Case ID: misc_58/html/0570-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Per Curiam.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph P. Schmitt, Respondent, v. Abraham Greenberg, Appellant.
    (Supreme Court, Appellate Term,
    April, 1908.)
    Principal and surety: Discharge of surety—Indulgence: Rights and remedies of surety against creditor — Credit for payments from estate of principal in bankruptcy.
    Where -the defendant sold out to his copartner his interest in the ■business of the copartnership, and the purchaser' assumed the existing debts of the firm and continued the business and thereafter failed and was adjudicated a bankrupt, the mere fact that the plaintiff, a creditor -of the firm whose debt the defendant’s co-partner assumed, did net enforce collection of his demand for six months but continued to sell the copartner, who continued business, goods, for which the latter was indebted to him at the -time of his bankruptcy in a large amount, in the absence of proof as to when the payment of the firm account became due, or the circumstances which caused the delay in the plaintiff’s enforcing his claim, or whether there was any express extension of time for payment, or whether the delay was with the knowledge and consent of the defendant, is insufficient to set aside a verdict in the plaintiff’s favor.
    The proving of the plaintiff’s claim in bankruptcy, against the partner, who continued the business and the receipt of a dividend thereon will not impair the plaintiff’s claim against the outgoing partner, except to the extent of the payment made to the plaintiff from the bankrupt’s" estate.
    Appeal by the defendant from a judgment in favor of the plaintiff, rendered in the Municipal Court of the city of New York, first district, borough of Manhattan.
    Isidore Witkind, for appellant.
    Sol. A. Cohn, for respondent.
   Per Curiam.

The agreed statement of facts is as follows, viz.: Between February 7, 1905, and January 31, 1906, the defendant and one B. M. Shaine were partners in business under the firm name and style of B. M. Shaine & Co. Between January 23, 1906, and January 30, 1906, plaintiff sold and delivered to said firm goods of the agreed price and value of $170.17, which is the subject-matter of this action. On January 31, 1906, the said firm was dissolved, and B. M. Shaine assumed the payment of all the liabilities of the firm, including said, debt of $170.17 to plaintiff; and, on the same day, plaintiff was duly notified of such dissolution of the firm and such assumption of the liabilities thereof by said Shaine. Subsequently to such dissolution and notice thereof the plaintiff continued to sell goods to said Shaine, although no part of said existing debt of $170.17 was paid. On July 10, 1906, said Shaine owed plaintiff $2,829.67, in addition to the said previous indebtedness of $170.17. On said 10th day of July, 1906, said Shaine was duly declared a bankrupt. Plaintiff appeared in the bankruptcy proceedings, as an unsecured creditor, and filed and proved a single claim of $2,999.84, being composed of the said previous debt of $170.17 and of the subsequent debt of $2,829.67. Plaintiff in the bankruptcy proceeding made no disclosure of the liability of the defendant herein, Greenberg, for the said $170.17, as a member of the then existing firm of B. M. Shaine & Co., to whom the goods were sold, for which the-said stun of $170.17 was due. Thereafter plaintiff received from the trustee in bankruptcy of said Shaine, by way of dividend, the sum of $180.23', which is all that he will receive, as there are no further assets in the hands of the trustee out of which any further dividends can be paid. Plaintiff thereupon brought this action against defendant for the sum of $170.17, and obtained a judgment for $163.19 damages and costs. Defendant appeals. At the time of the sale of the goods, in January, 1906, both Shaine and defendant became liable, as copartners, to plaintiff for the said sum of $170.17; but, upon the dissolution of the firm and the assumption of the liabilities of the same by Shaine, with due notice thereof to plaintiff, Shaine became the principal debtor and defendant became surety for the payment of the debt. Reed & Barton v. Ashe, 18 App. Div. 501; McLoughlin v. Bieber, 41 id. 561; Keitel v. Zimmermann, 19 Misc. Rep. 683. The general rule is that leniency extended to the principal debtor, without the knowledge and consent of the surety, releases the latter from his liability; and appellant urges that, in delaying efforts to enforce collection of the debt from January to July, plaintiff gave such an extension of time of payment as operated to extinguish the obligation of the surety. In the case at bar the agreed statement of facts is absolutely silent as to when payment became due, as to what circumstances caused the delay, as to whether there was any express extension of time, and as to whether or not the delay was with the knowledge and consent of defendant. If defendant wished to avail himself of the objection under consideration he should have presented sufficient facts" to enable the court to intelligently pass upon the same. We are not disposed to interfere with the finding of the court below in favor of plaintiff upon the point here raised. The proving of the claim in bankruptcy against Shaine does not bar this action. Plaintiff was not a secured creditor, within the meaning of the Bankruptcy Act, as there was no lien held by him or accruing to his benefit on the property of the bankrupt; and, therefore, he was not required to disclose the surety-ship of defendant for the debt. Collier Bankruptcy (6th ed.), 437. The discharge of the principal in bankruptcy does not relieve the surety from liability for the balance due. Bank. Act, § 16; Witthaus v. Zimmerman, 91 App. Div. 202, 205; Collier Bankruptcy (6th ed.), 212. The court below has credited defendant upon the claim in suit with a proportionate share of the dividends received by plaintiff from the trustee in bankruptcy; and, as plaintiff has proved his debt in bankruptcy, defendant may have himself subrogated to the rights of plaintiff upon paying the balance due on this claim (In re Ditton, 100 Fed. Repr. 627) ; although, as we have seen, no more dividends can be obtained, as no further assets remain in the hands of the trustee.

We see no good reason for disturbing the judgment, which should he affirmed, with costs.

Present: Gildersleeve, Seabuby and Dayton, JJ.

Judgment affirmed, with costs.