text:
    Spencer vs. Spencer and Corning.
    It is proper, in taking and stating the accounts of two trustees, that the master should state the accounts as to the trust fund separately, as between the trustees respectively and the cestui qde trust; although each trustee is liable for the defaults of the other in úiisapplying the trust fund And the conséllt of the parties that the accounts should be thtis stated is equivalent to a special provision, in the Order of reference, authorizing the accounts to be so stated.
    Where stock is transferred, by the holder, and there is no evidence that such holder did not receive paymént for the stock from the transferee, it seems the legal presumption is that he did receive such payment.
    Where stock belonging to a trust fund is transferred under a joint- power of attorney given by rivo trustees of the fund, they are both liable for the Whole proceeds of the stock; although such proceeds pass wholly into the hands Of one of the trustees. The joining in the sale of stock, by a trustee, and his suffering the money received for the stock to go into the hands of his co-trustee, renders him liable to the trust fund for such money, in case of a misapplication thereof by the co-trustee.
    Where the litigation, in a suit against a trustee, arises from his gross negligence in not keeping proper accounts of the trust estate, and from his misapplication of the tfúst funds, he will be charged with the costs of the suit.
    And where one of the trustees neglects to insist that the accounts of the trust estate shall be annually passed, as specially directed by the trust deed, and omits to take steps for the removal of his co-trustee who neglects to have the accounts passed, he is not entitled to his costs, in a suit against him and his co-trus-ee for an account.
    Where a cestui que trust files a bill against his trusteefor an account, and in such bill makes an unfounded claim against the trustee, and where the trustee, in his answer, to such bill, makes an unfounded claim upon the trust fund in his hands, neither party will be entitled to costs as against the other.
    This case came before the chancellor upori an appeal from a decree of the late assistant vice chancellor, made upon the hearing of exceptions to a master’s report arid for further directions. The defendants W. Spencer and R. S. Corning were trustees of the property of J. Spencer, the 'complainant, the brother of one and brother in law of the other of the .defendants. The defendant Corning put in his answer to the bill; to which answer a replication was filed. And the defendant W. Spencer suifered the bill to be taken as confessed. In January, 1839, upon the written stipulations of all the parties, a decretal order was entered, referring it to Master J. Rhoades to take and state an account between the parties coriiplainant and deferidants, touching and concerning the matters in the complainant’s bill and the answer of the defendant Corning. But such decretal order provided that nothing therein contained should be construed to admit or establish or waive the liability of the respective defendants for the acts or omissions of each other. Under this order of reference the master took the accounts between the parties; and he found a balance due to the complainant of §4940,34. By the request of the defendant Corning, and with the assent of the other parties, the master also made separate statements of the receipts and disbursements of the defendants W. Spencer and R. S. Corning respectively. And he reported that W. Spencer was a debtor on account of the trust estate, to the amount of §5658,41; and that the disbursements, and payments of the defendant Corning, on account of the trust estate, exceeded his receipts §887,53.
    To this report the complainant filed five exceptions, all of which were disallowed, except so much of the second exception as related to the sum of §208,07 included in voucher No. 45 ; as to that sum the exception was allowed.
    W. Spencer took nine exceptions to the report in reference to the statement of his individual receipts and disbursements on account of the trust estate; all of which exceptions were disallowed except the fifth, which the assistant vice chancellor allowed. And he charged the §976,89, under the date of November 3d, 1834, to the account of the defendant Corning.
    The defendant R. S. Corning took three exceptions to the report ; the t#o first of which were disallowed. But the assistant vice chancellor allowed Coming’s third exception, except so far as it involved the charge of interest upon a note of §203,58, from the 28th of July, 1834. And having proceeded to state the result of the account according to his decision upon the exceptions, he made the balance due to the trust estate, from W. Spencer, §3749,14, with interest from the date of the master’s report, and the balancé due from the defendant Corning -to the trust estate the sum of §1258,72; these sums he required the respective defendants to pay into court within thirty daysj for the use of the complainant. And he directed the defendants to transfer the securities in their hands to the clerk of the court, for the complainant’s use, until a new trustee could be appointed. But the assistant Tice chancellor having been furnished with copies of .the original schedules, which were annexed to the draft of the master’s re-. port, instead of the corrected schedules annexed to the report as it was settled and filed, a mistake ocCtirred in computing the balances due from the defendants respectively; under the decision of the court as it was intended to be made. By such decree neither party was to recover costs as against the other.
    The defendant Corning appealed from the whole of the decree. But he subsequently gave notice ,to the respondents that he waived his appeal except as to the following points: First; as to that part of the decree which allowed so much of the complainant’s second exception as related to the sum of ¡$208,07 included in voucher No. 45. Second; as to só much of the decree as allowed the fifth exception of the defendant W. Spencer. Third; as to that part of the decree which disallowed so much of the third exception of the defendant Corning which involved a charge of interest upon the note of ¡$203,58; given for interest. Fourth; as to that part of the decree which; in carrying out the allowance of the third exception ■ of the defendant Corning, charged him with $2861,42, the balance of Horton’s bond, as an offset to the debt of Corning against thé complainant, which was liquidated on the 27th of July, 1833, at ¡$2908,32; to which the third exception of Corning referred ; and also as to that part of the decree which fixed the balances declared to be due from the defendants respectively, and decreed payment thereof. Fifth; as to that part of the decree which refused costs to either party as against the other. And the complainant appealed from that part of the decree which related to costs.

      S. Stevens, for the complainant.

      L. H. Palmer, for the defendant W. Spencer.

      L. H, Sandford, for the defendant Corning.
   The Chancellor.

The first question which I shall consider-, and which is the most important one in the case, is as to the defendant Coming’s third exception j or rather to that part of the decision which holds Corning accountable for' the balance upon Horton’s bond and mortgage. The evidence in the case leads my mind irresistibly to the conclusion that the defendant Corning never paid any consideration for the deed of the 20th of April, 1833, and for the assignment of the mortgage of Horton, except the several sums included in exhibit B. B. The sole object of the deed appears to have been to prevent the property from being squandered, and to transfer it as a security for a portion of the debts mentioned in exhibit B. B. It will be seen, by reference to the evidence, and the endorsements upon many of the vouchers, that a considerable portion of these debts had been paid or assumed, by the defendant Corning, before the date of that deed. Coming’s letter of the 13th of April,-1833, is important evidence on this subject. The second execution and acknowledgment of the assignment of the mortgage, in which the consideration is altered to $3000, took place on the 7th of June; four days after the date of the deed of trust to the defendants. And Coming’s letter to W. Spencer, immediately after the assignment was thus amended, shows how the $3000 was made up. It follows of course, upon this view of the case, that the interest of the note given for a year’s interest on exhibit B. B. was properly disallowed by the assistant vice chancellor. And so much of the decree as declares that the defendant Coming is to be charged with the $2861,42, as the balance of Horton’s bond and mortgage, and allows that sum as an offset against the debt acknowledged in exhibit B. B., is not erroneous. The assistant vice chancellor was also right in supposing that these claims should be adjusted in this suit. For if there was in fact any debt due to Coming from Spencer, at the date of the trust deed, which had not been paid by the proceeds of this mbrtgage, it was proper that it should be retained by Corning out of the trust property.

