Court Opinion

ID: 6123154
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:11:03.015357+00
Date Added: 2024-06-11T08:24:18.162805
License: Public Domain

Taloott, J.:
This is an appeal from a judgment rendered for tbe defendant for costs in an action brought on a promissory note for $115, given by tbe defendant to tbe plaintiff, and also for moneys paid by tbe plaintiff on account of a note wbicb be. bad signed as surety for tbe defendant and at bis request. Tbe note to tbe plaintiff fell due in April, 1871. Tbe note paid by tbe plaintiff wbicb be bad signed as a surety for defendant fell due in November, 1866. Tbe cause was tried by tbe court without a jury. On tbe 7th of February, 1872, tbe defendant was adjudged a bankrupt in proceedings regularly instituted in tbe District Court of tbe TTnited States for tbe northern district of New York. On tbe first day of March, 1872, tbe plaintiff, as a creditor of tbe defendant .and bankrupt, duly proved in bankruptcy bis note, described in tbe first count of tbe complaint; and on tbe 14th day of March, 1872, Isaac Hewitt, then tbe bolder and owner of tbe note wbicb tbe plaintiff bad signed as surety for tbe said defendant bankrupt, duly proved in bankruptcy tbe note described in tbe second count of tbe said complaint. Tbe plaintiff, as such surety,. after such proof, paid to tbe said Hewitt tbe whole amount of the note wbicb be (tbe plaintiff) bad so signed as surety, and tbe said note was by tbe said Hewitt delivered to tbe said plaintiff. Afterwards, and on or about tbe 18th of February, 1873, tbe register in bankruptcy declared a dividend to tbe creditors of tbe bankrupt, who bad proved their claims, out of the assets wbicb bad come to tbe bands of tbe assignee, as such assignee in bankruptcy of tbe defendant, wbicb dividend amounted to tbe sum of fifteen dollars and thirty cents on tbe note described in tbe first count of tbe complaint and held by tbe plaintiff, and to tbe sum of sixty-five dollars and fifty-three cents on tbe amount of the debt arising on tbe note wbicb bad been signed by tbe plaintiff as surety and wbicb bad been proved in bankruptcy by Hewitt. Both of these amounts were duly paid by tbe assignee to tbe plaintiff, and were accepted by him as applicable to tbe debts on wbicb they were declared.
After tbe payment of said dividends, and before tbe commencement of this action, tbe assignee in bankruptcy rendered bis accounts as such to tbe register, and was by him duly discharged. After such discharge and accounting no further proceedings Have *596been bad in tbe bankruptcy case by or in bebalf of tbe bankrupt or any creditor. Tbe court, at tbe Circuit, beld as conclusions of law that by proving in bankruptcy tbe note described in tbe first count of tbe complaint, tbe plaintiff is deemed to have Avaived all right of action and suit thereon until such time as tbe proceedings in bankruptcy are determined; and that tbe said Hewitt, by proving tbe said debt on tbe note wbicb tbe plaintiff bad signed as a surety for tbe defendant, bad waived all right of action thereon in like manner ; and that tbe said plaintiff, by tbe payment of said amount to Hewitt, and tbe receipt and acceptance from tbe assignee in bankruptcy of tbe dividend thereon, elected to stand in tbe place of Hewitt, and was also prevented from maintaining a suit for tbe money paid by him or upon tbe said note until tbe determination of such proceedings in bankruptcy; that at tbe time of tbe commencement of this suit and the tidal of tbe action, tbe proceedings in bankruptcy commenced by tbe said defendant were not fully determined, and as a necessary conclusion from tbe foregoing premises rendered a judgment for tbe defendant for costs as to both said causes of action.
