Russell v. Owen

Sherwood, Judge, delivered the opinion of the court. 1. The chief question for determination in this case is, whether a creditor who, in making proof of his claim before the register in bankruptcy omits to show that the bankrupt has an unsatisfied claim against him, can, when sued by the. assignee for the amount of such unsatisfied and omitted claim, plead as a set-off the amount allowed by the register as a balance due to him. This question must receive a reply in the negative. Although the right of set-off is recognized by section 20 of the general bankrupt law of 1867, yet this recognition is accompanied with the provision, “ that in all cases of mutual debts or mutiral credits between the parties, the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed and paid.” And the next succeeding section of the law provides: “that no creditor, proving his debt or claim, shall be allowed to maintain any suit at law or in equity therefor against the bankrupt, but shall be deemed to have waived all right of action aud suit against the bankrupt.” When a party defendant pleads a set-off, he, in effect, brings an action for the amount of that set-off; but, by presenting and proving his claims before the register, the creditor is to [187] be deemed as waiving “ all right of action or suit against the bankrupt.” It would be clearly contrary therefore to the evident intent of the above recited sections, to allow a creditor to do that indirectly, which the law precludes him from doing directly; to accomplish, by way of set-off, that which he would be debarred from asserting in a direct action. The same view of this point is taken elswhere. (Brown vs. Farmers’ Bank of Kentucky, 6 Bush., 198.) 2. Another question presented by the record is, as to the jurisdiction of tlie trial court. On this, also, no doubt is entertained. The assignee stands in the shoes of the bankrupt, and can select forum in which to bring bis action; and this right of the assignee is not at all affected by the fact that another court has acquired jurisdiction of the bankrupt’s estate. As that jurisdiction is exclusive only so far as relates to the proper disbursement of the assets of the bankrupt when collected, and has no reference to the method or agencies to be pursued or employed in their collection. (Bump Bankr., 198; Stevens vs. Mech. Sav. Bk., 101 Mass., 109; Ward vs. Jenkins, 10 Met., 583.) The judgment is therefore affirmed. Judges Tories and Hough absent. The other judges concur.