Packer v. Lehner

• Decision Date: 25 July 1935
• Docket Number: No. 447.,447.
• Citation: 180 A. 407
• Parties: PACKER v. LEHNER.
• Court: New Jersey Supreme Court

180 A. 407

PACKER

v. LEHNER.

No. 447.

Supreme Court of New Jersey.

July 25, 1935.

Appeal from District Court, Bergen County, Second District.

Action by Israel Packer, trading as I. Packer & Company, against John Lehner. Judgment for plaintiff, and defendant appeals.

Affirmed.

Argued May term, 1935, before TRENCHARD, HEHER, and PERSKIE, JJ.

Allan M. Kobalkin, of Passaic (Sidney Alexander, of Paterson, of counsel), for appellant.

Harry Kampelman, of Passaic (Sigmond Unger, of Passaic, of counsel), for appellee.

PERSKIE, Justice.

Does the "Act concerning general assignments (Revision of one thousand eight hundred and ninety-nine)," 1 Comp. St. 1910, pp. 113, 114, § 1 et seq., as amended by chapter 234, P. L. 1928, p. 410 (Comp. St. Supp. 1930, §§ 12—6, 12— 12, 12—16, 12—30, 12—31), operate for the discharge of the debtor from future liability to a creditor who has come in under the assignment and claimed to participate in the distribution of the proceeds of the assigned property?

The stated question arises out of these stipulated facts: Plaintiff below sued the defendant below for $539.98 (waiving the excess of $500) on a book account for merchandise sold and delivered by him to the defendant between August 24, 1931, and December 30, 1931. In pursuance of an indorsement on the summons and complaint that defendant file specification of defenses to the suit (chapter 281, P. L. 1910, section 61b, District Court Act, 2 Comp. St. 1910, p. 1971 as amended by P. L. 1929, p. 758 [Comp. St. Supp. 1930, § 61—61b]), defendant pleaded: (1) That he filed an assignment with the clerk of Passaic county in accordance with the provisions of the act; that plaintiff participated in that proceeding by filing a proof of claim, with the assignee, for the indebtedness upon which this suit is based; and (2) that the assignee obtained a discharge from the Passaic county orphans' court; and that therefore he (defendant) was discharged from the payment of this indebtedness.

On the return day of the suit, counsel for the plaintiff moved to strike the specification of defenses on the grounds that they were legally insufficient and frivolous and therefore judgment should be entered for the plaintiff.

It further appears by concession of counsel for the respective parties that the assignment was made subsequent to the date that the instant cause of action arose against the defendant; that plaintiff received no dividend on his claim because there were no funds in the hands of the assignee to pay general creditors; and that the assignee had been discharged of his trust.

The trial judge, pointing out that section 22 of the act of 1899, 1 Comp. St. 1910, p. 122, supra (the sole section thereof relating to discharge), was repealed by the act of 1928, supra, concluded that there was nothing in the act as now constituted which operates to discharge a debtor, and accordingly granted the plaintiff's motion and entered judgment in his favor and against the defendant in the sum of $500.

In support of appellant's contention we are told that it is of no moment that the plaintiff did not receive any dividend or that the assignment was made subsequent to the date when the cause of action arose against the assignor. Defendant's insistment is that plaintiff's presentation of his claim was a coming in for a dividend to the extent of binding him by the assignment, Vanderveer v. Conover, 16 N. J. Law, 487; that the performance of all of the provisions of the act by the defendant, and the discharge of the assignee of his trust, operated, under the act, to discharge him of his indebtedness to the plaintiff.

We think that appellant's contentions are untenable. Whatever may have been the original intention or design of the act, it clearly does not now so operate and if it did it would be unconstitutional.

No case directly in point, in our state, is brought to our attention. With us it is a subject of first impression.

A review of the legislation in question and the adjudications of substantially like legislation by the courts of our sister states and the Supreme Court of the United States will throw some light on the subject.

Section 2 of the act of 1899, supra (1 Comp. St. 1910, p. 115), treats of the method to effect a valid assignment, etc., and concludes as follows: "In case such assignor shall willfully violate any of the provisions of this section, the said general assignment shall not thereby be rendered invalid or be excluded from the operation of this act, but in such case such assignor shall remain liable to his creditors for any remaining indebtedness after distribution by the assignee, and shall not receive any of the benefits hereinafter provided for assignors in the twenty-second section of this act."

Section 22 of the same act (identical with section.14 of the act of 1846,¹ entitled "An Act to secure to creditors an equal and just division of the estates of debtors, who convey to assignees for the benefit of creditors"), was as follows: "Creditors not exhibiting claims.—Nothing in this act shall be taken or understood as discharging said assignor from liability to his creditors, who may not choose to exhibit their claims, either in regard to the persons of such assignor or to any estate, real or personal, not assigned as aforesaid, but with respect to the creditors who shall come in under said general assignment and exhibit their demands as aforesaid for a dividend they shall be wholly barred from having afterwards any action or suit at law or equity against such assignor or his representatives; unless on the trial of such action, or hearing in equity, the said creditor shall prove fraud in the said assignor with respect to the said general assignment or concealing his estate, real or personal, whether in possession, held in trust or otherwise."

The aforesaid section was specifically repealed by chapter 234, P. L. 1928, p. 410, § 5.

As far back as 1883 the Supreme Court of the United States, in construing section 14 of the act of 1846, supra, held it to be "inoperative in so far as it provided for the discharge of the debtor from future liability to creditors who came in under the assignment and participated in the distribution of the proceeds of the assigned property." Boese v. King, 108 U. S. 379, 2 S. Ct. 765, 769, 27 L. Ed. 760; Stellwagen v. Clum, 245 U. S. 605, 38 S. Ct. 215, 62 L. Ed. 507; In re Smith, 68 Cal. 203, 8 P. 881; Patty-Joiner & E. Co. v. Cummins, 93 Tex. 598, 57 S. W. 566; In re Voluntary Assignment of Tarnowski, 191 Wis. 279, 210 N. W. 836, 838, 49 A. L. R. 691. And power cannot be conferred by state legislation upon state courts to discharge debtors during the existence of the Federal Bankruptcy Act (11 USCA § 1 et seq.). In re Voluntary Assignment of Tarnowski, supra.

In the last-cited case it was said:

"A voluntary assignment for the benefit of creditors is a personal right inherent in the ownership of property. Such a right existed at common law independent of statute. The statutes do not confer the right, but statutes in this country have been enacted for the purpose of regulating the administration of the estate for the benefit of creditors. The discharge of the bankrupt from his debts constitutes the very essence of a bankrupt law. While the administration of the estate of the bankrupt and the distribution of the proceeds thereof pro rata among his creditors is a usual, if not a necessary, incident of a bankrupt law, the discharge of the debtor from his debts is no part of an assignment law. The winding up and a fair and equal distribution of the estate of insolvent debtors may arise in various ways, but where such a proceeding does not result in the discharge of the insolvent debtor statutes regulating such a proceeding do not conflict in any manner with the bankruptcy law, and it has been squarely held by the Supreme...