Commercial National Bank's Appeal from Probate

21 A. 1021, 59 Conn. 25, 1890 Conn. LEXIS 2

• Court: Supreme Court of Connecticut
• Decided: April 22, 1890
• Status: Published

Opinion

Torrance, J.

The record in this case presents several questions for consideration, the most important of which perhaps is, whether, in the absence of fraud or collusion of any kind, a creditor whose attachment may be dissolved by proceedings brought by another creditor to put the debtor into insolvency, can appeal from the decree of the probate court adjudging the debtor to be an insolvent, and contest on such appeal the allegations of the original petition.

In the case at bar a creditor of one Bartholomew brought such a petition against him to the probate court in the usual form. A time for a hearing on the. petition was appointed and notice ordered to be given to the debtor. On the day appointed for the hearing the court found that actual notice had not been given to the debtor, and thereupon adjourned court for one hour. At the end of that time, the debtor not appearing, the court found that notice to the debtor had been duly given by leaving a copy of the petition and order at his place of abode, heard the petitioner with his witnesses, found the allegations of the petition to be true, and thereupon decreed the debtor to be an insolvent and ordered a trustee of his estate to be appointed.

At the same time, and without having given such previous notice thereof as tire law requires, or any notice at all, the court of probate appointed a trustee of Bartholomew’s estate, and the trustee at once qualified, and has since proceeded with the settlement of the estate.

Some four months later the Commercial Rational Bank, one of Bartholomew’s creditors, who had a few days prior to the decree of insolvency brought suit against Bartholomew and attached his real estate, having taken judgment in the suit for a little over ten thousand dollars, appeared in the probate court and took an appeal from each of the decrees, and filed in the Superior Court certain reasons of appeal, which set up in substance the following facts:—

1st. The debt mentioned in the original petition was not founded on contract and was not due when the writ mentioned in the petition was issued.

2d. At and during the time the writ was in the bands of the officer who served it, Bartholomew owned property, liable to attachment, sufficient to satisfy the demand of the writ and any judgment that might be obtained thereon, which could easily have been found and attached by the officer, but he made no due and proper search therefor.

3d. That although the probate court found that actual notice of the petition had not been given to Bartholomew, the first hearing thereon, had before the probate court at 10 o’clock in the forenoon of September 29th, 1886, was not adjourned for a reasonable time, nor was any further notice of the pendency of the petition given to Bartho7omew before the second and final hearing thereof in the probate court, to wit, at 11 o’clock in the forenoon of said September 29th, 1886.

4th. That public notice of the time assigned for the hearing upon the application for the appointment of a trustee of the estate of Bartholomew was not given.

To these reasons of appeal the present appellants demurred, upon the ground that the matters alleged therein were matters personal to the debtor only and could be taken advantage of only by him, and because it was apparent from the record that the Commercial National Bank had no such interest in said matters as would entitle it to appeal.

The Superior Court overruled the demurrer, and held on the trial, against the objection of the present appellants, that the Commercial National Bank had such right of appeal, and had the right to prove the facts set up in said reasons of appeal; and thereupon found the allegations of the second, third and fourth reasons of appeal true, and rendered judgment reversing both of the decrees of the court of probate.

So far as the decree appointing the trustee is concerned, we think the court below in reversing it committed no error. The Commercial National Bank as a creditor of Bartholomew had a right to be heard on that matter and of course had a right to notice. The statute requires the court of probate to give notice of the hearing on such a matter, and none whatever was given. Doubtless the peculiar circumstances of the case then known to the court induced it to act in the matter without giving the notice required by law, but this can make no difference with the rights of creditors.

But in holding that the bank had the right to appeal from the decree adjudging Bartholomew to be an insolvent debt- or, and the right to contest on such appeal the allegations of the original petition, we think the court erred.

These rights are claimed under section 640 of the General Statutes, which reads as follows:—“ Any person aggrieved by any order, denial or decree of a court of probate in any matter * * *, may appeal therefrom to the Superior Court.” It may be conceded that this language considered by itself is broad enough to include an attaching creditor in a case like the present, but the language of the statute in question in a case like the one at bar must be read and interpreted in connection with the provisions of the insolvent law. It will hardly be claimed that a man who is not and cannot by any possibility become a party to a proceeding before the probate court can take an appeal from a decree thereof, even if he is in some way and to some extent harmed thereby.

