Nuss, William J.

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Bills and Notes - Statute of Limitations - Accommodation Maker

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Marquette Law ReviewVolume 20Issue 1 December 1935 Article 9Bills and Notes - Statute of Limitations -Accommodation MakerWilliam J. NussFollow this and additional works at: http://scholarship.law.marquette.edu/mulrPart of the Law CommonsThis Article is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. It has been accepted for inclusion inMarquette Law Review by an authorized administrator of Marquette Law Scholarly Commons. For more information, please contactmegan.obrien@marquette.edu.Repository CitationWilliam J. Nuss, Bills and Notes - Statute of Limitations - Accommodation Maker, 20 Marq. L. Rev. 42 (1935).Available at: http://scholarship.law.marquette.edu/mulr/vol20/iss1/9RECENT DECISIONSBANKRUPTCY-INSOLVENCY PROCEEDINGS-ACTs OF BANKRUPTCY.-The debtorhad filed its petition as a Michigan corporation praying for dissolution under thelocal statutes [MICH. CorAp. LAWS (1929) § 15310]. The debtor corporation wasin fact insolvent. The Michigan court entered its decree dissolving the corpo-ration and appointed a receiver to carry out the liquidation of the company'saffairs. Within four months thereafter a creditor petitioned the bankruptcy courtto have the corporation adjudicated a bankrupt, alleging as an act of bankruptcythe debtor's petitioning voluntarily for dissolution when it was insolvent. Thebankruptcy court denied a motion by the equity receiver to dismiss the petition.On appeal, held, order affirmed; the operation of the bankruptcy laws cannot bedefeated by voluntary dissolution under state statutes. Austin v. Thomas, 78 F.(2d) 602 (C.C.A. 6th, 1935).Although a corporation has ceased to exist in the eyes of its own domesticcourts it is not beyond the reach of the bankruptcy court. Hammond v. LyonReally Co., 59 F. (2d) 592 (C.C.A. 4th, 1932) ; see also in re Watts and Sachs,190 U.S. 1, 23 Sup Ct. 718, 47 L.ed. 933 (1902). The Federal Constitution [Art.1, § 8 (4)] gives Congress exclusive power to establish uniform laws on thesubject of bankruptcy, and any state law may be a bankruptcy law in substanceand in fact which provides for the administration and distribution of the estatesof insolvents. Barks v. Kleyne, 15 F. (2d) 153 (C.C.A. 8th, 1926). State insol-vency laws are suspended to the extent that they conflict with the BankruptcyAct. Stellwagon v. Clum, 245 U.S. 605, 38 Sup. Ct. 215, 62 L.ed. 507 (1917). Thecourt, in the principal case, was not required to fix the precise time when theact of bankruptcy was committed. The voluntary petition for dissolution wasfiled, the decree for dissolution was entered, and the receiver appointed, all withinfour months before the filing of the involuntary petition in bankruptcy. Theappointment of a receiver to liquidate the affairs of a corporation dissolved on avoluntary petition to the Michigan equity court under the local statutes is not anact of bankruptcy if the corporation is not in fact insolvent. Vassar FoundryCorp'n. v. Whiling Corp'n., 2 F. (2d) 240 (C.C.A. 6th, 1925). If the corporationis not in fact insolvent the statutory scheme under which the equity court throughits receiver is supervising the liquidation of the dissolved corporation's affairs isnot an "insolvency law" in conflict with the Bankruptcy Act. Vassar FoundryCorp'n v. Whiting Corp'n., supra. It is submitted that a voluntary dissolution bya special majority vote of the stockholders under the Wisconsin statutes [Wis.STAT. (1933) c. 181] would not by itself be an act of bankruptcy. Some conductthereafter on the part of the statutory trustees, the old corporation directors, orprevious conduct on the part of the directors, as such, just before dissolution,together with the fact of insolvency as defined in the Bankruptcy Act [see § 1(15), 30 STAT. 544 (1898), 11 U.S.C.A. 1 (15) (1926)] would have to be shownto justify the bankruptcy court's adjudicating the dissolved corporate debtor abankrupt and supervising the liquidation of the estate. The opinion in the princi-pal case, however, indicates quite definitely that if the requisite facts are presentthe estate of such a dissolved corporation-debtor would not be outside the scopeof the bankruptcy court's jurisdiction.CLYDE F. BALEY.BILLS AND NOTES--STATUTE OF LIMITATIoNS-AccoMODATION MAKER.