Lavender's Lessee v. Gosnell

Bartol, C. J., delivered the opinion of the Court. Thomas T. O’.Dell applied for the benefit of the insolvent laws, and received his discharge in January 1841. On the 28th day of March 1842, he applied for the benefit of the Bankrupt Law of the United States (of 1841,) and received his final discharge thereunder, in August 1842. In .December 1843, Elizabeth, wife of Isaiah O’Dell died intestate, seized in fee of a tract of land known as “ Sheepfold and Wilmot’s Meadows,” leaving her husband surviving her, who died in 1847, and six heirs-at-law, among whom was Thomas T. O’Dell, the insolvent, who by deed dated the 10th day of May ls64, conveyed all his interest in the land to Elizabeth T. Lavender, the appellant, in trust for his wife and children. On the 7th day of October 1861, M. T. Gosnell was appointed trustee, in the insolvency proceedings, and claiming that he was [158] entitled, as such trustee, to the interest in the land which had devolved upon the insolvent, by the de'ath of Elizabeth O’Dell and her husband, hy virtue of the Act of 1834, ch. 293, sec. 2, sold and conveyed it to the appellees, who are now in possession. This action was brought hy the lessor of the appellant, claiming title under the deed of May 10th 1864. The plaintiff having abandoned all claim to “ Sheepfold,” the contest was as to the title to “ Wilmot’s Meadoios.” There was no dispute as to the facts above state’d, and it was admitted that “ the list of debts furnished hy the bankrupt, did not include any mentioned in the insolvency proceeding.” By agreement of counsel filed in this Court, it is admitted that the assets of the insolvent were not sufficient to pay the creditors mentioned in the insolvent proceedings, and that at the time of O’Dell’s petition in bankruptcy, balances of their claims remained unsatisfied. In this state of facts, the only question to be decided, is, whether the title to the lands devolved upon the insolvent trustee under the Act of 1834, ch. 293. The second section of that Act provided, “that all property ****** that shall be acquired by or accrue to the insolvent debtor, by gift, descent, or in his own right by bequest, devise, or in any course of distribution, shall he deemed and so distributed and applied, as estate of said insolvent debtor for the benefit of his creditors at the time of his application, and as effectually as any property mentioned in the schedule of such insolvent debtor upon his said application, and shall as from the time of said acquisition or accrual, vest in any trustee or trustees for his or her creditors, appointed, or hereafter to be appointed under such application.” * * * * * There can be no doubt about the construction and effect of this section. It declares in terms that the property which accrues to the insolvent after his discharge, by inheritance, shall vest in the trustee, for the benefit of his [159] creditors, who were such at the time of his application. See State vs. Culler, 18 Md., 419, 433. Upon the death of Mrs. Isaiah O’Dell, in December 1843, the one-sixth part of the land in question, which descended to Thomas the insolvent, as one of her heirs was instantly vested in his insolvent trustee, by force of the Act of 1834 above cited. The statute operating to change the course of descent, and to substitute the trustee in the place of the insolvent, as the party to take the estate, which would otherwise have vested in the insolvent; and consequently the latter could pass no title to the plaintiff’s lessee by his deed of May 10th 1864. But it is contended that the discharge of O’Dell under the Bankrupt Law in 1842, has defeated the title of the insolvent trustee. First, because the Bankrupt Law operated as a repeal of the insolvent laws of the State ; and secondly, because by his discharge under the Bankrupt Law, O’Dell was released from all his debts ; and there being no creditors remaining, the powers and rights of the insolvent trustee have ceased, and he cannot claim the property. The answer to this argument seems to us to be very plain. It is certainly well settled that the power conferred upon congress by the constitution, to establish “ a uniform system of bankruptcy,” when “it has been exercised, is paramount and exclusive, and suspends the insolvent laws of the State, and the jurisdiction of the State Courts over cases falling within the purview and operation of the Bankrupt Law.” Van Nostrand vs. Carr, 30 Md., 128. But that does not affect the rights of the parties in the present suit. The Bankrupt Law did not go into effect till the 1st day of February 1842. Long before that time (viz: in March 1840,) O’Dell had petitioned under the Insolvent Laws and executed a deed to his trustee, and in January 1841, had been finally discharged. During all that time the Act of 1834 was in full operation, and under [160] it the rights of the creditors and of the trustee had been fixed. Under that Act, as we have seen, the trustee became entitled to receive, for the benefit of the then creditors, any property which might thereafter accrue to the insolvent, in the manner prescribed by the Act. This right, though dependent for its beneficial enjoyment, was as completely vested in the trustee, as was his right to the property mentioned in the insolvent’s schedule, and was not divested by the Bankrupt Law which was afterwards passed. The effect of the Bankrupt Act, while it was in operation, was to suspend, not to repeal the insolvent laws of the State, and when the former was repealed on the 3rd day of March 1843, the insolvent system was again in full force and operation. The Legislature however, out of abundant caution, re-enacted the several Acts and statutes of the State relating to insolvent debtors, which were in force and operation at the time of the passage of the Bankrupt Law. Act of 1843, ch. 109. But it is quite immaterial to consider either the effect of this Act, or the necessity for its passage. As it is very evident, that the rights of the trustee would not have been impaired or affected by the Bankrupt Law even if it_ had remained in full opei’ation. Now, what was the effect of O’Dell’s discharge under the Bankrupt Law ? The counsel for the appellant have argued that it released the bankrupt from all the debts which he owed at the time of his application under the insolvent laws, and that all such debts have been thereby cancelled as effectualh’- as if they had been paid. But this is an error. By his discharge under the insolvent laws, O’Dell had been released from all his debts and liabilities, existing at the time of his application. Consequently his then creditors had ceased to be such, and would not have been entitled to prove their claims against him [161] in the Bankrupt Court, or to participate in tbe funds in the hands of the assignee. (Decided 23rd June, 1875.) This is conclusive to show that they were not affected by the discharge in Bankruptcy. When the proceedings in Bankruptcy took place, O’Dell was not seized or possessed of the land now in controversy, nor had he any right or title therein which could pass to his assignee. He had nothing but a bare expectancy, and all possibility of acquiring it by inheritance had before been surrendered ; or taken from him by the Act of 1834, which had changed the course of descent, substituting the trustee in his place, and providing that eo-instanti upon the descent being cast, the property should vest in the trustee for the benefit of his creditors, from whose debts he had been discharged under the insolvent laws. For these reasons we are of opinion the prayer offered, by the appellant was properly refused. Judgment affirmed. Stewart, J., dissented.