In re Linforth

• Decision Date: 14 May 1898
• Docket Number: 2,071.
• Citation: 87 F. 386
• Parties: In re LINFORTH et al.
• Court: U.S. District Court — Northern District of California

87 F. 386

In re LINFORTH et al.

No. 2,071.

United States District Court, N.D. California.

May 14, 1898

Pierson & Mitchell, for assignee.

T. M Osmont, for E. W. Chapman.

DE HAVEN, District Judge.

This is a proceeding commenced by the assignee in bankruptcy, under section 5081 of the Revised Statutes of the United States for the purpose of determining the validity of a claim filed in this court by E. W. Chapman against the individual estate of John Bensley, bankrupt. The material facts out of which the present controversy arises are these:

On November 24, 1875, John Bensley executed to the Nevada Bank of San Francisco his promissory note for the sum of $80,000 payable, with interest, one year from its date, and as security therefor on the same day executed to that bank a mortgage upon a large amount of real estate. On the 15th day of February, 1877, this note was still unpaid; and the firm of Linforth, Kellogg & Co., and the individual members thereof (Bensley being one of the co-partners in the firm) were duly adjudicated bankrupts, upon a petition filed in this court on that day by the firm and its individual members. On the 17th day of February, 1877, one James Coffin to whom the above referred to note and mortgage of Bensley had been assigned by the Nevada Bank, for its convenience, and for collection only, instituted an action in one of the courts of this state for the purpose of foreclosing such mortgage. On March 26, 1877, James Patrick and A. L. Tubbs were duly appointed assignees in bankruptcy of said bankrupts; and on the following day all of the property of the firm of Linforth, Kellogg & Co., and also all the property of its individual members, was duly appointed assignees in bankruptcy of said bankrupts; and on the following day all of the property of the firm of Linforth, Kellogg & Co., and also all the property of its individual members, was duly conveyed to said assignees in bankruptcy. Thereafter, on the 28th day of September, 1877, James Coffin filed in this court a petition in which he asked for an order allowing him to make the assignees of said bankrupts parties to the foreclosure suit commenced by him on February 17, 1877, and that he be permitted to proceed therein. The court thereupon made an order granting the prayer of his petition. The order, however, provided that in any judgment for foreclosure of said mortgage he should waive any personal judgment against Bensley. The said action never proceeded to judgment, and was dismissed on March 20, 1878. Prior to the dismissal of that action, Bensley and his individual creditors, including the Nevada Bank of San Francisco, and the creditors of the firm of Linforth, Kellogg & Co., entered into a contract by which it was agreed between all the parties thereto that this court should grant to Bensely a decree of final discharge in the bankruptcy proceedings then pending, and direct the assignees in bankruptcy to reconvey to him his individual property, 'free from, and discharged of, said proceedings in bankruptcy. ' This agreement contained the following provision:

'Said individual creditors of said John Bensely may and shall have the right to enforce payment of their claims against said John Bensley as fully and completely and effectually, to all intents and purposes, as though these presents had never been made, and as though said John Bensley had never been adjudged a bankrupt; and said John Bensely hereby agrees to pay and discharge to said individual creditors all their just claims, in the same manner and to the same extent as if said bankrupt proceedings had never been instituted, and as if these presents were never entered into, and that such claims shall have preference to payment out of the individual assets of said John Bensley.'

This agreement further provided that the decree of final discharge of Bensley in the bankruptcy proceedings should contain the express provision that the obligation of that agreement, and the matters therein agreed on the part of Bensley to be performed, should be exempt from the operation of such decree of discharge. The contract also provided that it was to be subject to the approval of this court, and without such approval should be of no effect whatever. This contract was ratified by this court on February 12, 1878; and in pursuance thereof Bensely was on March 20, 1878, finally discharged from the bankruptcy proceeding, and from all his debts and liabilities; and on the same day the assignees in said bankruptcy proceeding reconveyed to him all his individual property. In December, 1880, James Coffin reassigned to the Nevada Bank the note and mortgage executed to that bank by Bensely on November 24, 1875; and on January 19, 1881, the bank commenced an action for the foreclosure of the mortgage in one of the superior courts of the state of California. John Bensely, James C. Patrick, and A. L. Tubbs were made defendants. Patrick and Tubbs, as before states, were the assignees in bankruptcy of the firm of Linforth, Kellogg &amp Co., but were not sued in their official capacity; and no order was made by this court authorizing the Nevada Bank to prosecute that action. At the date of its commencement, and at all times thereafter, Bensely was absent from the state of California; and summons in the action was served upon him by publication only. On June 5, 1882, judgment was entered in that action in favor of the Nevada Bank against Bensley for the sum of $93,753.94 and costs; and the mortgaged premises were duly sold under an order of sale for the sum of $57,152.92, which was applied in part satisfaction of said judgment, leaving unpaid a deficiency of $37,727.51, which deficiency was on August 10, 1882, docketed in said court as a judgment against Bensley. Thereafter Bensely specially appeared in the action, and upon his motion the judgment for the deficiency was vacated by the court, upon the ground that the court was without jurisdiction to render a personal judgment against him for such deficiency, because the summons in the action was not personally served upon him. The Nevada Bank thereafter assigned its alleged claim against...