An appeal from probate ought to be given to those only who are, or maj’ be made or may become in some way, parties before that court, for it is not to be supposed that the law prevents a man from being heard there, and then allows him to appeal and contest elsewhere, at great expense and loss of time, matters which might have been cheaply and expeditiously settled in the probate court. The right to appeal presupposes the right to be heard on the same matter in the probate court.

The statute regulating such appeals contemplates the existence of such a right, for in section 641 it provides that “all such appeals by those of full age and present, or who have legal notice to be present, shall be taken within one month, and if they have no notice to be present and are not present, then within twelve months.” And indeed the whole argument of counsel for the bank, in favor of its right to appeal from the decree of insolvency, is based on the assumption that it was, or might have become, a party before the court of probate, with the right-to oppose the petition and contest its allegations.

The right then of the Commercial National Bank to appeal from the decree adjudging Bartholomew to be an insolvent, depends on the question whether, in a case like the one at bar, in which there is no fraud or collusion, it had a right to appear and contest the allegations of the petition before the probate court. .

It certainly had a right to intervene as a creditor under the provisions of section 508 of the statute, hut it could not be compelled to so intervene. It did not choose to do so however, and so we have perhaps no occasion to consider what its rights would have been under such circumstances. We think however, upon examination of the statutes in relation to insolvency proceedings, and upon consideration of the purpose and object for which such right of intervention is given, that an intervening creditor has no right to contest the allegations of the petition in a case brought in good faith and in the absence of all fraud and collusion on the part of the petitioner and the debtor. A creditor so intervening cannot occupy the position of petitioner and defendant in the same cause at the same time, or appear as petitioner ■or defendant at pleasure.

But however this may be, we need not consider the matter further, because the right of the Commercial National Bank to appear and contest the allegations of the petition before the probate court is not placed on the ground that it was an intervening creditor, but simply on the ground that it was an attaching creditor, whose lien of attachment was affected by the insolvency proceedings. We think this claim is untenable for several reasons.

In the first place, proceedings in insolvency of the kind in question here, are statutory proceedings. The rights of all the parties thereto are to be ascertained from the provisions of the statute to a large extent. But the statute nowhere in express terms gives such a right as is here claimed to an attaching creditor, nor do we think it is given by implication or otherwise.

If such a right exists in favor of an attaching creditor, it must: exist in favor of a preferred creditor whose rights would be affected by proceedings in insolvency, and perhaps in favor of any and all- creditors except the petitioning creditor.

And if such creditors are parties defendant, or if by law they have a right to be made so, surely the law ought to provide in some way for notice to them ; and yet no such provision is made. The law seems to contemplate the debtor as the only defendant. He is cited to appear to answer to the petition, and the statute is silent as to all others. There is no way provided for admitting others to become parties defendant, either voluntarily or by compulsion. In the same way the petitioning creditor seems to be regarded as the sole plaintiff so long as he continues to prosecute his petition. Even if other creditors intervene, they remain passive until the petitioner in some way goes out of the case. In certain contingencies the petitioner must pay the probate fees and costs to the defendant debtor. If the debtor appears he may pay or satisfy the petitioner’s claim, and then, if no creditor has intervened, the proceedings are at an end, and without regard to the rights of other creditors. The debtor may pay or secure the debt of an intervening creditor also. He may contest the validity of the petitioner’s claim, may file an affidavit of defence to the whole or any part thereof, and may make tender of payment of the part admitted to be due and compel the petitioner to give bond before proceeding further.

In short, the proceeding to put a man into insolvency, from the time the writ issues until the decree in insolvency is passed, seems bjr the statute to be limited entirely to the petitioner and the debtor, with a provision for creditors to intervene in aid of the petition if they choose to do so. We look in vain for any recognition of a right on the part of an attaching creditor or any other creditor to appear as a defendant.