The form of the complainant’s second exception is that the master has allowed vouchers Nos. 31, 34 and 43. And the decree is that the exception shall be disallowed, except so much thereof as relates to the $208,07 included in Toucher No. 45. This part of the decree is right in form, if the assistant vice chancellor came to the correct conclusion that the sum referred to, and allowed upon exhibit 45, was also embraced in the general receipt, voucher No. 43, which was -given sixteen days after-wards for $330,28; for the cash received up to that date. For the $208,07 being allowed to Corning, as of the 30th of April, upon the first receipt, the whole of voucher No. 43, referred to in the complainant’s second exception, should not also baallowed. The assistant vice chancellor is also right in reference to the substance of this item. On the face of the receipt of the 16th of May, it is stated that the complainant has received in cash, up to this date, $330,28; and that receipt is embraced in the annual account rendered in June thereafter, showing the sum of $699,77 received on account of the $700 annuity. But that account does not contain the other charge of $208,07 in voucher 45; although the last mentioned voucher states in express terms that the $208,07 was on account of the annuity for the current year ending on the first of June then next. This is conclusive, to any mind, that this sum was embraced in the subsequent receipt given on the 16th of May, and was brought into the account of the annuity for the current year.- It is true the defendant Corning, in his further answer, swears he believes these charges to be correct. That, however, is not sufficient to countervail the intrinsic evidence arising from the face of the several vouchers. The probability is, that Corning forgot that he had taken a receipt for the $208; that when he paid a further sum, a few days after-wards, he drew the receipt in such a form as to include the whole; and that when he put in his answer, some years after-wards, he found this receipt and supposed it was not embraced in the receipt subsequently given.

I shall next proceed to consider whether the master or the assistant vice chancellor came to the correct conclusion upon the subject of the 5th exception of the defendant, W. Spencer. It was not only proper, but necessary to the attainment of justice, that the master should state the account as between the complainant and each of the defendants, in relation to the trust fund; even if the defendants were eventually to be charged for the defaults of each other in misapplying the fund. And the master, by his report, shows that the accounts were thus stated at the request of Corning, and with the consent of the other parties. And this consent of the parties is equivalent to a special provision in the order of reference, authorizing the master to state the accounts in that manner.

The fifth exception of W. Spencer is, that the master has charged him itidividually with $976,89, as of the 3d of Nov. 1834, the proceeds of the sale of New-York state stock; whereas he ought to have charged the same to the defendant Corning, and not to the exceptant. The facts in relation to this sum are as follows: Corning, W. Spencer, D. Spencer, and Corning & Spencer as the trustees of John Spencer, had equal shares of the New-York five per cent canal stock, redeemable in 1845; amounting to $872,23 for each. On the 30th of'October, 1834, R. White, as the attorney of W. Spencer, transferred the stock of the latter to R. S. Corning; and on the next day Corning sold to Coster & Carpenter, brokers in New-York, $1744,48 of the same kind of stock, at 112 per cent, and received therefor a check for $1953,82. This must have been Coming’s original stock and the stock which William Spencer had transferred to him the day previous, by his attorney. And as there is no evidence that W. Spencer did not receive pay for the stock thus transferred to Corning, at or before the time of such transfer, the legal presumption is that he was paid. If he was not, however, that stock had nothing to do with the trust funds in the hands of the defendants as the trustees of John Spencer. Of course, therefore, it cannot come into these accounts. And W. Spencer must proceed in some other way to obtain payment, from Corning, for the $976,91 received upon the sale of W. Spencer’s half of the stock sold to Coster & Carpenter, on the 31st of October; if he has not heen already paid.

The only remaining question for consideration, upon this exception, is whether Corning or Spencer is primarily liable to the complainant for the proceeds of the stock held by them as trustees ; apd which it appears, from the testimony, was transferred to Coster & Carpenter under the joint power, on the Bd of November, 1834, for the $876,89, which is in controversy by this exception. The testimony of White shows that the stock which belonged to the trust fund was transferred by virtue of a power of-attorney to him, to make the transfer, executed by both the trustees. That power was dated on the 1st of November, and was acknowledged before Judge Hilton of the Albany common pleas, and witnessed, by him. Corning, therefore, must have returned fromNew-York, after the sale of the other stock which he transferred to Coster & Carpenter the day previous. Whether either he or W. Spencer went to New-York after that, does not appear; but I should infer from the testimony that neither of them went there to make the sale. For it appears that Daniel Spencer also gave a power to White to transfer his stock on the book of the Manhattan Company, where all the stock was transferable. And on the 3d of November, 1834, White transferred both parcels to Coster & Carpenter, who took but one certificate, from the Manhattan Company, for the two parcels transferred to them on that day. None of the witnesses have any recollection of the transaction except from their books. But from such books it appears that A. Kimball made the sale of these two parcels of stock to Coster & Carpenter and received therefor their check, payable to him or his order, for the sum of $1953,79; or $976,89 for each moiety of the stock. I infer from all this, that after the return of Corning to Albany, on the morning of the 1st of November, it -was deemed advisable by the trustees to sell the stock held by them, at the price it was then bringing in the market; that the power was thereupon executed by them and sent to A. Kimball, as their agent, to make the sale and transmit them the proceeds; and that Daniel Spancer at the same time, either through Corning or otherwise, employed Kimball to sell his stock, and transmitted a similar power to White, the cáshier of the Manhattan Company, to enable him to make the transfer upon the books of the company. There is no-evidence as to who received the money for the trust stock, from the hands of Kimball; except what may be inferred from the receipt of W. Spencer, of the 10th of November, 1834. And if that receipt does not relate to the stock in question, one half of the $976,89 should be charged to each of the defendants, as between themselves. As to the complainant, however, they are both ultimately' liable for the whole'; for the stock was transferred under a joint power from both.

But unless this receipt has been altered by the defendant Corning, and is a forgery, the fifth exception of the defendant W. Spencer ought not to have'been allowed; even as to the one-half of the proceeds of that stock, and the interest thereon. The receipt is in the hand-writing of the defendant W. Spencer, and the amount specified therein is the precise sum for which the trust stock was sold, a few days previous. It is also two cents less than the amount for which W. Spencer’s own stock was sold, on the 31st of October, before Coming’s return to Albany. The language of the receipt is singular, but I think it can be rationally explained. The receipt is in these words:

“ Received of Richard S. Corning nine hundred and seventy-six jW dollars, in full for the amount received by him on the sale of New-York state five per cent stock owned by me, &c. Nov. 10th, 1834.
Wm. Spencer, Trustee, &c.”

It will be seen that the defendant Wm. Spencer, is credited with $1648,42; which, Mr. Stevens says, he actually paid on the first of July, for John Spencer’s share of the Canal Bank assessment. But exhibit No. 7, produced by W. Spencer, shows that a part of the funds for that purpose must probably have been raised by him upon the discount of a note, signed by him and his co-trustee, R. S. Corning, for $1000, dated on that day, payable to the order of D. Spencer, at the New-York State Bank, sixty-three days after date, and endorsed by D. Spencer. The note was discounted by some bank, as would appear from the calculation of the discount thereon. This note became due on the 2d and 5th of September; and if renewed once it would fall due in the fore part of November when this stock was sold. This corresponds with the filing upon the back of the receipt of the 10th of November,, which is in these words: “ Wm. Spencer’s receipt for New-York state stock sold, Nov. 10, 1834, for J. Spencer’s part of Canal Bank money.” The probability, therefore, is, that the funds of the several parties to pay off their shares of the assessments were, to a certain extent, raised by discounts; that •their notes were renewed until their several shares of this stock were sold, about the 1st of November, 1834, to pay them off; and that W. Spencer received the proceeds of the trust stock, and applied it to the payment of the money loaned, upon the joint note of himself and-Corning, on the 1st of July. Even if this were not so, and I admit it is but a conjecture, it appears that the defendant W. Spencer was the keeper of the funds of the trust estate; and that whenever expenses had been incurred or payments made by Corning, they were refunded to him by Spencer out of the trust funds. It was, theiefore, strictly in conformity with the mode of doing business between them, that W. Spencer should receive the proceeds of the stock, belonging to the trust estate, when the sale was completed and the money was received. And if Corning had in fact received a transfer of W. Spencer’s stock, to be sold for him, and had not taken a voucher showing that the proceeds of that sale had been accounted for, this receipt was probably intended by Spencer, who drew and signed it, to answer the double purpose, of showing that he had received the $976,89, the proceeds of the stock of the trust estate, which was to be accounted for by him as trustee, and also of acknowledging that he had been paid in full for his own stock, which had also been sold by Coming. If the &c. before the word November, in the receipt, and the words trustee, &c., after the name of W. Spencer, have not been fraudulently and feloniously interpolated by the defendant Corning, it is impossible to resist the conclusion that W. Spencer received the proceeds of the sale of the trust stock ; and that he intended to acknowledge the receipt of it, by the instrument in question. And the testimony establishes the fact, that the word trustee is in the hand-writing of Spencer; thus removing all grounds for suspicion that the defendant Corning has been guilty of a forgery. I conclude, therefore, that the master was right in charging this sum to the individual account of W. Spencer, and not to the account of Corning. Of course, the decree of the assistant vice chancellor was erroneous in allowing the fifth exception of the defendant W. Spencer. The $976,89, with interest thereon, must therefore be taken from the separate account of the defendant Corning, and must be decreed to be paid by W. Spencer to the complainant, in addition to the amount which he was directed to pay by the decree appealed from. But the defendant Corning has unquestionably rendered himself liable to the complainant for this sum of money, by joining in the sale of this stock, and suffering the money to go into the hands of his co-trustee; who, as it now appears, had misapplied a large sum of the trust funds, received upon E. Coming’s bond in January, 1884. Corning must therefore be decreed to pay the amount of the proceeds of the stock, or so much thereof as may be necessary to pay the amount due to the complainant from the two defendants, if it cannot be collected from W. Spencer.

