In re Kipp

14 F. Cas. 653, 4 Nat. Bank. Reg. 593

• Court: District Court, E.D. Michigan
• Decided: July 1, 1871
• Status: Published

Opinion

LONGYEAR, District Judge.

Deeming the question raised by the issue above certified of sufficient importance, I ordered the same to be argued before me on the 2Sth day of February, 1871; and the same was accordingly argued by Mr. Cleveland Hunt, for the assignee, and Mr. William Jennison, for John N. McDonald, survivor, etc. The distinct issue or question of law arising in this case is not stated with such clearness and certainty as could be desired; but the facts clearly appear, and from them I infer, and find my inferences confirmed by the statements of counsel on the argument, that the specific grounds of opposition to McDonald’s claims are; First. That the case falls under the second clause of section 23 of the bankrupt act, and that McDonald’s surrender to the assignee of all property, etc., received by him under his preference, not having been made until after suit brought against him by the assignee for the recovery of such property, is not such a surrender as is contemplated by section 23. Second. That the proof of the claim is absolutely barred by the last clause of section 39 of the bankrupt act.

It does not appear in the record whether or not there was a demand and refusal before the assignee brought his suit. It was cláimed, however, on the argument, and conceded, I believe, that there was such demand and refusal. But in the view I take of the law, I do not consider it material whether there was such demand and refusal or not. It has been already decided by this ■court: First. That the operation of the second clause of section 23 is, in the first instance, merely to suspend the right of a preferred creditor to prove his claim until he shall first have surrendered; to ripen, however, into absolute prohibition if said surrender shall not be made. Second. That such surrender cannot be made after a recovery has been had under sections 35 and 30. Third. That the absolute prohibition contained in the last clause of section 39 applies only after such recovery. Fourth. That the recovery provided for in sections 35 and 39, when considered in relation to the surrender provided for in section 23, means a recovery in its strict legal sense, viz. by judgment or decree. In re Scott (Case No. 12,518]; In re Tonkin [Id. 14,094].

Under the above rulings, and to which I fully adhere, it inevitably follows, that until a recovery has been had, as above defined, that is, by judgment or decree, a preferred creditor may surrender under section 23, and his right to prove his debt against the bankrupt’s estate, and to receive dividends therefrom, will by such surrender be revived, and become binding on all concerned, regardless of the question whether a suit shall or shall not have been commenced against him by the assignee, and be pending at the time of such surrender. Whether, in case of an offer to surrender after a trial shall have been commenced in such a suit, the matter would not be so far under the control of the court that it could not and would not direct a judgment to be entered, notwithstanding such offer, is a question not involved in this consideration, and is therefore not now decided.

The able arguments of counsel for the as-signee against the policy of allowing preferred creditors to prove their debts, after having refused to surrender on demand, and put the assignee to the trouble, delay, and expense of bringing suit, may be. and probably are, good and sound in favor of an alteration of the law. so as to fix some definite time within which preferred creditors shall surrender after demand. But the law must be administered as it is; and so administering it in this instance. I must hold that the deot of the said John N. McDonald, survivor, etc., as certified to me by the register, is provable against the estate of the said bankrupt.