In re Baxter

2 F. Cas. 1045, 18 Nat. Bank. Reg. 497, 1878 U.S. Dist. LEXIS 100

Opinions

CHOATE, District Judge.

Re-examination of proof of debt. The Canadian Bank of Commerce became the holder for value before maturity of two drafts drawn by the bankrupts on their correspondents in Liverpool, who accepted the same. Since the dishonor of the draft, the bank has received from the acceptors fifty per cent, of the amount due on them, without prejudice to the rights of the bank against other parties. The drafts were drawn against consignments of merchandise, which the drawers undertook to make, but which they failed to make. It is claimed that the acceptor has released the drawer from all demands. It is now insisted by the trustee of the bankrupt that the holder of the draft can only prove for the amount thereof, after deducting the payment made by the acceptor, but the register allowed the proof for the whole amount.

The bankrupt is in this case the principal debtor, and the acceptor is the surety. It is conceded that, but for the release of the drawer by the acceptor, the creditor would have the right to prove for the whole amount. Downing v. Traders’ Bank, [Case No. 4,046.] But it is insisted that in this case, as the acceptor has released all his claims against the drawer, the creditor cannot prove for the whole, because the acceptor has no claim on the surplus after the creditors shall be paid in full. There is no merit in this position. If the dividend which the creditor shall be entitled to shall, with the sum received from the surety, exceed the whole amount of the drafts, that may be a proper case for an application to the court to have this surplus disposed of, according to the equities of the parties, if the acceptor is then properly before the court; meanwhile, to reduce the amount for which the creditor is to prove would certainly prejudice his rights, contrary to the conditions under which he accepted the money from the surety. He is entitled to prove for the whole amount, and if there shall be a surplus it can then be determined to whom it belongs. The entry of a judgment does not affect the right to prove the debt. Petition dismissed.