As a mistake in the schedules has led the vice chancellor into another error in stating the balance due from Corning, that error must also be corrected in the decree. And if the parties cannot agree as to the corrections and computations, so as to insert the proper amounts in the decree without a further reference, there must be such a reference to adjust the amount, in conformity with this decision. It may also turn out, upon a proper statement of the accounts in conformity with the decision upon the exceptions, &c., that the $976,89 still due from Spencer, will more than pay what is due to the complainant, and leave a small- balance of that amount due from the defendant W. Spencer, to Corning. The decree must, in that case, direct the payment to the complainant of the balance due to him from W. Spencer, and that W. Spencer pay the residue of what is due to the trust estate, to Corning, to make up the amount which Corning has overpaid.

Upon the question of costs, I think the defendant W. Spencer should have been directed to pay to the complainant so much of the costs of the suit as had not been produced by the litigation of the items of the account as between the complainant and the defendant Corning. That exception, of course, includes the expense of all the testimony in relation to the character of Corning and the costs upon the exceptions, both of the complainant and of Corning. The whole, or nearly the whole, of the necessary part of the litigation in this suit, appears to have arisen from the gross negligence of W. Spencer in not keeping proper accounts of the trust estate; and from his having misapplied the funds to the extent of several thousands of dollars.

' The defendant Corning is also in fault for not having insisted that the accounts should be annually passed, before the master, as directed in the trust deed. For when his co-trustee neglected to have such accounts passed, Corning should have taken the proper steps to have him removed as one of the trustees. The fact that W. Spencer was his brother in law, and also a brother of the complainant, is some excuse; but it is not sufficient to entitle Corning to his costs out of the trust fund. Besides, Corning, in his answer, made an unfounded claim upon the trust fund which was in substance disallowed. On the other hand, the complainant has also made unfounded claims upon him, which have been disallowed. As between the complainant and Corning, therefore, the decree of the assistant vice chancellor, as to costs, is right, and it should not be disturbed upon the appeal of either party.

' Neither party is to have costs upon the appeals, as against the other. Nor are costs to be allowed as between either of the appellants and the respondent W. Spencer, on either of the appeals. But as the suit was for the benefit of the trust fund, all the necessary costs of the complainant, as well upon the appeals as in the proceedings before the assistant vice chancellor, or in the cause, which shall not be collected from the defendant W. Spencer under this decree, must be paid to the complainant’s solicitors out of the trust fund in the hands of the new trustee.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    Hubbell and Curran vs. Cramp and others.
    The bankrupt act of August, 1841, makes the discharge and certificate, when duly granted, a full and complete discharge of all the debts of the bankrupt provable under that act. And to render a debt provable under the act, it is not necessary that it should have been stated in the petition, presented to the district court in which the proceedings in bankruptcy were instituted.
    The omission of the name of a creditor, in the list of creditors, by mistake, or in con- ' sequence of the ignorance of the bankrupt of the existence of the debt, or of his belief that it had been paid, will not prevent the creditor from proving his debt under the act, so as to entitle him to his share of the bankrupt’s property.
    The bankrupt act does not require absolute certainty in the petition, either as to the creditors, or as to the inventory of the property of the bankrupt; but it requires that the bankrupt should set forth both according to the best of his knowledge and belief.
    It seems if the bankrupt, in his petition, intentionally omitted the names of any of his creditors, or wilfully misstated the places of their residence or the amount of their debts, that his discharge can be avoided, upon that ground.
    Where the district court obtains jurisdiction of the case, the discharge and certificate are a complete bar to all Buits against the bankrupt; unless the discharge is impeached for some fraud, or for wilful concealment, by him, of his property or his rights of property.
    The mere regularity of the proceedings in bankruptcy, subsequent to the presenting of the petition, cannot be inquired into collaterally, where there is no fraud in the case.
    Where a plaintiff, who had recovered a judgment before the decree in bankruptcy, files a creditor’s bill against the bankrupt after he has obtained his discharge, and does not in his bill, impeach the validity.of the discharge, either for fraud, or for an irregularity not apparent on the face of the proceedings, and where the answer sets up the discharge as a bar to the suit, the complainant, in opposition to a motion to dissolve an injunction, which has been granted on the bill, cannot read affidavits impeaching the discharge.
    Where a creditor intends to.impeach a bankrupt’s discharge, for fraud, the bankrupt is entitled to a previous notice in writing of such intention; and such notice must specify the alleged fraud.
    This was an appeal, by the defendant J. Cramp, from a decision of the vice chancellor of the fifth circuit, denying an application to dissolve an injunction, upon a creditor’s bill, so far as respected the appellant’s property. It appeared from the answer of the defendant Cramp, that he was the second endorser upon a business note, made by H. Proud, and endorsed by W. Draper, the other defendant in this suit. The note belonged to the complainants ,at the time Cramp applied for the benefit of the bankrupt act, in March, 1842, and it had been duly protested for non-payment. The defendant Cramp, in the inventory of his debts, as the complainants stated in an affidavit read in opposition to the motion to dissolve the injunction, either from inadvertence or otherwise; neglected to insert their names, as creditors, in consequence of his liability as such second endorser on the note. And-they had no other notices of the proceedings in bankruptcy than the ordinary notices in the newspapers. Subsequent to the presenting of the petition in bankruptcy, and previous to Cramp’s discharge, the complainants obtained a judgment against him and the other defendants, as the drawer and endorsers of the note; upon which judgment an execution was afterwards issued and returned unsatisfied. After the recovery of the judgment, and on the 2d of July, 1842, the defendant Cramp was discharged from all his debts by a decree of the district judge, in the usual form. Nearly a year afterwards, and after the complainants had been informed of the discharge, they filed their creditors’ bill, in this suit, against Cramp and the other defendants in the judgment; alleging, in the usual form, that the judgment remained in full, force, and that there was then justly due thereon to them $264,19, and interest, over and above all claims of the defendants. But nothing was stated in the bill in relation to the discharge of the defendant Cramp under the bankrupt act, nor was any attempt made, in the bill, to impeach the discharge as fraudulent, or as irregularly obtained. The defendant Cramp, by his answer, denied that there was any thing due by him to the complainants. And as evidence that nothing was due, and that the judgment was not in force as to him, he set out his discharge under the bankrupt act; showing all the necessary facts to give the court jurisdiction to grant such discharge, and to make it a full discharge of this and all other debts which were provable against his estate, under the proceedings in bankruptcy.

