Waddell v. Delaplaine

By the Court,

Mitchell, J.

Waddell was assignee in bankruptcy of John A. Moore, a bankrupt. The defendants executed a bond, reciting this fact, and that it was believed that Moore possessed property not disclosed or surrendered by him to the assignee, and that proceedings at law, or in equity, on the part of the assignee, might be necessary to enforce a delivery of the property; and agreeing that the defendants would at all times thereafter, pay all costs, expenses, and counsel fees, which the assignee should incur, or be liable for, on account of such proceedings ; and would always indemnify him against all such costs, fees, and expenses.

The declaration avers that proceedings were had at law, and in equity, oh the part of the plaintiff, as such assignee, to enforce the delivery of property not disclosed or surrendered, and which Moore retained in his possession or control; and that the plaintiff has paid and sustained costs, fees, and expenses, on account of such proceedings, to the amount of $516,30.

The defendant pleads that the plaintiff, as such assignee, recovered from Moore, and other persons on his behalf, a large sum of money, as and for the property of said Moore, and the costs, and expenses of said proceedings ; and more1 than sufficient to pay all said costs, fees, and expenses.

The plaintiff replies, that he did not recover from Moore, or any other person, the costs, and expenses of said proceedings, or any part thereof, or any money, &c., as and for such costs, and expenses ; and to this the defendant demurs.

The defendant insists, that the declaration is bad, because it does not alledge that the proceedings at law were necessary. The declaration shows, that the very reason why the bond was given, was, that the bankrupt did not disclose, nor surrender property in his possession: he, therefore was unwilling, voluntarily, to surrender it; and some proceedings at law, or in equity, would, under those circumstances, evidently be necessary to compel a disclosure of what was thus concealed. If on request the bankrupt would make a disclosure, no bond could be necessary to indemnify the assignee; but the creditor could save himself the responsibility, by making the request. When, therefore, the bond says, that certain proceedings, might be necessary to enforce a delivery, and that the defendants would pay the costs of all such proceedings, it substantially admitted, that some such proceedings would be necessary, and threw -on the defendants the burthen of alledging and proving that any particular proceeding was unnecessary, after the plaintiff alledges that expenses were incurred in proceedings at law and in equity, for the purpose intended. The admission is at least sufficient to make so much of a prima facie case, for the plaintiff, as to prevent the defendant from raising the objection, except by special demurrer.

The demurrer admits, that the plaintiff has not received the costs, and expenses of those proceedings; nor any money as and for such costs, and expenses ; although he has received money, &c. the property of Moore, sufficient to pay such costs, and expenses — but not by means of those proceedings. In other words, the assignee has, in some way, unaided by the proceedings, which the defendants instigated him to adopt, recovered other property of Moore, the bankrupt: and these defendants say, that all such property must, when so received, be applied first to pay the costs of these particular proceedings. This assumes that a suit instigated by them, and which, it may be, that every other creditor of the bankrupt opposed, must be so favored, under the bankrupt law, that it should possess an equity superior to all other claims on the bankrupt’s estate. The judge in bankruptcy is to pass on that question, and say how that estate is to be distributed. If he considers the proceedings judicious, he may, perhaps, allow these costs a preference • otherwise, he may refuse to allow them at all. The assignee is to sue and defend actions, subject to the orders and directions of such judge. (Sect. 3 of .Bankrupt Act.) There is no evidence that the judge ever sanctioned these proceedings; and he may, therefore, refuse to allow the costs incurred in them. The bond did not require his previous assent, and may have been given that the defendants might be sure of having the proceedings taken, whether the judge would authorize them or not. If it is to be inferred that he did sanction them, or did not disapprove them because the assignee should be presumed to have acted rightfully, still the judge is to determine whether, under all the circumstances under which this bond was given, he will allow these costs a prior lien on the fund, to all other claimants. What the equities of other claimants may be, how many other bonds of a like kind there may be, or what other circumstances there are to determine who has the best claim on the fund, is not disclosed here. Under these circumstances the defense can not be sustained.

[New-York General Term, June 14, 1851.

Edmonds, Edwards and Mitchell, Justices.]

The defendants have agreed not merely to indemnify the plaintiffs — (then perhaps they might say he should wait until an actual loss was sustained) — but they also agreed, at all times, to pay all costs, and expenses, which he might incur. They therefore must pay him according to their agreement; and if they have any equity on the fund, the judge in bankruptcy will pass upon it.

Demurrer should be overruled with costs; with leave to the defendants to plead.