Page:Harvard Law Review Volume 5.djvu/423

407 LECTURE NOTES. 407 only enough to give him full payment. After proof is made, a dividend from one estate will not reduce the proof against the other. If, however, a dividend is received from A's estate before proof is filed against B's, the latter proof must be diminished by the amount of the dividend already received. Thus, if A's estate has paid fifty per cent, the subsequent proof against B's estate must be for $5,000 only; and if B's estate pays fifty per cent. C will receive only seventy- five per cent, in all. The results reached by the established rule are certairly unsatisfactory. Obviously each estate ought in justice to bear an equal burden. But as the law stands, if A becomes bankrupt first, proof for the full amount can be made against his estate ; while subsequent proof against B's estate must be diminished by the amount received from A's. If each est Ate pays fifty per cent., A will be obliged to pay $5,000, and B only $2,500. The same result will be reached if the cred.tor inadvertently or through ignorance delays his second proof until after a dividend has been declared upon the first. A rule which thus distributes the burden unequally and hap-hazard according to mere chance has little to com- mend it as a practical working-rule. Nor is it necessary upon sound principles. To an action at common law on an obligation under seal, payment was no defence. If the obligor upon payment was not diligent enough to take a discharge under seal, or to have the instru- ment delivered up to be destroyed, he was liable to another action at law on the obligation. His only remedy was a bill in equity. The foundation of this bill was the injustice of allowing the creditor to receive payment twice. Now, upon a joint bond each obligor is liable, and a judgment at law may be recovered against each for the full amount. If one of the co-obligors, for example A in the case stated, had paid hilf the debt, he would still be liable at law for the whole amount, and B would also be liable for the whole amount. And, as the creditor has received but half the amount due him, neither A nor B would have any equitable defence except as to half the debt. And if B is insolvent and only able to pay fifty per cent., there can be no equitable bar what- ever to the creditor's legal claim against him for the full amount ; because, upon the hypothesis, the creditor will not receive more than the amount actually due. It would seem to follow that if both the obligors are insolvent, being both liable at law for the full amount, full proof should be allowed against each estate, the fact of a dividend received from one declared before proof against the other being no answer to the second proof in full, unless it can be ft&own that the dividend from the second estate will give the creditor more then he is equitably en- titled to receive. If the first estate pays more than its proper share, that is, more than half the debt, anything received from the second estate in excess of full payment should be allowed to be received in trust to be paid over to the first estate. Thus if A's estate pays seventy- five per cent, $7,500, and B's estate subsequently yields fifty per cent., $5,000, the surplus, $2,500 must be handed over by the creditor to A's estate. Perfect equality is thus secured. This rule is based upon the theory that a creditor can prove for what is legally due him. The only other sound view is that the creditor can prove only for what he is equitably entitled to receive. Neither of these views is entirely consist- ent with the authorities. Upon the latter theory dividends from one estate, although not declared until after proof against the other, should diminish that proof. And upon this view the legal rights of a creditor