      M. T. Reynolds, for the appellant.

      R. W. Peckham, for the respondents.
   The Chancellor.

The bankrupt act of August, 1841, makes the discharge and certificate, when duly granted, a full and complete discharge of all debts 'of the bankrupt which are provable under that act. And to render a debt provable under, the act, it is not necessary that it should have been stated in the petition, presented to the district court in which the proceedings in bankruptcy were instituted. For if the name of a creditor was left out of the list of creditors by mistake, or because the bankrupt was not aware of the existence of the debt, or because he supposed it had been paid by the drawer, or by a prior endorser of a note, that would .not prevent the «’editors from proving their debt under the act, so as to entitle them to a share of the bankrupt’s property and effects. The statute does not require absolute certainty in the petition, either as to the list of the creditors or as to the inventory of the property of the bankrupt. But it requires that the bankrupt shall set forth both, according to the best of his knowledge and belief. And as the presenting such a petition is necessary to give the court jurisdiction in the case, if it can afterwards be shown that the bankrupt intentionally or knowingly omitted the names of any of his creditors, or wilfully misstated the places of their residence, or the amount of their debts, I am not prepared to say that the discharge cannot be avoided on that account; although that may not be one of the frauds referred to, in the fourth section of the bankrupt act, for which the discharge may be impeached.

The answer in the present suit, however, shows the necessary facts to give the district court-of the northern district of New-York jurisdiction of the case. For it states, among other things, that the defendant Cramp presented a petition to that court, in March, 1842, such petition setting forth to the best of his knowledge and belief, a list of his creditors, their respective places of residence and the amount due to each, together with an accurate inventory of his property, &c., verified by his oath, And the fact that the names of the complainants, who held a note upon which Cramp was only second endorser, were not inserted in the list of creditors, is not sufficient to induce a belief that his petition was false; as not containing a correct list of his creditors according to the best of his knowledge and belief. The jurisdictional facts being thus stated in the answer, and sworn to, must be taken as true, for the purpose of this application. That being the case, the act makes the discharge and certificate conclusive evidence, in favor of the bankrupt; and a full and complete bar to all suits against him, unless the same is impeached for some fraud, or wilful concealment of his property or rights of .property. The regularity of the subsequent proceedings, therefore^ cannot be inquired into in this collateral way, where there is no fraud in the case.

Besides; it appears, in this case, that the complainants were aware of the fact that Cramp had been discharged, under the bankrupt act, previous to the filing of their bill in this cause. And if they intended to impeach his discharge, either for fraud or for an irregularity which was not apparent on the face of the proceedings, they should have set forth the facts in their bill; instead of leaving the court or the officer who granted the injunction, to infer that the judgment still remained in full force as against this defendant and his property. (Hilten v. Lord Granville, 4 Beav. Rep. 130.) The complainants having omitted to impeach the discharge, by their bill, they cannot, in this state of the suit, read. affidavits to sustain their injunction,by impeaching the discharge, without giving the bankrupt any opportunity to answer them. For, by the express provisions of the bankrupt act, even where the discharge is impeached for fraud, the bankrupt is entitled to a previous notice, in writing, of the intention to impeach it; specifying the'alleged fraud or concealment.

The injunction should therefore have been dissolved, in this case, notwithstanding the affidavits which were read in opposition to the application. The order appealed from must be reversed with costs; and the injunction dissolved.


text:
    Cruger and others vs. Halliday, adm'r, &c.
    Where J)., by her will, appointed H. L. J. & C. trustees under her will, and devised and bequeathed to them, or to such of them as should accept the trust, and to the survivors or survivor of them, or to such other person or persons as might become trustees thereof in virtue of the subsequent provisions of her will, her residuary estate real and personal, upon various active trusts; and in a subsequent clause of the will provided, that as often as it should happen that her said trustees by death, removal from the United States, or otherwise, should be reduced to the number of two or one only, her children then living, or a majority of them, or in case a majority of her children living at the time of her death should be dead, then her surviving children and her grandchildren, if of full age, &c. at a meeting for that purpose, held upon notice, should nominate to the surviving trustees or trustee, three or more discreet freeholders to be associated with the said two or one surviving trustees or trustee, and that it should be the duty of the surviving trustees or trustee to accept one or more of the persons so to be nominated to be joined in the trust, and should declare such consent and acceptance by a writing, un.der their hands and seals; and upon failure of such a meeting, nomination, and acceptance, the testatrix authorized her surviving trustees or trustee, &c. from time to time, by writing, &c. to nominate and appoint one or more persons to be trustees, &c. And C. S. and F. filed a bill; as trustees under the will of D. and in such bill alleged that J. and L., two of the trustees named in the will, declined to accept the trust, and that in June, 1833, W. was appointed to act as trustee in place of J. and L., in pursuance of the provisions of the will; and that in March, 1837, W. resigned his office of trustee, and the complainant S. was duly appointed trustee under the will, with H. and C.; and that in October, 1840, H. died, and the complainant F. was duly appointed trustee under the will with S. and C.

      Held on demurrer, that the bill was defective, in not stating how, in what mode and by whom W. S. and F. were appointed trustees, and in what manner W. resign- ' ed his trust and was discharged as trustee.
    A trustee, after he has accepted the trust, cannot discharge himself from liability by ■ a resignation merely. He must either be discharged from the trust by virtue of a special provision in the deed or will which created the trust, or by the order or decree of the court of chancery, or with the general consent of all the persons interested in the execution of the trust.
    Where infants or persons not in esse are interested in the trust, it seems that a trustee cannot be discharged without an order or decree of the court of chancery.
    A party coming into chancery and claiming a right as a substituted trustee under the will of the testator, should state, in his bill, the necessary facts to show that a vacancy had occurred which authorized his appointment as such substituted trustee.
    This was an appeal from a decretal order of the vice chancellor of the first circuit, overruling the demurrer of the defendant The bill was filed by H. I}. Cruger, G. W. Strong, and F. De Peyster, all claiming to be trustees under the will of Margaret Douglass, who died in December, 1829. The decedent, by her will, executed in due form of law to pass real estate, appointed R. Hálliday, I. Laurie, J. Johnson, and her daughter H. D.' Cruger, one of the complainants, her executors and trustees. And she devised and bequeathed to them, or to such of them as should accept the trust, and to the survivors or survivor of them, or to such other person or persons as might become trustees under the will, in virtue of the subsequent provisions thereof, her residuary estate, real and personal, upon various active trusts specified in the will. By a subsequent clause of her will, the testatrix provided, that so often as it should happen that her said trustees, by death, removal from the United States, or otherwise, should be reduced to the number of two, or one only, her children then living or a majority of them, or in case a majority of her children living at the time of her death should be dead, then her surviving children and her grandchildren, if of full age, and the guardians of such of-them as should be minors, at a meeting for that purpose, to be held upon notice, should nominate to the surviving trustees, or trustee, three or more discreet freeholders, to be associated with the said two or one surviving trustees, or trustee, in the execution of the trusts of the will; and that it should be the duty of the surviving trustees, or trustee, to accept one or more of the persons so to be nominated, to be joined in the trust, and to declare such acceptance and consent in writing, under their hands and seals. Upon failure of such a meeting, nomination, and acceptance, the testator, by her will, authorized and empowered her surviving trustees, or trustee, and their successors in the said trust, from time to time, by writing, under their or his or her hands and seals, to nominate and appoint one or more respectable freeholders, to. be trustees and to be joined with the surviving trustees, or trustee, in the execution of the trust. And she further directed that all the securities, in which the trust estate should then be invested, should be assigned and transferred by the surviving trustees; or trustee; to themselves and the new trustee, to be held by them upon the trusts mentioned in the will.
    The complainants, after stating the will and the death of the testatrix, and that she died seised and possessed of a large real and personal estate, alleged in their bill that Johnson and Laurie, two of the executors and trustees named in the will, declined and refused to accept the trust, and that the other two accepted it; that in pursuance of the provisions of the will, J. Whetten, in June, 1833, was appointed .to act as trustee, in conjunction with Halliday and Mrs. Cruger, in the place of Johnson and Laurie; that in March, 1837, Whetten having resigned his office of trustee, the complainant G. W. Strong, was duly appointed trustee under the will, with Halliday and Mrs. Cruger; and that in October, 1840, Halliday having died, the complainant F. De Peyster, was duly appointed trustee under the will, with Strong and Mrs. Cruger. The bill further charged that Halliday received a large amount of the trust fund, in. the execution of his trust, and that he had kept and retained to his own use $3750, for commissions to which he was not entitled. And the bill called upon the defendant, as administrator with the will annexed of Halliday the trustee, for an account and payment of the amount which was in the hands of his testator at the time of his death.
    The defendant put in a general demurrer to the bill. And upon the argument of the demurrer his counsel insisted, as ground of demurrer, that the bill showed no right or title in the complainants to maintain the suit, as no right or title was shown in any of the complainants except Mrs. Cruger: First, because it was not stated how or by whom Whetten and Strong and De Peyster respectively, were appointed trustees — whether by the children, or by the surviving trustees in default of a nomination by the children; and Secondly, because Whetten, if duly appointed, was still a trustee — the will having made no provision for his resignation of the trust; of which trust he could not divest himself without the consent of all the cestuis que trust or the sanction of the court of chancery.
    The vice chancellor disallowed the objections to the bill, and overruled the demurrer generally; with costs. From this decision the defendant appealed to the chancellor.

