Bell v. Forrest Paschal Machinery Co.

282 S.E.2d 232, 277 S.C. 19, 1981 S.C. LEXIS 485

• Court: Supreme Court of South Carolina
• Decided: September 14, 1981
• Docket: 21559
• Status: Published

Opinions

Lewts, Chief Justice:

This appeal is from an order striking certain defenses set out in the appellant’s Answer below. We affirm.

The respondent brought action for personal injuries allegedly caused by defects in certain machinery produced by the appellant. By way of defense, the appellant pled its bankruptcy as a bar to the suit, specifically alleging: (1) a restraining order of the bankruptcy court enjoining “all persons” from commencing such actions against appellant; (2) appellant’s discharge by the bankruptcy court; (3) failure of the respondent to name the trustee in bankruptcy as a codefendant. These defenses were struck from the Answer by the court below, and appeal is taken. Additionally the appellant urges this Court to hold that its liability insurer should be relieved of any liability or duty to defend by reason of .the bankruptcy and other considerations.

The striking of a defense from a pleading is a “drastic remedy” rarely to be granted. Germofert Mfg. Company v. Castles, 97 S. C. 389, 393, 81 S. E. 665; Etiwan Fertilizer Co. v. Johns, 202 S. C. 29, 35, 24 S. E. (2d) 74. Upon the review o£ the record and briefs of counsel, however, we conclude that in each instance the challenged defense was so manifestly false that the trial court had no choice but to strike it as a sham. Town of Bennettsville v. Bledsoe, 226 S. C. 214, 217, 84 S. E. (2d) 554; Scott v. Meek, 228 S. C. 29, 333, 88 S. E. (2d) 768.

The appellant’s first defense set up a restraining order issued by the U. S. District Court for North Carolina acting as a court of bankruptcy under the pre-1978 Bankruptcy Act. The order was issued in September 1976, and the respondent commenced her action in the Richland County Court of Common Pleas in July 1978. Appellant urges that the respondent was bound by the restraining order and barred at the outset from pursuing recovery in this proceeding. We find ike law to be otherwise.

Study of United States Supreme Court cases on the subject shows that a North Carolina federal court has no power to restrain a plaintiff who is not a party to a-bankruptcy proceeding therein who has not submitted to its jurisdiction, and who is a resident of another jurisdiction, such as South Carolna. Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 300, 32 S. Ct. 96, 56 L. Ed. 208. Under the pre-1978 Bankruptcy Act, a federal district court acting in a bankruptcy cáse could reach into other jurisdictions beyond its territorial limits only by means of an ancillary proceeding in a district court having jurisdiction oyer persons to be restrained. The record before us shows that this respondent was never served with process in the appellant’s North Carolina proceeding, and as a result the restraining order is unvailing against her. The court below properly struck this defense from the Answer.

Appellant next asserts that the respondent’s claim is barred by its discharge in bankruptcy. This defense is difficult to understand in light of the appellant’s candid admission that the respondent was at no time scheduled as a creditor in the bankruptcy proceeding. Under Section 17(a)(3) of the Act, 11 U. S. C. A. § 35(a)(3), no debt is discharged in bankruptcy which has not been scheduled in time for the creditor to file and prove a claim. Section 57(n) of the pre-1978 Bankruptcy Act, 11 U. S. C. A. § 93(n), establishes a six month limitation for the proof and allowance of claims. There is no dispute in the record of this appeal that the respondent commenced her action and learned of appellant’s bankruptcy at least one year after the expiration of the filing period. When the absence of scheduling has been shown, as here, the debtor must prove in the alternative a timely notice or knowledge of the bankruptcy on the part of a creditor. 8B C. J. S., Bankruptcy, Section 586(b), p. 149. No such showing was made to the court below, rendering appellant’s claim of bar by discharge a falsity in fact. The court acted properly in striking this defense.

As a further defense, the appellant asserts that a defact in parties existed by reason of respondent’s failure to name the trustee in bankruptcy as a defendant. Appellant’s Answer alleges no facts to show why this is so; on the contrary, it offers nothing more than a legal conclusion that the trustee was a necessary and/or indispensable party. We find no authority for the proposition that where, as here, a plaintiff has effectively been foreclosed from participating in the defendant’s bankruptcy estate, there is any “interest” in the trustee to require the presence of the same before a state court in a separate, subsequent proceeding. The defense was properly struck from the pleading.

Finally the appellant calls upon us to determine the liability or duty to defend of its liability insurer. We find the request both premature and improper, since the insurer is not before this Court. We have certainly expressed the view that a discharge in bankruptcy is personal to the bankrupt and does not generally cancel, release or impair liability of a surety or person jointly liable for a debt. Dominion Culvert & Metal Corp. v. United States Fidelity & Guaranty Company, 238 S. C. 452, 460, 120 S. E. (2d) 518. This holding rests upon the language of Section 16 of the Act, 11 U. S. C. A., Section 34, as commonly understood and applied in most jurisdictions. In re Bracy, 449 F. Supp. 70 (D. C. Mont.). Since we have determined that the appellant’s bankruptcy defenses are of no avail in this case the duty to defend on the part of its insurer as well as its ultimate liability are matters of contract between those parties and are obviously not presented on this appeal.

Ness, Gregory and Harwell, JJ., concur. Littlejohn, J., dissents.