1. Under the thirty-ninth section of the Bankrupt Act, enacting
that a person may, in certain events, be decreed a bankrupt against
his will "on the petition of one or more of his creditors the
aggregate of whose debts provable under this act amounts to at
least $250," it is not necessary that the principal of the debt
should amount to $250. If, with interest plainly due on it,
according to what appears on the face of the petition, it amounts
to at least $250, that authorizes the decree.
2. In a case where the decree is thus authorized -- in other
words, where jurisdiction exists in the district court of the
United States to decree a person a bankrupt and the person has been
decreed a bankrupt accordingly, a party against whom the assignee
in bankruptcy brings suit in another court, not appellate, to
recover assets of the bankrupt's estate cannot show that payments
made on account had reduced the petitioning creditor's debt so low
as that the bankrupt did not owe as much as the petitioning
creditor in his petition alleged. The finding of the district
Page 89 U. S. 151
court of the existence of a debt to the amount of $250 due from
the party proceeded against to the petitioning creditor is
conclusive, in a collateral action, of the fact that a debt of that
amount was due.
The Bankrupt Act [
Footnote
1] enacts that any person owing debts and committing certain
acts,
"Shall be adjudged a bankrupt on the petition of one or more of
his creditors, the aggregate of whose debts provable under this act
amounts to at least $250."
This enactment being in force, Bell filed a petition in the
District Court of the United States of North Carolina, praying that
a certain Rhyne might be decreed a bankrupt. The petition
alleged,
"That your petitioner's demands against the said Rhyne exceed
the sum of $250, and that the nature of them is as follows."
It then set forth three sealed notes amounting in the aggregate
to $249.35, and on comparing the dates of the three notes with the
date when the petition in bankruptcy was filed, it appeared that
several years' interest was due on them.
The "debt" therefore, using the word "debt" in its strict common
law parlance, was less than $250, though, with the interest added,
it much exceeded that sum.
The debtor was, on this petition, decreed, against his will a
bankrupt, and one Lewis was appointed his assignee.
Lewis now sued one Sloan in a state court of North Carolina to
set aside certain conveyances made by the bankrupt in fraud, as was
alleged, of the Bankrupt Law, and one of the defenses in the action
was that the adjudication of bankruptcy was void because the record
showed that the debt owing to the petitioning creditor was less
than $250, and consequently that the court had no jurisdiction in
the premises.
Page 89 U. S. 152
The state court in which the suit was brought considered that
the district court of the United States which made the adjudication
in bankruptcy had, in fixing the amount of the debt, properly added
the interest to the principal of the debt. In addition it refused
to allow the defendant to show that the debt of $249.35 had been
reduced by a credit of $64 which the creditor petitioning in
bankruptcy had not allowed -- a reduction, it may be noted, which
was not alleged in the pleadings. Its view was that
"the petition of Bell in the bankrupt court had been passed on
by that court and the matter presented by it there adjudicated, and
that other courts, not appellate, could not go behind the
record."
And fraud on the Bankrupt Act being found in the conveyances
made by the bankrupt, it set them aside. This decree being affirmed
by the supreme court of the state, the case was now brought here by
Sloan, claiming under the conveyances.
Page 89 U. S. 155
THE CHIEF JUSTICE delivered the opinion of the Court.
The Bankrupt Act [
Footnote
2] provides for an adjudication of involuntary bankruptcy upon
the petition of one or more creditors the aggregate of whose debts
provable under the act amounts to at least $250. It becomes
necessary, therefore, to ascertain what constitutes a debt that may
be proved. The plaintiff in error contends that it is limited to
the principal of a sum of money owing, while the assignee claims
that it includes the principal and all accrued interest.
To determine this question. we must look in the first place to
the act itself. If the intention of Congress is manifest from what
there appears, we need not go further. Section nineteen
provides
"That all debts due and payable from the bankrupt at the time of
the adjudication of bankruptcy, and all debts then existing but not
payable until a future day, a rebate of interest being made when no
interest is payable by the terms of the contract, may be proved
against the estate of the bankrupt."
And again,
"All demands against
Page 89 U. S. 156
the bankrupt, for or on account of any goods or chattels
wrongfully taken or withheld by him, may be proved and allowed as
debts to the amount of the value of the property so taken or
withheld, with interest."
There is certainly nothing here which in express terms excludes
interest from the provable debt. On the contrary there is the
strongest implication in favor of including it.
The object is to ascertain the total amount of the indebtedness
of the bankrupt at the time of the commencement of the proceedings,
and also the amount of this indebtedness owing to each one of the
separate creditors. Accrued interest is as much a part of this
indebtedness as the principal. It participates in dividends, when
declared, precisely the same as the principal. One has no
preference over the other, and for all the purposes of the
settlement of the estate, the bankrupt owes one as much as he does
the other. Creditors prove their debts in order that they may
participate in the management and distribution of the estate. Their
influence in the management and their share on the distribution
depend upon the amount of their several debts which have been
proven. Hence, in order to fix the equitable representative value
of a debt not due, provision is made for a rebate of interest. But
if interest is to be rebated on debts not due, why not upon the
same principle add it to such as are past due?
The provision for adding interest to the value of goods
wrongfully taken and converted is equally significant. Certainly no
good reason can be given for withholding interest in cases arising
upon contract and allowing it in cases of tort, and because it is
expressly given in the last and no provision is made for it in the
first, the conclusion is irresistible that it was expected to
follow the contract as a part of the obligation.
We are all, therefore, clearly of the opinion that accrued
interest constitutes part of a debt provable against the estate of
the bankrupt, and if it does it is necessarily part of a debt which
may be used to uphold involuntary proceedings. It is only
necessary, upon this point of jurisdiction, that the
Page 89 U. S. 157
petitioning creditors should have owing to them from the debtor
they wish to pursue, debts provable under the act to the required
amount. The English cases referred to in the argument, in our
opinion, have no application here. They are founded upon the
English statutes and the established practice under them. Our
statute is different in its provisions and requires, as we think, a
different practice.
This is conclusive of the case. The petition filed in the
bankrupt proceedings distinctly averred that the debts due the
petitioner exceeded the sum of $250, and if interest is added, the
particular indebtedness specified amounts to more than that sum.
The court found this allegation true. That finding is conclusive in
a collateral action. We have so decided in
Michaels v.
Post, [
Footnote 3] at the
present term. Where the record shows jurisdiction, an adjudication
of bankruptcy can only be assailed by a direct proceeding in a
competent court. Evidence, therefore, to show that payments had
been made which reduced the indebtedness below the required amount
was inadmissible under any form of pleading in an action like this,
but it was especially so in this case, because there is no averment
in the pleadings contradicting the record. The sole objection is
that, upon the face of the record, the error is apparent. A record
cannot be impeached without previous notice by proper form of
pleading.
Judgment affirmed.
[
Footnote 1]
Section 39.
[
Footnote 2]
Section 39.
[
Footnote 3]
88 U. S. 21 Wall.
398.
