Mudge v. Wilmot

Gbay, C. J. By the U. S. St. of June 22, 1874, § 17, it is enacted that the provisions of a composition, accepted by a resolution of the requisite majority of the creditors of a bankrupt, and confirmed by the District Court of the United States, in pursuance of this section, “ shall be binding on all the creditors whose names and addresses and the amounts of the debts due to whom are shown in the statement of the debtor produced at the meeting at which the resolution shall have been passed, but shall not affect or prejudice the rights of any other creditors.” The bankrupt act provides that “ no debt created by the fraud or embezzlement of the bankrupt, or by his defalcation as a public officer, or while acting in any fiduciary character, shall be discharged by proceedings in bankruptcy; but the debt may be proved, and a dividend thereon shall be a payment on account of such debt.” U. S. Rev. Sts. § 5117. U. S. St. March 2, 1867, § 33. A claim in tort for goods obtained by false and fraudulent representations is within this section. Morse v. Hutchins, 102 Mass. 439. In re Devoe, 1 Lowell, 251. Turner v. Atwood, ante, 411. The question presented therefore is, whether an action on a debt, which would not be barred by a certificate of discharge under the bankrupt act, is barred by a composition under the act of 1874. We are of opinion that it is not, for the following reasons: The statute of 1874 is declared to be an amendment and supplement of the bankrupt act; and a composition under it is a substitute for the ordinary proceedings and discharge under that act, and takes effect, not merely by the voluntary assent of the parties, but from the action of the District Court of the United States, and binds alike those creditors who do and those who do not assent to it. In re Becket, 2 Woods, 173. Guild v. Butler, 122 Mass. 498. The words of the statute, declaring that the provisions of a composition “ shall be binding on all the creditors whose names and addresses and the amounts of the debts due to whom are shown in the statement of the debtor,” must be construed in reference to the provisions of the bankrupt act. These words certainly do not include debts, though appearing on that statement, [496] which are not provable in bankruptcy. Ex parte Trafton, 2 Lowell, 505. Pari ratione, they affect the rights of creditors, whose debts are provable in bankruptcy, so far only as they would be affected by a certificate of discharge under the bankrupt act. The statute prescribes that “ every such composition shall, subject to priorities declared in said act, provide for a pro raid payment or satisfaction, in money, to the creditors of such debtor, in proportion to the amount of their unsecured debts, or their debts in respect to which any such security shall have been duly surrendered and given up.” It does not allow any special compensation to be made to any creditor whose debt is of a class from which the debtor would not be discharged by ordinary proceedings in bankruptcy; and cannot be presumed to have been intended to cut off without compensation the right that such a creditor would retain against the bankrupt, notwithstanding a certificate of discharge. The impression made upon our minds at the argument has not been removed by a consideration of the reasons assigned for a different view, in the cases, to which we have since been referred, in the Supreme Court of New Hampshire, and in the District Court of the United States for the District of New Jersey. Wells v. Lamprey, 58 N. H. In re Shafer, 17 Bankr. Reg. 116. It may be added that there are decisions of the Chief Judge in Bankruptcy in England, and of Justices Davis, Brady and Ingalls in the Supreme Court of New York, in accord with our conclusion. Ex parte Halford, L. R. 19 Eq. 436. Libbey v. Strasburger, 14 Hun, 120. The Superior Court therefore rightly refused to rule, as requested by the defendant, that the composition operated as an accord and satisfaction of the claim in suit, and as a discharge thereof, and as a bar to this action. Exceptions overruled.