      L. H. Sandford, for the appellant.
    The bill shows no right or title in the complainants to maintain this suit. No right or title is shown in any person except Mrs. Cruger, and the will requires three trustees. It is not shown how, or by whom, Mr. Whetten was appointed; whether by the children, at a regular meeting on notice, or by the surviving trustees, on default of a selection by the children; or in any other manner pursuant to the provisions of the will. The will having provided a particular mode of appointment, vesting the power partly in the children and partly in the surviving trustees, that mode must be strictly pursued; and the power of appointment must be shown to have been exercised according to the terms of the grant. The estate could not vest in new trustees, unless they became such in virtue of the provisions contained in the will. And the complainants claiming title under an exercise of that power, must show a fulfilment of all its provisions. (2 Sug. on Pow. 529 to 531. Story’s Eq. PI. 206, § 241. Id. 213, § 255. Id. 214, § 257. McElioaine v. Willis, 9 Wend. 563. Mitf. 155, 6, by Jeremy. Story’s Eq. PI. 216, § 260. Edwards v. Edwards, Jacob, 335. 3 Madd. 197, § c.) ■ The same objections apply to the alleged appointment of Mr. Strong, as one of the trustees; and to the succession of Mr. De Peyster. John Whetten, who is said to have been succeeded by Mr. Strong, if he ever was properly appointed, is still a trustee. The will made no provision for his resignation, and he could not divest himself of the trust, without the assent of all the ces-tuis que trust, or the sanction of this court; neither of which was ever obtained., Mr. Strong, therefore, never became a trustee. (Lew. on Trusts, 260. Idem, 465. 4 Kent’s Com. 311, 4th ed. Doyle v. Blake, 2 Sch. &• Lef. 230, 245. Bradford v. Belfield, 2 Sim. 264. Chalmer v. Bradley, 1 Jac. & Walker, 51, 68. Moran v. Hays, 1 John. C. R. 339. Shepherd v. McEvers, 4 Idem, 136. Willis on Trustees,
      Í44, 5. Law. Lib. v. 10. Bampton v. Birchall, 6 Land. Jur. 815.)

    If the appointment of the trustees, as set forth in the bill, shall be deemed to be stated with sufficient certainty, and so as to constitute all the complainants trustees. See., still they fail in showing title, because the will does not per se vest the estate in them upon their appointment merely. It requires an assignment from the surviving trustee to the new trustees upon each appointment; and no such assignments are stated in the bill. (Wilkinson v. Parry, 4 Russ. 272. 2 Sugd. on Powers, 527, 8.)

      W. S. Johnson, for the respondents.
    The title of the complainants, as trustees under the will of Margaret Douglass, deceased, and their several appointments as such, are stated in the bill with sufficient certainty. (Sto?y’s Eq. PI. § 206, p. 241. Id. § 212, p. 252, 253. Id. p. 24, 28, and authorities cited.) The trustee John Whetten had power to vacate his office, by resignation, and the facts of his resignation, and the appointment of his successor, George W. Strong, are sufficiently averred. The will contemplates vacancies otherwise than by death or removal, and so does the law. (Lew. oñ Trustá, 260,263,465.) But if Whetten has not regularly resigned, so as to be discharged of his obligations as trustee, his resignation, nevertheless, renders him an unnecessary party to the suit.
   The Chancellor.

The objectioh appears to be well taken, that it does not sufficiently appear that either of the complainants, except Mrs. Cruger, were properly appointed trustees; so as to authorize them to join with her in this suit. If Whetten was properly appointed, then the number of trustees was not reduced to two, while he remained a trustee, so as to authorize the children or grandchildren to nominate, or the other trustees to appoint Strong as his successor. And if the allegation in the bill is not sufficient to show that he was regularly appointed, the objection is equally fatal as to the allegations of the appointment óf Strong and óf De Peyster respectively. It is true, the will provides for the appointment of new trustees when the number shall be reduced to two, by death, removal from the United States, or otherwise. But it is a settled rule of law that a trus--tee, after he has accepted the office, cannot discharge himself from liability by a subsequent resignation merely. He must either be discharged from the trust by virtue of a special provision in the deed, or will, which creates the' trust, or by an order or decree of the court of chancery, or with the general consent of all persons interested in the execution of the trust. And, in the present case, it is at least doubtful whether the concurrence of every person now interested in the execution of this trust, would render the resignation of a trustee valid; so as to authorize the appointment of another in his'place, without an order or decree of this court. They might indeed consent to his relinquishment of the trust, so far as to release him from personal liability to them if the trust fund should afterwards be misapplied, by his co-trustees, in consequence of his neglect to discharge the duties of a. trustee in conjunction with them. But that would not divest him of the legal title' to the trust property, and vest it in the other trustees exclusively; nor would it authorize them to appoint a new trustee, upon a contingency not provided for by the testatrix, in her will. In this case the trust was in part for the benefit of infaqts, and for other persons not in existence, or who were not in a situation to consent.

The revised statutes have authorized this court, upon the petition of a trustee, to accept his resignation and discharge him from his trust, under such regulations as may be established by the court for that purpose; and upon such terms as the rights and interests of the persons interested in the execution of the trust nay require. (1 R. S. 730, § 69.) If the bill had shown that Whetten presented such a petition to this court, and that the chancellor accepted his resignation and discharged him from his trust, that would have divested him of the legal title to the trust property; and would have vested it in the remaining trustees exclusively, unless the court had appointed another trustee in his place. And it would have been such a reduction of the number of trustees as was contemplated by the testatrix, by the use of the word otherwise, in her will. A reduction of the number, within the meaning of the will, might have occurred. by a removal of one of the trustees for cause, upon a summary application to this court; as authorized by the 70th section of the article of the revised statutes relative to uses and trusts. (1 R. S. 730.) But a simple recital in the bill, that Whetten having resigned his office of trustee, Strong was appointed trustee under the will, in his place, is not tantamount to an allegation that he had presented a petition to the court of chancery, and that the court had accepted his resignation and discharged him from his trust. For the person swearing to the bill, in its present form, would not be guilty of perjury, even if she knew that the court of chancery had never been called on to act upon the subject of the acceptance of Whetten’s resignation of the trust. A party coming into this court and claiming a right as a substituted trustee, under the will of a testator, should state all the material facts distinctly, in his bill, to show that such a vacancy had occurred as to authorize his appointment. (Welf. Eq. Pl. 89. Story's Eq. Pl. 206, § 241. Id. 214, § 257.)

