Aaron Coffee v. Ball, Hutchins & Co.

Citation49 Tex. 16
PartiesAARON COFFEE v. BALL, HUTCHINS & CO.
Decision Date01 January 1878
CourtSupreme Court of Texas
OPINION TEXT STARTS HERE

ERROR from Galveston. Tried below before the Hon. A. P. McCormick.

This was a suit, brought in the District Court of Galveston county, on the 28th day of May, 1871, by Aaron Coffee, to set aside a judgment by default that had been rendered by that court, on the 3d of March, against him, in favor of the defendants. At the November Term, 1872, of the District Court, a jury was waived, and the case submitted to the court upon the pleadings and an agreed statement of the facts, upon which judgment was rendered for the defendants.

The facts, about which there was no controversy, were, as alleged in the petition, that on the 6th of December, 1866, Ball, Hutchings & Co. instituted suit in the District Court of Galveston county against Coffee, who resided in Brazoria county, upon a promissory note executed on the 9th of June, 1861, for $1,050, and service was made on the 15th of December, 1866. This suit remained upon the docket, and was continued from term to term, until March, 1871, when judgment by default was taken against the defendant. Prior to the rendition of this judgment, to wit, on the 29th day of February, 1868, Coffee filed his petition, in the United States District Court at Galveston, sitting as a court of bankruptcy, praying, among other things, to be discharged from his liabilities, under the provisions of the Bankrupt act. On the 1st of April following he was adjudged a bankrupt. On the 8th of May, 1868, Ball, Hutchings & Co., after being duly notified of the proceedings in bankruptcy, proved and filed, in the Bankrupt Court, their claim for the amount due on the note upon which they had commenced suit, in the District Court of Galveston county, on the 6th day of December, 1866.

Coffee was discharged from his liabilities, in accordance with the provisions of the Bankrupt act, on the 7th of April, 1869.

Gresham & Mann, for plaintiff in error, contended--

I. That at the time judgment was rendered by default in the State court, that court had no jurisdiction over him; citing Gordon v. Longest, 16 Pet., 104; Sampson v. Burton, 4 Bank. Reg., 1; Taylor v. Bonnett, 38 Tex., 523.

II. Ball, Hutchings & Co., by proving their claim, and making themselves parties to the proceedings in bankruptcy, waived their right to proceed to judgment in the State court after the discharge of Coffee by the Bankrupt Court. The first clause of the twenty-first section of the Bankrupt act provides, “that no creditor proving his debt or claim shall be allowed to maintain any suit at law or in equity therefor against the bankrupt, but shall be deemed to have waived all right of action and suit against the bankrupt; and all proceedings already commenced, or unsatisfied judgments already obtained thereon, shall be deemed to be discharged and surrendered thereby.” The language here employed is clear and explicit: that “all proceedings already commenced shall be deemed to be discharged and surrendered, by the creditor proving his debt.” The natural signification of these words can be limited only in so far as it would be inconsistent with other provisions of the act. We therefore submit, that this clause, when construed with the whole act, means that a creditor, by proving his debt, waives all right of action against the bankrupt, except in those cases enumerated in section 33 of the act; and proceedings already commenced are discharged by operation of law. But should the bankrupt fail to obtain his discharge, then his creditors, who have proved their debts, have the right, after the judgment of the Bankrupt Court, to commence and prosecute these legal remedies. This view of the law is sustained not only by the language of the statute, but by its history. Our system was borrowed from that of England; and upon an examination of the law of that country, we find that before the passage of the statute of 1849, George III, there was no rule of law prohibiting a creditor of a bankrupt, who had proved his debt, from proceeding by suit against the bankrupt, to compel payment of the debt that had been proved. But the Court of Chancery, in the exercise of the power which it had over suitors, would, previous to any statutory provision on the subject, compel a creditor, who had proved his debt against the bankrupt under the commission, to elect between that and other remedies for the collection of his debt. ( Ex-parte Salkeld, 1 P. Wm., 561; Aylett v. Harford, 2 W. Black., 1317.) In order to reconcile the conflict between the courts of law and chancery upon this subject, the statute of 1849, George III, was passed, the fourteenth section of which provided that the proving of a debt under commission against the bankrupt should be deemed an election by the creditor to take the benefit of such commission, with respect to the debt so proved. In Reed v. Sweeny, 3 M. & S., 78, Lord Ellenborough, in construing this section, says: “It seems to me that the act is introductory of a new state of things arising out of the creditor's proving his debt under the commission; it shall be deemed an election by him to take the benefit of such commission, with respect to the debt so proved. ‘Election’ here imports that he renounces his other rights for the sake of that which he elects.” In the same case, Dampier, J., says: “The statute meant to take away the remedy by action.” Congress, in order to obviate some of the difficulties that had arisen under the English Bankrupt act, in the fifth section of the Bankrupt act of 1841, declared that “no creditor, or other person, coming in and proving his debt or other claim, shall be allowed to maintain any suit in law or equity therefor, but shall be deemed thereby to have waived all right of action and suit against such bankrupt.” When the act of 1867 was passed, Congress, in order that there might be no doubt that a creditor, by proving his debt, waived all right of action, and that all suits pending should be dismissed by operation of law, changed a little the phraseology of the act of 1841, and added: “And all proceedings already commenced, or unsatisfied judgments already obtained thereon, shall be deemed to be discharged and surrendered thereby.” Thus our law, instead of prohibiting a creditor from coming in and proving a debt until he had relinquished any suit that he may have instituted for the collection of that debt, as he was bound to do in England, and instead of declaring the proof of the debt an election by the creditor to take the benefit of the proceedings in bankruptcy, declares that the mere act of proving a debt under the proceedings in bankruptcy shall of itself be deemed a surrender of all proceedings already commenced. (See the opinion of the court in Haxton v. Corse, 2 Barb. Ch., 522-531, where the act of 1841 is very ably and elaborately discussed.)

