Glenn v. Karthaus , 4 G. & J. 385 ( 1832 )

Buchanan, Ch. J.,

delivered the opinion of the court.

After adverting to the facts before set forth, the judge said, the question is, whether the plaintiff is entitled to recover in this action of trover; which depends upon the construction proper to be given to the insolvent laws.

The act of 1816, for the first time, introduces into the insolvent system, a provision for the appointment of a provisional trustee by Commissioners of Insolvent Debtors, appointed for the city and county of Baltimore.

This provisional trustee is always to be appointed, as was done in this case, before a personal discharge is granted to the petitioning debtor. He acquires no title to the property of the insolvent by his appointment, but is a mere custodiary, and takes possession of it for the benefit of the creditors; and on the report of the commissioners to the court, or a judge thereof, that he is in possession of all the property of the insolvent debtor, the court or judge grants to such debtor a personal discharge. After which it becomes the duty of the commissioners, having first given the requisite notices, and pursued the directions of the act, to appoint a trustee for the benefit of the creditors, (commonly called a permanent trustee) in whom, under the provisions of the system, all the property of the insolvent debtor in the possession of the provisional trustee, vests.

By the 5th sec. of the act of 1816, the commissioners are required to examine into the nature and circumstances of all such applications, and if it appears that the insolvent debtor has complied with all the terms and conditions of the insolvent laws, and has acted fairly, and bona fide, it is made their duty to report the same to Baltimore County Court, and to return the schedule, and all other proceedings had before them, to the office of the clerk of that court; upon which the judges are authorised to grant a final discharge.

It has been urged in argument, that under that act, the appointment of a permanent trustee by the commissioners, had reference to, and was in contemplation of a final discharge, and that if a petitioning debtor failed to obtain a final discharge, the whole proceedings fell to the ground, and it was as if there had been no application, and the property which had vested in the permanent trustee, reverted to the petitioning debtor.

If that were so, Fahnestock, the petitioning debtor in this case, haying failed to obtain a final discharge, his property, of which the defendant had obtained and held possession, as provisional trustee, ceased to be held by him in that capacity, for the benefit of the creditors; but upon his taking out letters of administration, on the death of Fahnestock, he held it in the character of administrator.

But it is not considered that the appointment of a permanent trustee under that act was made with reference to, and in contemplation of a final discharge, to have effect or not, as the petitioning debtor might or might not prove to be successful in his application ; but as being perfectly independent of it, being made anterior to the examination and report of the commissioners, upon which the final discharge was granted, and the policy of the law being (to prevent frauds, and in consideration of the personal discharge) to secure the property of the petitioning debtor for the benefit of the creditors, whether finally discharged or not, by causing it to vest for that purpose in the permanent trustee, and that investiture for the benefit of the creditors, in consideration of the relief from the pain of imprisonment by the personal discharge, could not be divested by the subsequent failure of the petitioning debtor to obtain a final discharge. As well may it be said, that where an insolvent debtor is convicted upon allegations filed by his creditors after a final discharge, the property remaining in the hands of the trustee reverts to him, because he is thereby deprived of all benefit of the insolvent laws, there being no difference in effect between the failing to obtain a final discharge, and the being deprived of the benefit of such discharge.

It is affirmed by this court, in Glasgow vs. Sands, 3 Gill and Johns. 96, to have been the duty of the commissioners under the act of 1816, first to appoint a provisional, and then a permanent trustee, and after having done so, to examine into the circumstances of the application, and if it should appear that the petitioning debtor had complied with the terms, of the insolvent laws, and acted fairly and bona fide, to report, &c. to the court, whereupon the final discharge was authorised to be granted, and that is clearly the law; so that, as the permanent trustee was to be appointed before any examination into the conduct of the petitioner, and when the commissioners could not have known what would be the result of their examination, or whether the petitioner would be able to show himself entitled to a favorable report, the appointment could not be considered as being made with reference to a final discharge, upon which its efficacy was to depend; but when a petitioner obtained his personal discharge, and transferred his property, and surrendered up the possession to the provisional trustee, (who was appointed in contemplation of a permanent trustee to be nominated by the creditors,) he parted with all control over it, and ceased to have any interest in it, except so far as related to any surplus that might remain after payment of the debts; and the provisional trustee took and held it as a custodiary for the benefit of the creditors, until the appointment and qualification of a permanent trustee, in whom it vested. When, therefore, Fahnestock, the petitioning debtor in this case, obtained his personal discharge, he ceased, rightfully, to have any thing to do with the property in the hands of the defendant, the provisional trustee, whose duty it was to keep and preserve it for the benefit of the creditors, until there should be an appointment and qualification of a permanent trustee; and that custody of it was not affected, either by the failure of Fahnestock to obtain a final discharge, or by his subsequent death; but the defendant continued to hold the property in his character of provisional trustee, notwithstanding he afterwards became the administrator of Fahnestock, the property not having vested in Burniston and Scott, the persons appointed by the commissioners as permanent trustees, they having neglected to give bond and security as required by law.

The only question remaining, therefore, is, whether Glenn, the plaintiff, was properly appointed permanent trustee, at the instance of creditors, by Baltimore County Court. The act of 1816 gave no exclusive authority to the commissioners, in such a case, to appoint another trustee; and if the power to make such an appointment resided neither in the commissioners, nor the County Court, yet the property did not therefore revert to Fahnestock, but Chancery might have extended its aid to the creditors, and have appointed a trustee for their benefit, to take and make a proper disposition of the property.

But we think the Baltimore County Court had full power to make the appointment it did, and that Glenn having given bond and security as required by law, the property vested in him. The act of 1816, giving to the commissioners the power to appoint, first, a provisional, and then a permanent trustee, in relation to the city and county of Baltimore, operated as a repeal of so much of the act of 1805, ch. 110, as gave to the Baltimore County Court the power, in the first instance, to appoint a trustee. But the act of 1816, not giving to the commissioners, on the refusal to act, the death, or neglect, of the permanent trustee appointed by them to give bond, the power to appoint another, or the power to remove for misbehavior such a trustee, and to appoint another in his place, it only took from the County Court the power of appointment in the first instance; and being a part of the same system, to be taken altogether, the appointment by the commissioners took the place of the appointment by the court, leaving the power of the court to substitute another trustee in the place of one before appointed, in either of the events enumerated, the same in relation to an original appointment by the commissioners, that it before possessed in relation to an original appointment 'made by the court, just as if the act of 1816 had been originally introduced into the act of 1805, as a special provision for the city and county of Baltimore. The judgment of the court below must, therefore, be reversed.

JUDGMENT REVERSED A ND PROCEDENDO AWARDED.