By tbe bankrupt act, as it was originally passed, it was enacted “that no creditor proving bis debt or claim shall be allowed to maintain any suit at law or in equity therefor against tbe bankrupt, but shall be deemed to have waived all right of action against him, and all proceedings already commenced or unsatisfied judgments already obtained thereon against tbe bankrupt shall be deemed to be discharged and surrendered thereby.” (H. S. Rev. Stat., 5105.) This was amended by act of congress June 22, 18Y4, by providing as follows: “ But a creditor proving bis debt or claim shall not be deemed to have waived bis right of action or suit against tbe bankrupt where tbe discharge has been refused or tbe proceedings have been determined without a discharge. (18 U. S. Stat. at Large, 179, § 7.)
No discharge has been refused to tbe bankrupt, and tbe Special Term beld that tbe proceedings in bankruptcy had not been determined without a discharge. There was some conflict of opinion in tbe United States courts whether tbe right on tbe part of tbe bankrupt to apply for a discharge from bis debts under tbe act was limited to one year by section 29 of tbe original bankrujot act, or *597whether the limitation of one year was only applicable to cases where no debts had been proved and no assets had come to the hands of the assignee. (See Wood v. Hazen, 10 Hun, 362.)
But in Wood v. Hazen this General Term held, following the rules of Mr. Justice Blatoheord and Judge Nelson, made in the Circuit Court of the United States (and which are the same cases relied upon by the judge at Circuit in this case) that the limitation of one year, within which the bankrupt might apply for a discharge, did not apply to those cases in which debts had been proved against the bankrupt and assets had come to the hands of his assignee; that there was no statutory limitation npon the right to apply for a discharge in cases of the latter description, and that the proceedings in bankruptcy could not be considered as determined under section 5105, as amended by the act of June 22,1871 (supra), and that the right of a creditor who had proved his debt in bankruptcy was suspended indefinitely, until some order of the court in bankruptcy had been made declaring the proceedings to be determined.
It seems that the judge of the southern district, with a view, prohahly, to meet this difficulty, had made a rule declaring that “ a canse in bankruptcy is not to be deemed finally disposed of until an order is entered in the District Court declaring its termination,” which order is to be made on motion to the bankrupt; but no such rule, as we are advised, exists in the northern district. And as to proceedings in bankruptcy in the northern district of New York, we suppose a special order in each case would be necessary in order to bring the proceedings in bankruptcy to a close, so that the suspension of a right to sue, which results from the proof of the debt in bankruptcy, while the creditor is desirous of using the same as a cause of action, may be brought to an end. This probably should be on notice to the bankrupt, as is provided by the rule in the southern district; and on that motion both the bankrupt and the creditor can be heard.
In regard to the claim founded on the money paid to discharge the debt on which the plaintiff was a surety, the plaintiff claims that that debt was not proved by him, and consequently that as to that, there is no suspension of a right of action. But such debt was provable under the bankruptcy, as is conceded, and the discharge, if granted, will operate to release the bankrupt from the same, *598though, the payment by the plaintiff was after the decree in bankruptcy. The section 5070 of the Revised Statutes provides that “ any person liable as bail, surety, guaranty or otherwise for the bankrupt, who shall have paid the debt or any part thereof in discharge of the whole, shall be entitled to prove such debt, or to stand in the place of the creditor if the creditor has proved the same, although such payments shall have been made after the proceedings in bankruptcy were commenced.” This seems accurately to describe the position of the plaintiff as to the claim described in the second count of the complaint, and we interpret the section to mean that if the creditor has proved the debt against the bankrupt, the surety who shall have paid the debt after that time is, by force of the statute, subrogated to the position of the original creditor as to the proof, the dividends and the claim or debt. The plaintiff received the dividend, which he could not have done unless the debt had been proved in bankruptcy. He cannot be permitted to avail himself of the proof of the debt for the purpose of receiving the dividends and repudiate it so far as it operates to create a suspension of his right to sue on the demand. On the whole case, we think the judgment rendered at the Circuit is correct.
Judgment affirmed.
Present — Mullin, P. J., Talcott and Smith, JJ.
Judgment affirmed.