by the French law was the effect of the concordat, not whether it discharged the persons and future acquisitions as to the French creditors and those who ■became parties to it, I think is the real question in this case. As near as I can understand the various articles of the French code relating to “ failures and bankruptcies,” the effect of the declaration of the failure by the judgment of the tribunal of commerce is, to divest the debtor or failed person of the administration of all his property, and give it to the syndics or assignees, at first provisional and then definitive, under the supervision of the judge commissary. But this di — 477 — vestiture is only provisional, and is subject to the right of the failed person and a majority of his creditors in number and representing three-fourths, of the debts in amount, if the failure is declared excusable, to make or enter into the agreement called the concordat. (Art. 507.) The concordat must be confirmed or homologated by the tribunal of commerce, to make it effective; but when so confirmed, the functions of the syndics or assignees cease, and they render to the failed person an account of their administration and deliver to him all his assets, books, papers and effects. Of the transaction a report is made to the judge commissary, and then his functions cease. (Articles 516, 519.) The concordat can be annulled by action, for fraud discovered after its homologation, and perhaps for other causes; but until so annulled, it is obligatory upon all the creditors. (Articles 516, 518.) The concordat, then, is an agreement or composition between the failed person and creditors, forming the majority in number and representing at least three-fourths of his debts ; the terms and conditions of which, subject to certain legal regulations and to judicial confirmation, the parties are permitted to fix; and the effect of which is, to restore to the failed person the administration of his property, upon or subject to the terms and conditions thereby agreed upon. The failure of the Bonaffes was pronounced excusable ; a concordat between them and creditors of the requisite number and representing the requisite amount was entered into and confirmed. By the very first article of this covenant, the Bonaffes surrender and abandon to their creditors all their assets (so restored, or to be restored to them, by the syndics or assignees, on the confirmation of the concordat) as well in the United States as in France and other places, to be sold and liquidated. By the second article, the liquidation is to be made by Auguste Bonaffe, (one of the failed firm,) whom the creditors make commissioner or liquidator for that purpose, giving him full powers to receive all sums, to give re — 478 — ceipts and to institute all proceedings and suits &c. By the third article, after paying the bankrupt or failure expenses, the remainder is to be distributed among the creditors ratably. By the'fourth article, as soon as the concordat shall have been confirmed, such confirmation shall be made known to the syndics or assignees, who shall give up their accounts to the bankrupts or failed persons, “ and the latter shall be free in their persons arid their property.” It is clear that these last words were not intended, and could not have the effect to discharge or free the property of the Bonaffes in the United States and elsewhere at the time of the failure, from the debts of their creditors generally, or the debts of such as signed the concordat, for they had already by the first article absolutely surrendered and abandoned all such property to their creditors. The Bonaffes by the concordat absolutely surrender and abandon all their property to their creditors, in consideration of which the creditors agree that they shall be free or discharged from their debts as to their persons and property. Gan any thing be clearer than that the effect of this composition or agreement was, and was intended to be, to leave .all the property of the Bonaffes, in the United States and elsewhere, not only subject to the payment of their debts, but absolutely to appropriate it to that purpose ; Auguste Bonaffe undertaking, simply as commissioner or attorney, to liquidate or administer the surrendered assets, for the benefit . of the creditors. The assets in the state of New York were of course so surrendered subject to the attachment proceeding here, and subject to the exclusive right of the authorities here to administer the assets here, and subject to such principle of distribution as the authorities or courts here should determine on; but the moment you admit or adopt the just principle of the distribution of the New York assets, or of the proceeds of those assets to be, that all the creditors, foreign as well as domestic, are entitled to participate ratably in the same, it follows that — 479 — this French bankrupt proceeding could not, and ought not, to prevent the French and other creditors who were parties to it, from, participating in such Hew York assets, or their proceeds in the hands of the trustees. Assuming the just principle of the distribution of the fund in the hands of the trustees to be that all the creditors foreign as well as domestic have equal rights ratably in that fund, to meet the creditors who were parties to the concordat when they apply for their ratable share of that fund, with the technical pretense that by the concordat they had discharged their debts, or the debtors and their property, from the payment of their debts, would in my opinion be not only a breach of international courtesy but of international justice. It is plain to me that the decision of the trustees as to the distribution of the fund in their hands was right, and that it should be affirmed with costs. The decision of the court of appeals in the matter of the attachment against Coates & Hillard, before referred to, that the debt of the petitioners in that case was discharged by the bankruptcy proceeding in England, and therefore that they were precluded from claiming as creditors of the bankrupts, is not, I think, in point, and should not control our decision in this case. The effect of the English bankrupt proceeding, as I understand it, is, to absolutely divest the bankrupt of his property, and vest it, perhaps at first in the commissioners, but subsequently in the assignees; and the petitioners in the case of Coates & Hillard could not therefore be said to have any right or interest in the property itself; whereas in the case before us, the effect of the concordat, as I understand it, was to divest the syndics or assignees of all the bankrupt’s property, and give it absolutely to their creditors. Besides, in the case