Columbia Bank v. . Birkett

66 N.E. 652, 174 N.Y. 112, 12 Bedell 112, 1903 N.Y. LEXIS 1310

• Court: New York Court of Appeals
• Decided: March 6, 1903
• Status: Published

Opinions

Gray, J.

The appellant does not dispute that the findings of fact are supported by the evidence ; but he does dispute that they support the legal conclusion. Indeed, the evidence, upon which the finding as to the defendant’s knowledge of plaintiff’s ownership and holding of the note is based, leaves no doubt possible as to that fact. The note was due April 5th, 1899. On March 27th, 1899, in response to a request of the defendant’s firm for an extension of their note, its payee, the advertising company, informed them that it was held by the plaintiff, whose president refused to give any extension. Thereupon, and on April 4th, the firm wrote to plaintiff that if it would hold their note “ due at your bank to-morrow * * * until the 12tli instant, we will endeavor to pay the same.” Their petition in bankruptcy was filed April 13th, and in their schedule of creditors they inserted, under the heading of “ names of creditors and last holders known to debtors,” the payee named in the note and not the plaintiff. In the following September, they obtained the decree discharging them from their debts. In the following Hovember, the plaintiff’s president wrote to the president of a bank in Penn Tan, H. Y., making inquiry about the firm of Bussell & Birkett and “ what condition their affairs are in.” Upon hearing, in reply, that they had “ been through bankruptcy,” plaintiff’s president asked, “ in which district Bussell & Birkett passed through bankruptcy, as we were not aware and never received notification that any such proceedings had taken place.” He then learned that the proceedings were in the H orthern District of Hew York. However singular those facts, we are not further concerned with them ; as we are not assuming, in this action, that the defendant was guilty of fraud in procuring his discharge in bankruptcy. _ The contention of the defendant is that, notwithstanding the facts, his discharge is a perfect defense to this action, and that involves a construction of the present Federal Bankruptcy Act, which was passed in 1898. Section 17 of that act provides that “ a discharge in bankruptcy shall release a bankrupt from all of his provable debts except such as * * (3) have not been duly scheduled in time for proof and allowance, with the name of the creditor, if known to the bankrupt, unless such creditor had notice, or actual knowledge of the proceedings in bankruptcy,” etc. The argument is made that, although the plaintiff had no notice, or actual knowledge, of the bankruptcy proceedings prior to the discharge, by subdivision H of section 57, claims may be proven within a year after the adjudication in bank ruptcy, and when, in ¡November, 1899, following the defendant’s discharge, the plaintiff learned of that fact, that it had still, five months left to make proof of its claim. Then reference is made to section 15 of the act, whose provisions allow a discharge to be revoked, upon the application of parties in interest, filed within a year from the discharge, for fraud of the bankrupt, etc., and, from these provisions of the Federal statute, it is inferred, and it is insisted, that no substantial rights of the plaintiff have been affected and that, within the intent of the act, it was bound by the decree in bankruptcy and its claim is barred. ,

While there may be some difficulty in the way of the statutory construction, I think the plaintiff’s claim has never been discharged, as the result of the bankruptcy proceedings. In my opinion, there are features in the present Bankruptcy Act, which differentiate it from preceding acts and which indicate a legislative intent that greater strictness shall prevail in notifying the creditor of the various proceedings in bankruptcy. It is provided that the voluntary bankrupt must file “ a list of his creditors, showing their residences, if known,” and that notices must be sent to the creditors at “ their respective addresses as they appear in the list of creditors of the bankrupt, or as afterwards filed * * * by the creditors.” (Sec. 58a and sec. 7, subd. 8.) While in the previous acts of 1841 and of 1867, substituted service of notices by publication was provided for, in the present act, it is actual notice that is required to be given. The schedule of debts, which the bankrupt is to file with his petition, furnishes the basis for the notices which the referee, or the court, is to give thereafter to the creditors, and, thus, the bankrupt appears to be made responsible for the correctness of the list of his creditors. That he is to suffer, in the case of his failure to state the name of the creditor, to whom his debt is due, if known to him, seems to me very clear from the reading of section 17 of the act. That excepts from the release of the discharge all debts, which “ have not been duly scheduled in time for proof and allowance, with the name of the creditor.” That is very emphatic language, and how is it possible to obviate its effect by the argument that the plaintiff still had time left, after the discharge was granted, to prove his claim % The excepting clause of the act excludes from-the bankrupt’s discharge debts, which “ have not been duly scheduled in time for proof,” etc. Can we say that such debts as may be proved within a year from the adjudication in bankruptcy are discharged ? I think, clearly, not. The present act, differing in such respects from the preceding acts, requires strict notification of the various steps in the bankruptcy proceedings to be given to the creditors of the voluntary bankrupt, according to his schedule, and it excepts from the release of the bankrupt’s discharge provable debts, which had not been duly scheduled, etc. I think it was intended that the decree discharging the voluntary bankrupt should be confined in its operations to the creditors, who had been duly listed and who were enabled to receive the notices which the act provides for.

If or can I agree with the suggestion that is made that plaintiff’s substantial rights were not affected. Whether that is a • necessary factor in the case, I do not say; but they certainly were, in my opinion. The plaintiff enjoyed none of the opportunities provided by the act for the creditors of a debtor who is seeking a discharge from his debts; such as the selection of a trustee, or the examination of the bankrupt, as preliminary to opposition to the discharge. Those were rights accorded by the act, and I am quite unable to perceive how it can be held that the plaintiff could be deprived of them and remitted for all remedy to an attack upon the decree of discharge.

For these reasons, I advise the affirmance of the judgment, with costs.