-A claim was filed against the estate of the decedent on a promissory note exe-cuted by the decedent along with five other joint makers. The decedent hadRECENT DECISIONS• signed as an accommodation party. The note was executed on January 13, 1919,and was payable one year from that date. Interest had been paid on the noteuntil 1932 by the principal debtors, the other co-makers. The claim against theestate was dismissed by the county court because it was barred by thestatute of limitations. Held, on appeal, order affirmed; the accommodation makerby "waiving notice" of renewals had not consented to payments to be made onhis behalf. In re Schinidt's Estate, (Wis. 1935) 261 N.W. 240.Under the common law rule, payments by one co-maker tolled the statuteof limitations as to both. Cox v. Bailey, 9 Ga. 467, 54 Am. Dec. 358 (1851) ; Bur-goon v. Bixler, 55 Md. 384, 39 Am. Rep. 417 (1881). An accommodation indorser isnot a co-obligor with the maker of a promissory note. The indorser's responsibil-ity on a negotiable note must be fixed by presentment for payment and thegiving of notice of dishonor. Wis. STAT. (1933) §§ 116.75, 117.07. Thereafter anyconduct by the principal debtor, in the way of the payment of interest or theacknowledging of the indebtedness, cannot toll the statute with respect to theaccommodation party without the latter's express authority. Smith v. Do'wden,92 N.J.L. 317, 105 Atl. 720 (1919) ; and cf. Bishop v. Genz, 212 Wis. 30, 248 N.W.771 (1933) where the accommodation party was not technically an indorser buta "guarantor." Nor should any conduct by the accommodation indorser affectthe position of the principal debtor-maker with respect to the tolling of thestatute. Cf. White v. Pittsburgh Vein Coal Co., 266 Pa. 116, 109 Atl. 873 (1920).The effect of payment by one co-obligor, principal debtor or accommodationparty, upon the tolling of the statute as to all is frequently covered by expressstatutory provisions. See Ford v. Schall, 110 Or. 21, 221 Pac. 1052, 222 Pac. 1094(1924). The Wisconsin statute provides that payment of interest or payment of apart of the indebtedness by one will not affect the position of the other jointdebtor. Wis. STAT. (1933) § 330.47. But the other joint debtor can in fact con-sent to such payment of interest and such consent will then toll the statute withrespect to both parties. Gillitzer v. Ducho'rne, 203 Wis. 269, 234 N.W. 503 (1931).This section is not limited by express terms to cases involving principal debtorsand accommodation parties, nor to cases involving obligations evidenced bynegotiable paper. Where the joint co-makers of negotiable paper purport to agreeby provisions written onto the face of the note to all extensions and partialpayments before and after maturity without prejudice to the holder, the courthas held that such is, in effect, a power of attorney by each co-maker to theothers authorizing partial payments on behalf of all. Kline v. Fritsch, 213 Wis.51, 250 N.W. 837 (1933). In the principal case there was literally a waiver ofnotice as to extensions on the note. And the court felt that this meant theexecution by the principal debtor of a new note and the taking of that note bythe holder. The court refused to construe the literal provision with respect toextensions as amounting to consent to the payments which the other co-debtorshad made.WILUAM J. Nuss.CHATTEL MORTGAGES-FoRECLOSURES-CONSTITUTIONALITy OF PENALTIES INFoREcLosuRE STATUTES.-The plaintiff brought this action to foreclose a realestate mortgage which was executed together with two chattel mortgages on livestock and farm machinery as security for a $5,500 promissory note. The mort-gagors set up as a defense the seizure without their consent of the propertycovered by the chattel mortgages and the sale thereof in contravention of Sec-tions 241.13 and 241.15 [Wis. STAT. (1933)] which provide that for any violationof any provision thereof the owner of the equity may recover damages sus-

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Bills and Notes - Statute of Limitations - Accommodation Maker

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