If we consider some of the consequences of admitting such a right, we shall be equally convinced that it does not exist. In the first place, if such creditors have a right to notice, then each creditor, unless he has had notice, can take an appeal any time within twelve months after the decree is passed. It would in most cases be very difficult to ascertain the names and residences of preferred and attaching creditors and other creditors, in order to give them notice, without great delay, and the law has not prescribed that any and if so what notice shall be given. Under such circumstances no trustee would be willing to go on with the settlement of the estate until the rights of creditors to appeal were barred by lapse of time. If he did so he would be liable to find himself contesting in the Superior Court on appeal the foundation questions that ought to have been settled finally and forever before he was appointed trustee. Then again it would seem, when the probate court has fairly and fully tried and found true the allegations of the petition in a case where the debtor contests them, that if the debtor does not appeal, no one else ought to have the right to contest those questions again before the probate court or elsewhere. Or if the debtor comes into the probate court and admits the truth of the allegations of the petition, or if after due notice he confesses their truth by default, it is difficult to see on what principle creditors should be allowed to contest those allegations again before the probate court or elsewhere. And yet, if the claim of the Commercial National Bank is correct, any attaching creditor may contest these allegations again before the court of probate or on appeal.

If they choose to do so, and the question of insolvency or not is again opened up in the probate court or in the Superior Court, it is difficult to see why the debtor, as the party principally interested, may not again contest the same matters that have once been decided against him after full hearing or after his admission or default. We do not think the insolvent law contemplates or permits such results.

When we consider the purpose and object of the insolvent law, we are led to the same conclusion. Its main purpose and object is to distribute the estate of the insolvent debtor fairly among his creditors according to the amount of their respective claims. To accomplish this purpose it defeats all attachments and all preferences made within sixty days of the commencement of insolvency proceedings. Whether this purpose is accomplished through voluntary or involuntary proceedings is usually a matter of no consequence to any one save the debtor ; for in either case, if the debtor is not in fact insolvent, no creditor is harmed, because he gets his claim in full, and if the debtor is in fact insolvent, then each creditor gets all the law intended he should get, namely, his fair proportion of the insolvent estate. And the law will not defeat its own purpose by aiding a creditor to get more than this at the expense of other creditors in a case where the aid of the insolvent law is invoked.

Then again, all the safeguards and requirements of the law in this matter of involuntary insolvency seem to be made for the protection of the debtor himself, and not for the benefit of attaching or preferred creditors. If the debtor in good faith and in aid of the policy of the insolvent law sees fit to waive any safeguard or requirement made for his benefit, and allows himself to be put into insolvency, who is harmed save himself? He is the one vitally interested in the proceedings, and ample opportunity is given him to contest the allegations of the petition, both in the court of probate and in the appellate court. Hawes’s Appeal from Probate, 50 Conn., 317.

The debtor may by a voluntary assignment defeat all attachments and preferences made within sixty days preceding, and such creditors have no remedy. Why should they have a remedy if the debtor, acting in good faith, chooses to admit the allegations of the petition either expressly in open court or-by his default and thus brings about the same result as he would by his voluntary assignment ?

To allow a creditor the same right that the debtor has in such cases, is to introduce confusion and uncertainty into the insolvent law, and to render its administration vexatious, expensive and full of delay, and all to enable a creditor to defeat the main purpose and object of that law. We are satisfied that no such right exists.

The case of Brewster v. Shelton, 24 Conn., 140, cited in the briefs, is not in conflict with the conclusion reached in the present case. In that case the very object of the proceedings was the injury of certain creditors by a fraud perpetrated under the forms and sanction of the law itself. It was a proceeding brought to defeat the very purpose of the insolvent law and not to aid in accomplishing that purpose. In such a case we think an attaching creditor would be entitied to protect Ms rights and wouM be afforded ample opportunity to do so.

The case of Geery's Appeal from Probate, 48 Conn., 289, cited on the brief of the appellee, is hardly in point, because that was, under the then statute, in form at least, an appeal from a decree or order appointing a trustee, and besides, the question made here was not raised, nor does it seem to have been called to the attention of the court in any way.

For the reasons before given, we think the court below erred in reversing the decree of the court of probate adjudging Bartholomew to be an insolvent, and the judgment of the court is to that extent reversed.

In this opinion the other judges concurred.