Cumberland Glass Mfg. Co. v. De Witt & Co., 237 U.S. 447 (1915)

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Cumberland Glass Manufacturing Company v. De Witt & Company

No.191
Argued March 10, 1915
Decided May 10, 1915
237 U.S. 447

ERROR TO COURT OF APPEALS

OF THE STATE OF MARYLAND

Syllabus

A plea of former judgment in a federal court adjudicating a right of federal origin asserts a right which, if denied, makes the case reviewable here under § 237, Judicial Code. Deposit Bank v. Frankfort, 191 U.S. 499.

The effect of a composition proceeding as provided in the Bankruptcy Act is to substitute that proceeding for the bankruptcy proceeding and in a measure to supersede the latter, and, when the composition is confirmed, to reinvest the bankrupt with all his property free from claims of his creditors.

Composition proceedings arise from the bankruptcy proceedings, and this part of the statute is to be construed with the entire act. Wilmot v. Mudge, 103 U.S. 217.

The restoration of his estate to the bankrupt after a composition restores to him the right of action upon choses in action. Cf. Stone v. Jenkins, 176 Mass. 544.

The object of the setoff provision in § 68-a of the Bankruptcy Act is to permit the statement of accounts between the bankrupt and his creditor with a view to the application of the doctrine of setoff between mutual debts and credits; it is permissive, rather than mandatory, does not enlarge the doctrine of setoff, and cannot be invoked where the general principles of setoff would not justify it.

The setoff provision in § 6-a of the Bankruptcy Act is not self-executing, and its benefit is to be had only upon the action of the district court when it is properly invoked.

After composition had been affirmed by the Bankruptcy Court against the opposition of a creditor, a claim against whom by the bankrupt had been scheduled as an asset, the creditor, without applying to the district court to set off the mutual claims, accepted the composition dividend, after which the bankrupt sued on the scheduled claim.

Held that:

The effect of the composition was to reinvest the bankrupt with all of his assets including the right to maintain a suit on the choses of actions including this claim against this creditor.

There was no automatic setoff under 68-a of the Bankruptcy Act.

The effect of the composition was not to extinguish the claim of the bankrupt against the creditor on his claim against the latter, and there was no adjudication that could be pleaded as res judicata in a federal court, and the state court did not err in respect to any federal question in rejecting the plea of res judicata.

120 Md. 381 affirmed

The facts, which involve the construction and application of certain provisions of the Bankruptcy Act in regard to appeals of mutual claims of the bankrupt and the creditors, are stated in the opinion.