Again; the will provides two modes for the appointment of the new trustees; one of which modes is the nomination of three freeholders, by the children, out of which three freeholders the existing trustees are to make a selection; and the other authorizes the trustees to appoint, in default of such nomination. Under such a power of substitution, it is not sufficient to allege generally that the new trustee was duly appointed a trustee under the will. But the complainant sh ould state in which mode he was appointed; to enable the defendant to know what were the facts in relation to such appointment, and to direct his inquiries accordingly. If there was but one mode in which the new trustee could be appointed, perhaps an averment that he was duly appointed, in the manner prescribed in the will, would be tantamount to setting out at length that the particular forms were complied with. The allegation in this case, however, is not as broad as. that. For in relation to Strong’s appointment it is, that he was duly appointed trustee under the will; not that he was appointed a trustee under the will in the manner and form required by or prescribed in the will. Such an allegation, would be equally applicable to the case of an appointment of a trustee under the will, by the court of chancery, in,the place of a former trustee whose resignation had been accepted, under the provision of the revised statutes before referred to.

For these reasons, the bill is fatally defective, in. not'showing a title in these complainants to institute the suit as trustees under the will of Margaret Douglass. The decretal order appealed from, is therefore erroneous,'and must be reversed, with costs. The demurrer must be allowed, and the bill must be dismissed with costs; unless the complainants, within forty days, pay the costs upon the demurrer and of this appeal, and amend their bill by showing that Whetten was appointed a trustee, in one of the modes prescribed in the will, specifying which, if he was so appointed ; and by also showing that his resignation was afterwards accepted by the court of chancery and that he was discharged from his trust. The amended bill must also show that the complainant Strong was properly appointed in his place, in one of the modes prescribed in the will; and that De Peyster was appointed in the place ofHalliday, stating the manner of his appointment.


text:
    Boughton vs. Allen.
    Where B. and S. gave a note to A., which B. alleged was usurious ; and B. and S., after the note became due, confessed a judgment on the same; and B. who was surety merely for S. afterwards filed his bill against A. alone, to set aside the judgment so far as respected him, on the ground of usrny; and no reason was stated in the bill why S. was not made a party; Held that S., who had a joint and common interest with B. in the claim to have the judgment set aside, should have been made a co-complainant; unless some sufficient excuse was stated, in the bill, for not making him a party complainant. And if a sufficient excuse was shown, he should still have been made a party, as a defendant.
    All persons having a joint and common interest in the claim set up in a bill, must be made parties thereto, either as complainants or defendants.
    Where two judgment debtors have a joint and common interest in setting aside a judgment for usury, one of them cannot, by filing a bill in his own name and making the other a defendant in the suit, call the latter as a witness to establish the charge of usury.

      This was an appeal, by the defendant, from a decree of the vice chancellor of the eighth circuit. In October, 1841, the complainant and D. Simmons gave to the defendant a promissory note, for #167, payable in one year, with interest; which note, as the complainant alleged in his bill, was usurious. After the note became.due, Boughton and Simmons confessed a judgment, for the amount of the note and interest, before a justice of the peace; and at that time all the parties to the judgment swore that Boughton and Simmons were-honestly and justly indebted to Allen, jointly, in the amount of the principal and interest of the noto. Boughton,- one of the defendants in the judgment, and who was in fact only a surety for Simmons, afterwards filed a bill against Allen alone; alleging that the note was usurious, and praying that the judgment might be set aside, discharged, and cancelled, so far as respected the complainant, and for a perpetual injunction restraining the defendant from enforcing the judgment against the complainant. No reason was stated, in the bill,- why Simmons did not join therein as a complainant. But the defendant having by his answer denied the-alleged usury, the complainant afterwards released Simmons, and examined him as a witness to prove the alleged usury in the note upon which the judgment was confessed. The vice chancellor, upon this evidence, decreed that the note and judgment were usurious and void, as against the complainant; and perpetually enjoined the defendant to desist and refrain from prosecuting or enforcing the judgment or execution in any manner, against the complainant.

      H. Humphrey, for the appellant.
    David Simmons should have been made a party to the suit, because the defence set up is common to him and the complainant. Both defendants, the principal as well as the surety, are interested in having the judgment set aside. The defendant may insist that Simmons should have been made a party, for his benefit; so that he may not be obliged to litigate the same question over again with him. {Bailey v. Inglee, 2 Paige, 278. Hallett v. Hallett, Id. 18. Miller v. McCann, 7 Id. 451. Carpenter v. Western, 3 Id. 124.) We are not too late to take the objection of a want of parties.
      (Hoffman’s Ch. Pr. 497, and cases there cited.) But if the proper parties were before the court, the complainant is not entitled to the relief sought. Before the act to prevent usury, passed May 15, 1837, the fixed and known rule of the court of chancery was, that “ he who asks equity must do equityand the complainant could obtain no aid from- this court in getting rid of a judgment, or recovering back what had been improperly exacted from him, until he repaid the amount which in justice and equity was due from him to the defendant. (Livingston v. Harris, 11 Wend. 329. Campbell v. Morrison, 1 Paige, 158. ■ Panning v. Dunning, 5 John. Ch. Rep. 122. Livingston v. Harris, 3 Paige, 528.) Before that statute, if a judgment was tainted with usury, the court would not set it aside in any case. They would open it so far only as to relieve against the usurious excess of interest — on payment of the amount due — not otherwise. (Panning v. Dunning, 5 John. Ch. Rep. 122. Campbell v. Morrison, 7 Paige, 158. Bartholomew v. Yaw, 9 Id. 165.) No case can be found where a judgment voluntarily confessed on an over-due usurious note has been interfered with. And no judgment is ever set aside, in this court, when the party has had an opportunity to make his defence and has neglected to do so. (Bartholomew v. Yaw, 9 Paige, 165.) Boughton, the complainant, might have refused to confess judgment. If the debtor gives a judgment when he asks for the loan, and when he is pressed for money and ready to comply with any terms to get it, such judgment will be set aside. But when he has had the money, and knows that he has a defence and does not set it up, but gives a judgment, the judgment wil 1 not be set aside. And this shows what is the true and safe distinction. This judgment is not within this statute. It was not a security whereby there was reserved, or agreed to be reserved, any sum whatever, for the loan or forbearance of money. It was not taken in violation either of the fifth section, title 3, chap. 4, part 2 of the revised statutes, or of the first section of the act amending the same, passed May 15,1843. The words'used do not apply to a judgment. The case of Fanning v. Dunham, (5 John. Ch. Rep. 122,) and the cases there cited, show that a judgment is not within the statute, or rather was not previous to the statute of 1830. And when the law antecedently to a revision of the statutes is settled, either by clear expressions in the statutes or by adjudications on them, the mere change of phraseology will not be deemed or construed a change of the law; unless such phraseology evidently purports an intention, by the legislature, to make a change. (Taylor v. Delaney, 2 Caines' Cas. Err. 143. Case of J. V. N. Yates, 4 John. Rep. 359. Ex parte Burr, 21 Wend. Rep. 316.)