III. Coffee is entitled, in equity, to the relief prayed for.

As the record shows, judgment by default was taken by Ball, Hutchings & Co. against Coffee, at the February Term, 1871, of the District Court of Galveston county; and at the June Term following, Coffee brought his suit to set aside that judgment, and to enjoin the defendants from enforcing it. This suit was an equitable proceeding; and whatever equitable rights the plaintiff had, could be considered, and should be enforced, in this case, by the court. (Davis v. Terry, 33 Tex., 426.)

Charles I. Evans, also for plaintiff in error, after arguing at length the difference between the English and American systems of bankruptcy, and insisting that there was no analogy between them, contended--

I. That the State court was ousted of its jurisdiction by the bankruptcy of defendant pendente lite; citing Taylor v. Bonnett, 38 Tex., 522;Kennedy v. Rust, 25 La. Ann., 554; Lewis v. Fisk, 6 Rob., (La.,) 159; Tobin v. Trump, 3 Brewster, (Penn.,) 288; Newman v. Fisher, 37 Md., 259; Allen v. Montgomery, 10 Nat. Bank. Reg., 503; In re Archenbrown, 11 Id., 149; Watson v. Savings Bank, 11 Id., 161; Planters' Bank v. Lanusse, 10 Mart., (La.,) 690; Wikoff v. Duncan, Id., 668; Alsabrooks v. Cates, 5 Heisk., (Tenn.,) 271; Bump's Bank., 7th ed., 5110, 5111, 5120; Johnson v. Poag, 39 Tex., 92;Foster v. Wells, 4 Id., 103;Weathered v. Mays, Id., 388.)

II. That the plaintiff below became civiliter mortuus by reason of the proceedings in bankruptcy, and the suit abated as to him; citing Herndon v. Howard, 9 Wall., 665;Cannon v. Wellford, 22 Gratt., 198; Story's Eq., secs. 328, 329, 342 and note, and 349 and note; Fisher v. Vose, 3 Rob., (La.,) 457; West v. Creditors, 4 Id., 88; Harrod v. Burgess, 5 Id., 449; Lockett v. Hoge, 9 Nat. Bank. Reg., 167; Randall v. Mumford, 18 Ves. Jr., 424; Sedgwick v. Cleveland, 7 Paige Ch., 290; Anon., 10 Id., 20; Story's Eq., secs. 342, 354; Danl. Chan. Prac., 229; Knight v. Callender, 10 La., 226; Levy v. Jacobs, 12 Id., 110; Muse v. Yarborough, 11 Id., 521; Adams v. Bridger, 8 Bing., 314; Augarde v. Thompson, 2 M. & W., 617; Chitty on Cont., 204; Bennett v. Goldthwait, 109 Mass., 494;Wilson v. Capuro, 41 Cal., 551.

It is believed that the bankruptcy of Coffee had the same effect on the suit pending against him in the State court as if he had died a natural death. By his bankruptcy, and consequent civil death, that court lost its jurisdiction of his person and estate, and the same was thereby transferred to the Bankrupt Court, having exclusive jurisdiction thereof. If he had died a natural death, the case would have been transferred to the tribunal invested by statute with the exclusive jurisdiction of matters pertaining to the estates of decedents. (Robertson v. Paul, 16 Tex., 475;Bissell v. City of Lavaca, 6 Tex., 54;Able v. Bloomfield, Id., 263;Mitchell v. Runkle, 25 Tex. Supp., 136;Herndon v. Howard, 9 Wall., 665; Rugely v. Robinson, 10 Ala., 702; Brandon v. Cabiness, Id., 155; Lacey, Terrell & Co. v. Rockett, 11 Id., 1002; Brooks v. Harris, 12 Id., 555; Sedgwick v. Cleveland, 7 Paige...

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