of Coates & Hillard, the English assignees were not parties; and the court of appeals did not decide, in that case, that the assignees, as such, could not have claimed a right to participate in the fund. — 480 — Allen, J. I concur in the result of Judge Sutherland’s opinion, and agree to an affirmance of the order made at special term. . The right of foreign creditors to share in the distribution of the estates of these debtors (when proceeded against under our attachment laws,) I consider settled by the decision of this court in the Coates case, which was not reversed by the court of appeals. The principle, it is true, was not affirmed by the latter court, the judgment of affirmance having been put upon a ground which avoided that question. But the question is not open for a re-examination in this court, and without considering it upon its merits, I prefer to rest my decision upon the doctrine of stare decicis. Heither. do I deem it necessary to inquire into the rights of the French creditors of the Bonaffes, or other creditors who became parties to the proceedings in France by proving their debts, accepting dividends, or otherwise, as against the debtors personally or their subsequently acquired property. It may well be that the debtors were discharged in their person and estate (that is, estate thereafter acquired,) from their debts existing at the time of the homologation of the concordat, and the debts nevertheless remain as against property of the debtors before then acquired, or as between the creditors and their persons. The debts necessarily exist, as against the property which came to the hands of the liquidator or commissioner under the concordat for administration and distribution. The creditors do not take an interest in the property in specie, but they acquired a right as creditors to share in the proceeds in proportion to their debts. So that the discharge is not absolute, hut qualified, and only to a certain extent and as to certain remedies. Whatever may be the rights of creditors, whose debts have been absolutely discharged by decree in bankruptcy, as in the case of Coates, before referred to, in which the court of appeals held that one whose debt had been discharged under the English bankrupt act could not prove such — 481 — debt against the estate if the debtor proceeded against him as a non-resident, I think this case is distinguishable from that. If they cannot be distinguished, then the creditors whose debts were under the operation of the French procedure ought not to be allowed to come in here, unless it can he shown that the debtors still remained liable to their creditors either absolutely or conditionally. I assume, however, that the debtors were discharged by the concordat when ratified and confirmed by the tribunal de commerce ; that is, in the language of the concordat, were “ free in their persons and their liroperty.” The discharge, however, is the result of an agreement between the debtor and his creditors, a certain proportion of the latter having debts, bearing a given proportion to all the debts owing by the bankrupt, having by law the right to speak and act for all; and the law regulates, and the court supervises, the acts and agreements of the parties, instead of discharging the debtor by a new judicial proceeding. This regulation and supervision is to protect the interests of the minority, or the absent creditors, rather' than for any other purpose. Hence, the parties to the concordat make their own terms and conditions, and those terms and conditions may vary with every case ; but when they are approved by the court and performed by the debtors, the agreement for a discharge becomes operative and effectual, according to the agreement, and not otherwise. At the time of the institution of the proceedings in France, or rather the day before the appointment of syndics pursuant to the code de commerce, these attachment proceedings were commenced here. The property of the debtors in this state was divided by such proceedings to the extent of the debts due the attaching creditors; and unless the attachment should be discharged, their property was entirely divided, and the estate was held for distribution, not only among the attaching creditors, but all that should prove their debts. The attachment was not discharged, and all creditors, unless — 482 — bound by some act of theirs, or by law, became entitled to participate in the fund, and the debtors only retained an interest in the estate and its proceeds, subject to this right, or, in other words, in the surplus after all the debts that should be proved were paid. But the right to prove was common to all creditors. When the concordat was settled, one of its articles, and that which constituted the consideration of the agreement of the creditors, was that the debtors did surrender and abandon to their creditors all their assets, as well in the different states of America, and particularly in the United States and Mississippi, as in France and its colonies, and other places whatsoever, to be sold and liquidated under superintendence, without any other reserve, &c. The debtors could only surrender the property in this state subject to the rights of creditors under the attachment, including the right of the French creditors, to prove their debts if the preceedings were prosecuted to a final distribution of the estate. This right the creditors nowhere released or abandoned ; and Auguste Bonaffe, as the liquidator of the estate in France, could not intervene here under the attachment proceedings. It followed then that the creditors' whole proceeding in terms for a surrender of the estate of the debtor to their use as a condition of the discharge, and asserting their right to share and participate in the entire estate wherever situated, must be held to have released a very considerable portion of such estate and yielded it to other creditors, or it must be held that quoad, the attached property was made, as they cannot have the benefit of their agreement under the administration of the liquidator. These debts still exist, and are provable as such, subject only to, such deductions as are just, having reference to the proceeds of the other property of the debtors in which they have shared. It is true, there is a difficulty in the proper settlement of the different accounts and claims and marshalling of assets, but this should not interfere with the judicially established right of foreign creditors to come in and claim under our at — 483 — tachment proceedings. My conclusion is that quoad the property of the debtor, the French claimants are still creditors. The order of the special term was correct, and should be affirmed. ■