      J. W. Gilbert, for the respondent.
    This court will notice an objection of the want of parties, only in cases where a final decree cannot be made between the parties to the suit, without affecting the rights of other persons who are not before the court. (Elmendorf v. Taylor, 10 Wheat. 152. Wallace v. Hinde, 12 Id. 193. Joy v. Winters, 1 Wash. C. C. 517.) If not made by the defendant before the hearing, the objection is so far waived that if the court can make a complete decree between the parties before the court, it will do it. (R. Owing's case, 1 Bland, 292. Nyl-lie v. Tenable's ex'r., 4 Munf. 369. Townsend v. Angee, 3 Cowen, 354. Robinson v. Smith, 3 Paige, 222. Bailey v. In-glee, 2 Id. 278. Halett v. Halett, Idem, 15. 1 Barbour's Ch. Pr. 320.)
    The proof shows that the promissory notes mentioned in the bill were usurious. And the judgment having been confessed for those notes, it was tainted with the original usury, and was therefore void. (Powell v. Waters, 8 Cowen, 692. Comyn on Usury, 183.) A judgment is within the words of the statute. (Chit, on Con. ed. 1842, p. 2. Fanning v. Dunham, 5 John. Ch. Rep. 142.)
    The judgment having been obtained by Confession, without suit, this court is bound to set it aside. Prior to the revised statutes, it was a familiar exercise of equitable jurisdiction, both in courts of law and of equity, to relieve against usurious judgments on terms. (Cook v. Jones, 2 Camp. 727. Fanning v. Dunham, 5 John. Ch. Rep. 141, and cases cited.) It was the object of the statute to give the borrower the same benefits by application to this court, in cases where the form of the security is such as to preclude a defence at law, as he would have had by such a defence. (1R. S. 761, § 8. Law of 1837, § 4. Livingston v. Harris, 13 Wend. 335.) And no distinction exists between the case of a judgment given as an original security, and one taken upon a settlement. (Taylor v. Bell, 2 Verm. Rep. 171. Drew v. Power, 1 Sch. & Lef. 195. Thompson v. Berry, 3 John. Ch. Rep. 395. Fanning v. Dunham, 5 Id. 122. West v. Brand et al., 3 Har. & John. 568, a case in point. Earl of Chesterfield v. Jansseti, 1 Atk. 354.) No act of the parties can operate as a waiver or confirmation of a usurious agreement. (Comyn on Usury, 183. 3 Atk. 154. Fonbl. Eq. ed. 1835, 124, note. Id. 126, note. Murray v. Riggs, 15 John. Rep. 571. Morse v. Royal, 12 Ves. 364. Payne v. Eden, 3 Caines, 213.)
    The rule that a party who suffers a recovery to be had against him at law, is precluded from making a defence, does not apply to this case. To make the rule applicable, the complainant must be shown to have had an opportunity of setting up his defence in a suit at law. (Story’s Eq. PI. 605. Pattison et al. v. Bangs et al., 9 Paige, 627, and cases cited. Bartholomew v. Yaw, Idem, 167.) A voluntary judgment is only a continuation of the old contract; and the distinction between it and one redditum in invitum has been uniformly recognized. (Middleton v. Hall, Cro. Eliz. 588. Rush v. Graves, 2 Strange, 1043.)

      ' The proof shows that the judgment was given as security for the usurious loan, upon an agreement to extend the time of payment thereof. It is therefore an original security and clearly void.
   The Chancellor.

The bill in this case was not properly framed to obtain the relief sought by the complainant. Simmons, who had a joint and common interest with him, in the claim to have Allen’s judgment set aside, cancelled and annulled, if the allegations in the bill were true, should have been made a complainant also; unless some sufficient excuse was stated, in the bill, for omitting to make him a complainant. But even if such an excuse had been stated in the bill, he should have been made a defendant. If he was an actual party to the suit, it would not be very material, except as a question of form, whetherhe joined in the suit as a complainant, or was made a defendant therein; under the usual allegation in the bill, in such cases, that he would not consent to join in the suit as a complainant. For in neither case could he be a witness to sustain a claim to have the judgment against him and the complainant set aside, annulled and cancelled. A decree against that claim, in a suit in which he was a party, would be a bar to any future suit to be instituted by him, or by Boughton, for similar relief. And the object of requiring all personshaving a joint and common interest with the complainant, in the relief sought, to be made parties, is that the decision, if in favor of the real defendant, shall be final; so that he may not be compelled to litigate the same matter in several suits with parties having a joint and common interest in the claim set up by the bill. But if a bill like the present can be sustained, and one of the parties, having a common interest with the nominal complainant, can be a witness for him to sustain the claim of such witness in the suit, the one who is now the witness, may afterwards file a similar bill, in his own name only, and may use the former complainant to prove the usury, if he is willing to testify to the same. Any device by which such a result could be produced, especially under the provision of the revised statutes which enables the complainant to deprive his adversary of the benefit of an answer on oath responsive to the allegations in the bill, would in many cases be productive of great injustice as well as of perjury; and it caunot be encouraged or sanctioned. I think the bill in this case, therefore, was bad in substance; because Simmons, who had a joint interest with the complainant in the relief sought, was not joined with him, and no excuse is shown for not making him a party, either as complainant or defendant. (See Bailey v. Inglee, 2 Paige’s Rep. 279; Savage v. Todd, 9 Id. 578; Vilas v. Jones, 10 Id. 78.) The defence which was sought to be established in the case of Miller v. McCan, (7 Paige's Rep. 459,) was one, which was personal to the complainant only, and in which the principal debtor had no interest; as he was liable upon the note in any event. That case, therefore, has no analogy to the one which is now under consideration.

Having arrived at the conclusion that the complainant was not entitled to relief on this bill, and that if Simmons had been a party his testimony could not have been received, to prevent a decision in favor of Allen, which would have been a bar to any future suit instituted by Simmons to set aside this judgment, it is unnecessary to examine the other questions in this case. The decree appealed from must be reversed, and the complainant’s bill must be dismissed with costs; but without prejudice to the complainant’s rights in any future litigation. And neither party is to recover costs against the other upon this appeal.


text:
    Lowry vs. Morrison and others.
    Where a judgment creditor’s suit is commenced before a decree in bankruptcy against the defendant therein, so as to obtain a lien upon his property, and the defendant subsequently obtains his discharge under the bankrupt act, he cann.ot plead such discharge in bar of the suit generally; as the discharge is only a bar to a personal decree against the bankrupt.
    And if the complainant neglects to bring before the court the assignee in bankruptcy, who has succeeded to the rights of the bankrupt in the property which belonged to the latter at.the time of filing the bill, the proper course for the defendant is to apply for an order that the assignee be brought before the court by a supplemental bill or otherwise, within such time as may be fixed by the court, or that the bill be dismissed.
    Where the defendant in a judgment creditor’s suit is decreed to be a bankrupt, or where hemakes an assignment under the insolvent act, subsequent to the, commencement of the suit and the interest of the defendant, in the property which he held at the commencement of the suit, thereby becomes vested in the assignee, the suit cannot proceed, so as to obtain satisfaction of the complainant’s debt out of such property, until the assignee, or the person to whom the assignee has conveyed his interest in the assigned property, is brought before the court.
    This was an appeal, from a decretal order of the vice chancellor of the first circuit, overruling the plea of the defendant C. B. Morrison. The complainant was a judgment creditor of the defendants J. C. Morrison and C. B. Morrison. And in Jan-nary, 1842, he filed his bill against them, in this suit, after the return of an execution unsatisfied, to obtain satisfaction of his judgment out of equitable interests and choses in action, &e. alleged to belong to them; and also to reach property, in the hands of the other defendants, which the complainants charged that his judgment debtors had fraudulently assigned to such other defendants. Another object of the suit was to obtain an offset of a part of the complainant’s judgment, against a judgment which had been recovered against him by the defendants J. C. Morrison and C. B. Morrison ; and - which, as the bill charged, had been fraudulently assigned by them to one of the other defendants, for the purpose of preventing such offset.
    In April, 1843, the defendant C. B. Morrison, one of the complainant’s judgment debtors, pleaded, in bar of all the discovery and relief sought by the bill, a decree in bankruptcy against him, upon proceedings instituted about nine months after the commencement of this suit, and a discharge and certificate of the district court, exonerating him from his debts.

