EMERY, V. C.
Bill by Edward R. Dimmick against the W. Fred Quimby Company for a receiver. On appeal from the allowance of a certain claim by the receiver.
A. C. Smith and Charles R. Glen, for appellants. William P. Martin, for appellee.
EMERY, V. C. Upon the questions reserved at the hearing I reach the following conclusions:
1. The claim of Mr. Hassell is entitled to a dividend upon the entire face value of the claim as owned by the Russell estate. The Hebherd Case, 55 N. J. Eq. 18, 36 Atl. 122, which was relied on as confining the claimant to a dividend merely upon $10,000, the amount paid by Dimmick to the Russell estate on the purchase of the claim, is not applicable. In the Hebberd Case the original debt was fraudulent as against the company, and bona fide purchasers were therefore only entitled to recover against the company, or prove for a dividend to the amount actually paid. In this case (see 55 N. J. Eq. 30, 30 Atl. 122) the claim to the full amount paid by the bona fide purchaser ($20,000) for bonds of that par value was allowed in favor of Damon, the original fraud-doer, who subsequently purchased the bonds from this bona fide purchaser. His proof on these bonds was not limited to what he paid for them, while it was so limited on the bonds received by him directly from the company. In the present case the entire amount of the Russell notes was a valid claim against the company when purchased by Dimmick, and he is therefore entitled to succeed to the rights of his vendor, so far as relates to the amount of the claim to be proved against the company.
2. The second question reserved was whether the appellants the Palmer & Smith Company and the Laurel Company are entitled to have the amount due on the Russell estate notes excluded from the Hassell claim for the purpose of dividends. This exclusion is claimed for the sole benefit of these special creditors, and the claim is based upon the alleged equitable estoppel in their favor against Dimmick, who purchased the Russell claim, and afterwards assigned it to Hassell as security. The estoppel is based on representations by Dimmick, claimed by these creditors to have been made to them, respectively, that the Russell claim against the company had been settled, upon the faith of which representations their claims against the company, or a portion of them, were incurred. The existence, extent, and the effect, as against Dimmick and as against Hassell, the assignee of the Russell claim, without notice of the alleged fraud, are issues which must be determined on some proper proceeding to which both Dimmick and Russell are parties. The present proceeding is an appeal on petition by creditors from an allowance of the Hassell claim by the receiver, and is for the benefit of all creditors, and the determination of these questions of special estoppel is not within the issue raised by the petition, nor could the questions be properly raised by a mere petition of appeal from a receiver's determination, which is the proceeding now pending. The estoppel claimed, if it exists, seems to be rather in the nature of a claim on the part of the defrauded creditors to be substituted, so far as the Russell claim is concerned, and to the extent of their loss, to the benefit of the proof made by Hassell on this claim; and, for the enforcement of the estoppel which exists in favor of these creditors only, the Russell claim must be held as existing for the benefit of these creditors, rather than disallowed. The allowance or disallowance, eitherwholly or in part, of the Hassell claim, is the issue on this appeal, and not the special equities of the appellants, or either of them, against Hassell and Dinimlck, if the claim be allowed. For this reason, therefore, I do not pass upon any of the questions relating to estoppel. The evidence as to the representations of Dimmlck to these creditors was admissible in this proceeding because Dimmlck was called to prove the existence of the Russell claim, and his previous statements that the claim was settled affected his credibility; but no adjudication as to the effect of such representations upon Dimmick and Hassell, his assignee, can be made, except in a proceeding to which all the persons interested are parties.
3. As to costs of these proceedings, my conclusion is that, in view of the whole case and the circumstances surrounding the contested claim, the case is one where the creditors were entitled to a full and complete disclosure under oath of the parties interested. The receiver had the authority, under the statute, to conduct such examination, and the costs of the proceedings would, in that case, have been chargeable to the estate; and, inasmuch as the creditors were, under the circumstances, entitled to an examination, and some of the important facts upon which the validity of the claim was based were disclosed for the first time on this examination, the appellant creditors are entitled to have the costs of the appeal (which, if successful, would have been for the common benefit of all the creditors) paid out of the estate.