Case ID: ad_85/html/0275-01.html
Source: Caselaw Access Project
Author: {"author": "Chester, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Oliver O. Latimer, Respondent, v. Frank H. McKinnon and Walter R. Burrows, Appellants, Impleaded with Joseph H. Clark, as Trustee in Bankruptcy of Frank H. McKinnon and Walter R. Burrows.
    (No. 2.)
    
      Action continued, after the defendants are adjudged bankrupts, for the purpose of liquidating the claim against them — they cannot set up their discharge in bankruptcy.
    
    Where, pending the trial of an action, the defendants are adjudged to be bankrupts and an order is made, under the provisions of subdivision b of section 63 of the National Bankruptcy Act, permitting the plaintiff to prosecute the action for the purpose of liquidating the claim against the estate of the bankrupts and directing the trustee in bankruptcy to be made a party defendant, the original defendants are not entitled to set up, in a supplemental answer served by them, an allegation of their discharge in bankruptcy, as that fact is entirely immaterial.
    Appeal by the defendants, Frank H. McKinnon and another, from an order of the Supreme Court, made at the Broome Special ■Term and entered in the office of the clerk of the county' of Chenango on the 2d day of December, 1902, striking out the 2d subdivision of the supplemental answer of said defendants.
    The subdivision stricken out was one alleging as a defense the discharge of the defendants in bankruptcy by an order of the United States District Court made on the 11th day of June, 1901, which discharge included the claim sued upon.
    
      James R. Baumes, for the appellants.
    
      Wordsworth B. Matterson, for the respondent.
   Chester, J.:

The facts concerning' this somewhat unusual litigation are quite fully stated in an opinion of Mr. Justice Houghton, handed down at this term of court, with a decision affirming a judgment overruling a demurrer by the defendant Clark,. as trustee, to the complaint and supplemental complaint in this action, and need not be here repeated. (85 App. Div. 224.)

After the court had affirmed an order denying the motion of these appellants for leave to serve a supplemental answer alleging their discharge in bankruptcy (see 72 App. Div. 290) they served a supplemental answer.containing a provision alleging such discharge. From an order striking out such provision this appeal is taken.

The claim sued upon was an unliquidated claim. After the plaintiff had procured judgment upon it his judgment was reversed by the Court of Appeals and a new trial granted. Thereafter the defendants filed a petition in bankruptcy.

The Bankruptcy Act of 1898 provides in subdivision b of section 63 (30 U. S. Stat. at Large, 563) that unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate.”

Upon an application to the bankruptcy court under that section by the plaintiff an order was made permitting him to proceed in the State court to liquidate his claim against the estate of the bankrupts and directing that Clark, the trustee in bankruptcy of the ■estate of the defendants, be brought in as a party defendant in the action. The plaintiff’s action is, therefore, continued for the purpose only of “liquidating” or ascertaining the amount of his claim against the defendants.

This being the situation, all that there is to try in the .action is what amount, if anything, did the defendants- owe to the plaintiff before their discharge in bankruptcy upon the claim sued upon, and .the only purpose of determining this is that it may be ascertained how much the trustee in bankruptcy' may lawfully allow to . the plaintiff in the distribution of the assets of the bankrupts.

The fact of bankruptcy is entirely immaterial in determining these questions, and the order striking out of the supplemental answer the allegation of defendants’ discharge , in bankruptcy was: proper and should be affirmed, with ten dollars costs and •disbursements.

All concurred.

Order affirmed, with ten dollars costs and disbursements.-