      C. O'Conor, for the appellant.

      R. P. Marvin, for the respondent.
   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.


text:
    Knapp vs. Burnham and others.
    upon a bill for the foreclosure of a mortgage payable by instalments, some of which instalments were not due and payable at the time of the decree in the cause, where the master upon the original reference reported that the premises could not be sold in parcels, it is not necessary to obtain another report, upon that subject, previous to the obtaining of another order of sale to pay instalments which have become due subsequent to the decree.
    Where a defendant has appeared in a foreclosure suit, he is entitled to notice to attend the master, upon a reference to ascertain the amount due upon instalments which have become payable subsequent to the decree; and the master’s report must be filed and confirmed, before the complainant can apply for an order of sale founded thereon, if any of the defendants have attended before the master and brought in objections to his report.
    Demands which the defendant, in a foreclosure suit, has purchased against the complainant, subsequent to the commencement of the suit, cannot be offset, on motion, against the amount due upon the mortgage; except where such demands have been liquidated by judgment.
    To entitle the defendant in a suit, either at law or in equity, to set off a demand which is.not liquidated by judgment or decree, he must have been the owner of such demand at the time of the commencement of the suit against him.
    An equitable set-off may be obtained by a cross-bill, where the complainant in the original bill is insolvent, so that the defendant’s debt will be lost unless such set-off is obtained.
    This was an appeal, by the defendants, from a decretal order of the vice chancellor of the seventh circuit. The bill was filed to foreclose a mortgage payable by instalments. The defendants appeared by their solicitor, and suffered the bill to be taken as confessed for want of an answer. Their solicitor was duly summoned to attend the master, upon the reference to compute the amount due and to become due, and to ascertain and report the situation of the mortgaged premises, and whether the same could be sold in parcels. The master reported an amount then due of about $1500, and two other instalments thereafter to become due. A decree was entered for the sale of the whole premises, unless the amount then due, with interest and costs, should be paid before the day of sale.. And the decree contained the usual provision, that if the next instalment was not paid the complainant should be at liberty to go before a master, upon the foot of the decree, and obtain a report of the amount due upon subsequent instalments; with liberty to the complainant to apply to the court for payment. The first instalment, with interest and costs, was paid without a sale. On the 28th of October, 1842, the second instalment having become due, the complainant, without any notice to the solicitor of the defendants, went before the master and obtained an ex parte report, of the amount due upon the second instalment. Upon this report, and upon a petition of the complainant, both of which were served upon the defendants’solicitor, with due notice of the application, the complainant applied for an order of sale to pay the amount which, had then become due. In the meantime, however, the defendants had purchased a judgment against the complainant, which the solicitor of the latter allowed as an offset against the amount due upon the second instalment upon the mortgage. On the 26th of October, 1842, two days before the date of the master’s report, the defendants became the owners of two promissory notes against the complainant, and also became the assignees of an account against him; all which he refused to allow to be offset. The defendants, therefore, resisted the application of the complainant for a further order of sale, and presented a cross petitión, to have the offset allowed. The vice chancellor denied the application to offset the notes and account, and directed the premises to be sold ; and that the whole amount of the second instalment, as reported by the master to be due, should be paid out of the proceeds of such sale, after deducting the amount of the judgment which the complainant’s solicitor had allowed as an offset.

      Gardner Lawrence, for the appellants.

      H. Sheldon & A. Taber, for the respondent.
   The Chancellor.

The objection that the vice chancellor was not authorized to order a sale of the whole premises, because the third instalment had not yet become due, is not well taken. Previous to the entry of the original decree, the master was directed to inquire and report whether the premises could be sold in parcels. Although that report is not before me on this appeal, I must presume he made his report according to the order of reference. And the vice chancellor having, in the original decree, directed that the whole premises should be sold, it is evident the master must have reported that the same could not be sold in parcels. It was not necessary, therefore, to obtain a second report on that subject before the making an order of sale, for the payment of the second instalment.

The appellants are also wrong in supposing that these unliqui-dated demands which they purchased against the complainant subsequent to the commencement of the suit, were the proper subjects of offset, upon motion or petition merely. Set-offs are to be allowed in equity in the same manner, and with the like effect, as in actions at law. (2 R. S. 174, § 43. Chapman v. Robinson, 6 Paige’s Rep. 627.) But to entitle a defendant to a set-off in a suit at law, he must have been the owner of the demand at the time of the commencement of the suit. {Idem, 354, § 32, sub. 4.) And in a suit at law upon a bond, payable by in-stalments, the defendant cannot be allowed to offset a demand which became due to him, from the plaintiff, subsequent to the commencement of the suit; even against an instalment upon the bond which has become payable after the right of set-off accrued. The judgment which the defendants had purchased, being a liquidated demand, the justice of which could not be questioned collaterally, was a proper subject of set-off upon motion or petition, either at law or in equity; against a judgment or decree for the payment of money. But a technical objection existed to the offset of the notes and account, in the manner proposed by the defendant; which objection the complainant had a perfect right to interpose in this case. The defendants were not without remedy, however, if they could establish the fact that the complainant was insolvent, so that they could not recover these demands against him by an ordinary suit at law; or if there was any other ground entitling them to equitable relief. But that remedy was by filing a cross-bill, and showing therein the necessity of an offset against the instalment then due upon the mortgage; to prevent injustice. It would be productive of more evil than benefit to permit a mortgagor to buy up counter claims, against the complainant, and to test the validity of such claims upon affidavits. Nor are such unliquidated counter claims a proper subject of consideration, before the master, upon the usual reference to ascertain the amount which has become due, and which remains unpaid, upon the instalments which were not payable at the time of the original decree.

The complainant, however, was himself technically wrong in his proceedings to obtain a decretal order of sale, for the nonpayment of the second instalment. A defendant who has appeared in a cause, is entitled to notice of every proceeding therein which may affect his interest injuriously; except in those, cases where by the rules and practice of the court he is bound to watch the proceedings, so as to protect his rights without such notice. Here, the defendants were directly interested in the subject matter of this reference to ascertain what was due upon the second instalment of the bond and mortgage. For, upon such reference, they would have the right to show that the instalment had been paid, either wholly or in part. These defendants were also entitled to a summons to attend upon the reference, so that they might see that the interest was correctly computed. And if they attended upon the reference, and made objections to the draft of the master’s report, so as to authorize them to except to the same, it would be necessary for the complainant to file the report, and have it duly confirmed; before he could apply to the court for an order of sale, founded upon such report. The defendants not having had an opportunity to make these objections previously, they had a right to urge this irregularity in opposition to the complainant’s petition for an order of sale. The vice chancellor should therefore have denied the application, as irregular and premature; and should have directed the complainant to go again before the master, under the original decree, and that the defendants’ solicitor be summoned to attend upon such reference.

This was a mere technical irregularity. But as the complainant also made a technical objection to the set-oif, without introducing any affidavit or evidence that the counter claims of the defendants were not justly due, they were perfectly justifiable, in resisting his application by a similar technicality.

The order appealed from must, therefore, be reversed, and the petitions of both parties must be dismissed. But it must be without prejudice to the right of the defendants to file a supplemental bill, and to apply thereon to stay the complainant’s proeeeedings under the decree; and without prejudice to the complainant’s right to apply for a new order of sale, upon a regular report of the master of the amount which has become due since the original decree, and which still remains unpaid.

As both parties have failed in part, costs are not allowed to either upon this appeal, or upon the proceedings before the vice chancellor.