Case ID: abbn-cas_1/html/0412-01.html
Source: Caselaw Access Project
Author: {"author": "Bt the Court.—Neils oh, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BEEBEE v. PYLE.
    
      Brooklyn City Court; General Term,
    March, 1876.
    Bankruptcy.—Composition.—Statement oe Debt.
    A composition adjudicated in bankruptcy is not defeated by the mere omission of the debtor to state accurately the amount of one of his debts,—e. g., to omit to specify that arrears of interest are due on it.
    The creditor whose demand is inaccurately stated must object before the bankrupt court. If he is a party there and does not do so, the State courts will not question the certificate for the error in statement.
    The entire debt, not merely the amount stated, will be deemed dis-. charged.
    Appeal from a judgment.
    Clement E. Beebee brought this action on a judgment recovered by him in this court, against Cyrus Pyle, the present, defendant, April 16, 1874, for $1267.68, upon a promissory note. The judgment was originally recovered by default, on April 16, 1874. In the action in which it was recovered the summons was for $1207.43, with interest from December 1, 1873. Less than a month before the recovery of the judgment a petition in bankruptcy was filed against defendant. After the recovery of the judgment, an amended petition was filed against defendant, on which he was adjudicated a bankrupt, in October 22, 1874. The default was opened, and the bankruptcy court allowed plaintiff to continue the action; and a few days after the adjudication plaintiff recovered a verdict on which the court ordered the original judgment to stand. The bankruptcy proceedings were conducted to a compromise, at the meeting for which the debtor stated the debt due to plaintiff at $1207.43, the original indebtedness, without mentioning interest. The plaintiff was a party to and present at the proceedings, butfiled.no objection to the statement of his claim. Finally, the bankruptcy court, plaintiff being represented by counsel, made an order sanctioning the compromise.
    Plaintiff refused to receive his share, and obtained leave of this court to bring the present action on his judgment.
    Judge McCtje, before whom the case was tried, held that “by failing to object at the proper time that the statement of the debt due to him. was not correct, the plaintiff is concluded by the final order of the bankruptcy court; and that all questions touching the debt and its amount are res adjudicata.” He accordingly dismissed the complaint with costs. Plaintiff appealed.
    
      J. T. Marean, for appellant.
    I. Interest should have been included (Re Hagan, 10 Bank. Reg. 383; Exp. Rooke, 1 Atk. 244; 4 Evans Stat. 407, § 49; 423, § 129 ; Sloan v. Lewis, 22 Wall. 150).
    
    II. Substantial under-statement prevents the composition from binding the creditor whose demand is under-stated. The law requires the debtor to state the whole, and gives the creditor no power of correction.
    TIT. There was no adjudication of the amount, but a mere unsworn statement; and the adjudication only determines that the resolution was properly passed and confirmed, and the composition for the best interest, &c.
    IV. The bankruptcy court left it to this court to adjudicate the amount of the debt.
    V. There is no pretense of an estoppel.
    VI. In no event is the claim barred as to the differ- • ence between the sum stated and the true amount (Clark v. Rowling, 3 N. Y. 216).
    
      John D. Taylor, .for respondent.
    I. The proceedings In bankruptcy against the defendant, and his composition with his creditors as stated in the findings? are a bar to the plaintiff’s recovery in this action. 1. Interest follows upon a liquidated debt as an incident, or is allowed as the measure of damages for the nonpayment of a debt when due, but is no part of the debt itself (Glass Factory v. Reid, 5 Cow. 610). 2. In the bankruptcy courts the rights of parties are adjusted as of the date of filing the petition, and no lien, right or priority can be acquired by any proceeding in a State court commenced thereafter (Bump’s L. & Pr. 69, 367; In re Crawford, 3 Bank. Reg. 171; Archenbrown, 8 Id. 429; In re Preston, 5 Id. 293; Gardner v. Cook, 7 Id. 346 ; In re Vickery, 3 Id. 696, 698 ; In re Rosey, 8 Id. 509; In re Brown, 3 Id. 584; Shellington v. Howland, 53 N. Y. 371-4; Mills v. Davis, 10 Bank. Reg. 340; In re Wynne, 4 Id. 5 ; In re Smith, 3 Id. 81; 2 Id. 20; Monroe v. Upton, 50 N. Y. 593; Clark v. Rowling, 3 Comst. 216). 3. The bankrupt act is highly remedial, and is to be liberally construed (In re Locke, 2 Bank. Reg. 123 ; In re Silverman, 4 Id. 173; In re Muller v. Brentano, 3 Id. 86; In re Dibblee, 2 Id. 185 ; 2 Id. 124, 77 ; 3 Id. 47, 17; 8 Id. 494 ; Platt v. Parker, 4 Run, 135 ; U. 8. Rev. Stat. § 5103).
    II. The final order ratifying the composition, is equivalent to a discharge in bankruptcy, and cannot be impeached or reviewed in a State court (Bankrupt Act, § 34; In re Bechet, 12 Bank. Reg. 201; Ocean Bank v. Olcott, 46 N. Y. 12-15; 9 Bank. Reg. 74; Stern v. Nussbaum, 5 Daly, 332 ; 8 Bank. Reg. 494).
   Bt the Court.—Neils oh, Ch. J.

It was the duty of the defendant to have stated the amount of the debt due to the plaintiff correctly, in the composition proceedings in bankruptcy. If, from inadvertence, or error of opinion, a mistake was committed, a correction could have been made by the district judge, on his attention being called to it. To illustrate: suppose a case where the principal of the debt being known and stated truly, the interest, regarded as a mere incident, is omitted; or a case, where it might be honestly supposed that there was no accruing interest, when in fact there was, and the principal sum only is stated; would it be just, follow as a necessary consequence, that the application should be defeated 1 We think not.

We also think that such considerations should have been addressed to the court having charge of the proceedings in bankruptcy.

The district court granted the required certificate on hearing the parties by their counsel, and we regard that as an adjudication, not to be questioned before, or qualified by us.

We concur in the views stated by the judge on the trial, and in the conclusion of law adopted by him upon the facts found.

The judgment should be affirmed with costs.

Reynolds, J., concurred.