Nassau Smelting Refining Works v. Brightwood Bronze Foundry Co
Decision Date | 28 April 1924 |
Docket Number | No. 242,242 |
Citation | 265 U.S. 269,44 S.Ct. 506,68 L.Ed. 1013 |
Parties | NASSAU SMELTING & REFINING WORKS, Limited, v. BRIGHTWOOD BRONZE FOUNDRY CO |
Court | U.S. Supreme Court |
Mr. Joseph B. Jacobs, and Jacobs & Jacobs, all of Boston, Mass., for petitioner.
Mr. Harry M. Ehrlich, of Springfield, Mass., for respondent.
On November 19, 1920, the Brightwood Foundry Company was adjudged a bankrupt by the District Court of Massachusetts. On February 12, 1921, it made an offer of composition to its creditors. On February 25, 1921, the meeting to consider the offer was held.1 The list of creditors provided for in section 7(8) of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 544, 548 [Comp. St. § 9591]), had been filed by the bankrupt on February 16, 1921. Among those scheduled, was the Nassau Smelting & Refining Works, with a claim of $11,354.40. It had due notice of all proceedings, but failed to present its claim for proof until more than a year after the adjudication. No order was made either allowing or disallowing it. On March 27, 1922—more than a year after the meeting to consider the offer in composition—the bankrupt filed a petition in which it alleged that the offer had been accepted by the requisite majority of creditors, and that many who had been duly scheduled failed to prove their claims within the year after adjudication as provided by section 57n. It prayed for an order that only such sum be deposited as would be required to pay, in composition, claims seasonably proved. After due hearing, the prayer of the bankrupt was granted. Objection had been made by the Nassau Works; and it filed a petition to revise under section 24b (Comp. St. § 9608). The order was affirmed by the Circuit Court of Appeals, Circuit Judge Anderson dissenting, 286 Fed. 72; and a petition for a writ of certiorari was granted, 261 U. S. 612, 43 Sup. Ct. 519, 67 L. Ed. 826. The question for decision is whether the deposit must include the amount required to pay creditors who were named in the schedule but failed to prove their claims within one year after the adjudication. In other words, are such creditors entitled to the benefit of the composition?
The Bankruptcy Act provides, in section 57n (Comp. St. § 9641), that 'claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication'; in section 12a, that 'a bankrupt may offer, either before or after adjudication, terms of composition to his creditors after * * * he had * * * filed in court * * * the list of his creditors required to be filed by bankrupts,' and that 'action upon the petition for adjudication shall be delayed until it shall be determined whether such composition shall be confirmed'; in section 12b, that the application for the confirmation of a composition may not be filed in the court until 'it has been accepted in writing by a majority in number of all creditors whose claims have been allowed, which number must represent a majority in amount of such claims, and the consideration to be paid by the bankrupt to his creditors, * * * have been deposited in such place as shall be designated by and subject to the order of the judge'; and in section 12e, that 'upon the confirmation of a composition, the consideration shall be distributed as the judge shall direct, and the case dismissed.'2 Comp. St. § 9596.
Composition is a settlement by the bankrupt with his creditors. In a measure, the composition supersedes, and is outside of, the bankruptcy proceedings. Cumberland Glass Co. v. DeWitt, 237 U. S. 447, 454, 35 Sup. Ct. 636, 59 L. Ed. 1042. It originates in a voluntary offer by the bankrupt; and results, in the main, from voluntary acceptance by his creditors. It cannot be confirmed unless there has been such acceptance by the requisite majority. When confirmed the bankrupt is discharged from all debts 'other than those agreed to be paid by the terms of the composition and not affected by a discharge. Section 14c (Comp. St. § 9598). Thus, the composition binds creditors with scheduled claims, although they do not prove. It may be effected before the adjudication.3 Where the assets have passed to the trustee pursuant to the adjudication, they are revested in the bankrupt.
There is no provision in the act which declares, in terms, that the offer extends only to those who prove their claims. Why should proof, within the year, of the existence of the debt be required where, by including the claim in the schedule, it has been admitted by the bankrupt? Obviously, section 57n does not operate to exclude any creditor from the benefits of the composition, where the offer is made before there is an adjudication.4 Section 57n would, also, have no application in a great majority of composition cases in which there has been an adjudication. For the offer is ordinarily made in order to enable the debtor to resume his business. In the normal case, the bankrupt is impelled by vital interests, not only to make the offer promptly, but to expedite confirmation. Interruption incident to delay necessarily impairs the value of a business as a going concern. Thus, the composition is usually carried through within the year. Creditors who have failed to prove their claims before confirmation (from inadvertence or because of their doubt whether it was worth the trouble and expense) are usually spurred to activity by notice that money on deposit awaits their application. The cases are rare in which a scheduled creditor who has had due notice fails to call, within the year, for the money awaiting him.
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...offer by the bankrupt, and results, in the main, from voluntary acceptance by his creditors." Nassau Smelting & Refining Works, Ltd. v. Brightwood Bronze Foundry Co., 265 U. S. 269, 271; Myers v. International Trust Co., 273 U. S. 380, 383. So far as concerns dissenting creditors, the compo......
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...composition, the case is dismissed, even though the debtor has not yet been adjudicated a bankrupt. Nassau Works v. Brightwood Co., 265 U. S. 269, at page 271, 44 S. Ct. 506, 68 L. Ed. 1013. The debtor is reinvested with all his property except such as may have been deposited with the court......
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Myers v. International Trust Co, 122
...in Cumberland Glass Co. v. De Witt, 237 U. S. 447, 453, 454, 35 S. Ct. 636, 59 L. Ed. 1042, and Nassau Works v. Brightwood Co., 265 U. S. 269, 271, 273, 274, 44 S. Ct. 506, 68 L. Ed. 1013, that a composition is 'a settlement of the bankrupt with his creditors'-in a measure superseding and o......
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