The Second National Bank of Richmond v. Townsend

• Decision Date: 15 May 1888
• Docket Number: 13,121
• Citation: 17 N.E. 116,114 Ind. 534
• Parties: The Second National Bank of Richmond v. Townsend, Assignee
• Court: Indiana Supreme Court

17 N.E. 116

114 Ind. 534

The Second National Bank of Richmond v. Townsend, Assignee

No. 13,121

Supreme Court of Indiana

May 15, 1888

From the Wayne Circuit Court.

Judgment reversed.

J. F Kibbey, W. A. Bickle and J. H. Kibbey, for appellant.

C. H Burchenal and J. L. Rupe, for appellee.

OPINION

Elliott, J.

Joseph W. Moore assigned all of his property for the benefit of his creditors. The assignment was made under the statute regulating voluntary assignments, and the deed was duly recorded. At the time the deed was executed and recorded, the appellant held two notes executed by Moore, and subsequently obtained judgment upon them. After judgment was recovered, the appellant filed a complaint against the assignee asking an allowance of the claim evidenced by the judgment, and on the trial offered in evidence a transcript of the judgment, but it was excluded, as were the notes on which the judgment was founded.

The appellee's counsel, in a very able and ingenious brief, defend the ruling of the trial court upon the ground that the judgment merged the debt and created a new one not in existence when the deed of assignment was executed and recorded. In support of their theory, counsel refer to the case of Bowen v. Eichel, 91 Ind. 22 (46 Am. R. 574), and the cases there collected. That case decides, that a defendant against whom an action is pending can not avail himself of a discharge in a bankruptcy, unless he pleads it in the action prosecuted against him. The decision in the case cited is supported by the decisions of the Supreme Court of the United States, and is, as we believe, a correct declaration of the law. Dimock v. Revere Copper Co., 117 U.S. 559, 29 L.Ed. 994, 6 S.Ct. 855, and cases cited.

While we adhere with confidence to the decision in Bowen v. Eichel, supra, we can not apply the doctrine it asserts to such a case as that now before us. In that case the question was, whether a defendant, who had suffered a judgment to be rendered against him, could subsequently avail himself of a defence that he might successfully have made to a pending action; while here the question is, does the creditor, by taking judgment on his claim, lose the right to participate in the benefit of a fund created by the assignment of the debtor? It is obvious that there is a wide and plain difference between the two cases. Here, the question is not between the creditor and debtor, nor is it as to the right of the debtor to defend against the judgment, for the only question here is as to the right of the creditor to share in the distribution of the trust funds in the hands of his debtor's assignee. We have no doubt that the judgment merged the notes as a cause of action; this is decided in Gould v. Hayden, 63 Ind. 443, and that case has been often approved. But the merger of a claim as a cause of action does not deprive the creditor of his right to resort to a fund held by a trustee, or to make available a security held for the debt. Thus, for example, a judgment will merge the mortgage as a cause of action, but will not destroy the lien. Muncie Nat'l Bank v. Brown, 112 Ind. 474, 14 N.E. 358; Curtis v. Gooding, 99 Ind. 45; Pence v. Armstrong, 95 Ind. 191; Manns v. Brookville Nat'l Bank, 73 Ind. 243; Evansville Gas-Light Co. v. State, ex rel., 73 Ind. 219 (38 Am. R. 129); Teal v. Hinchman, 69 Ind. 379.

Property fraudulently conveyed may be subjected to the creditor's claim and the grantee charged as a trustee, although the original debt is transformed into a judgment and the judgment is rendered after the conveyance. Stout v. Stout, 77 Ind. 537; Bump Fraudulent Conveyances, 498.

These familiar illustrations prove that, while a judgment so merges the claim as a cause of action that a second action can not be maintained upon it, and so concludes the defendant that he can not interpose a defence existing against the original claim, still, the judgment does not so change...