Court Opinion

ID: 5208612
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:07:43.659062+00
Date Added: 2024-06-11T08:27:19.967344
License: Public Domain

McLaughlin, J. (dissenting) :
I am unable to agree with the other members of the court that' the judgment here appealed from should be affirmed. In Wood & Selick v. Vanderveer (55 App. Div. 549) this court held that the confirmation of the composition in bankruptcy discharged a bankrupt from his debts under section 14 of the Bankruptcy Act.* Mr. Justice Rumsey, who delivered the opinion of the court, said : “ The original debt of the company to the plaintiff came within the pro*524visions of section 14 of the Bankruptcy Act. This debt having been discharged, the bankrupt was ’ relieved from further liability with respect to it to Wood & Selick: What might be the result of a failure to pay any of the notes agreed to be paid by the composition it is not necessary to consider because it is alleged that the composition has been performed and the rights of the parties are, therefore, controlled by section 14 of the Bankruptcy Act quoted above. It is to be noticed that this act differs' from that of 1867, as amended in 1874, because this one contains an express provision that a confirmation of a composition shall work a discharge of all of ' the debts of the bankrupt. That condition was not contained in the former law. Therefore, when that composition had been confirmed the original debt of the Tenney Company ceased to exist. It is not a case of a suspension of a remedy, but an absolute discharge of the debt. There never can be any remedy upon the original debt. The remedy of a creditor against the Tenney Company was to have jiayment of the composition notes, but when those notes were paid there still arose no remedy upon this original debt. So far as the creditor was concerned he had after that time no right whatever against the Tenney Company by reason of the existence of the debt which it is sought here to recover.”
In the case now before us, therefore, after the composition was confirmed, the plaintiff, could no more enter judgment against the Vehicle Equipment Company than if it had been paid its claim in full. It is true it had commenced an action against the latter com-j>any, by permission of the bankruptcy- court, but when the Composition agreement was confirmed, and the plaintiff had received its dividend, the debt, so far as the Vehicle Equipment Company was concerned, was extinguished and there remained no liability which could be enforced against the company by reason of it. The plaintiff would have had no more right to enter judgment — even though the fact of the composition was not set up by supplemental answer — than it would, had it brought an action upon a promissory note and after the summons and complaint had been served the defendant had paid the note in full with costs instead of inter- • posing an answer. The debt being discharged, the right to take a judgment against the debtor was extinguished and had judgment thereafter been entered, I do not see how the court could have. *525avoided vacating it if a motion were made for that purpose. But although the debt, so far as the company was concerned, was extinguished, its stockholders were not thereby released from the liability imposed by section 54 of the Stock Corporation Law. (Bankr. Act [30 U. S. Stat. at Large, 547], § 4,'subd b, as amd. by 32 id. 797, § 3; Hardman v. Sage, 124 N. Y. 25; Wood & Selick v. Vanderveer, supra.) Their liability became fixed before the debt was extinguished, and under the provisions of the Bankruptcy Act was not affected by the bankruptcy proceedings.
If the conclusion be correct that the debt itself, so far as the company was concerned, was extinguished, then the complaint in the case at bar states a cause of action, since the performance of the condition precedent — the recovery of a judgment against the corporation and the issuance of an execution thereon returned unsatisfied — had become impossible by operation of law. (Shellington v. Howland, 53 N. Y. 371; Kincaids. Dwindle, 59 id. 548 ; United Glass Co. v. Vary, 152 id. 121; Flash v. Conn, 109 U. S. 371.)
In the original action the corporation, by setting up the discharge in bankruptcy in a supplemental answer, could have prevented the performance of the condition precedent, and it seems to be conceded that the plaintiff would then have been entitled to maintain this action, but it is suggested that the court might deny the defendant the right to set up such fact by supplemental answer, so as to enable the plaintiff to go through the idle-ceremony of obtaining a judgment, well knowing when it did so that nothing could be collected thereon. All the property which the corporation had prior to the composition had been turned over to and accepted by its creditors, and property acquired after such composition could not be reached by an execution issued on such judgment. The purpose of a judgment is to accomplish something real, something substantial, and not something mythical or misleading. Such judgment, had it been obtained, would have accomplished nothing so far as in fact establishing liability on the part of the corporation, because there would have been no incentive to the corporation to defend, inasmuch as there was then no property which could have been reached by execution. The only purpose of the statute requiring a judgment and execution against the corporation is to compel a creditor to prove his *526claim and- first to exhaust his remedies against the corporation itself. Here, the purpose was accomplished when the composition was confirmed by an order of the court. That was an adjudication that it had no property which could be reached by execution. Upon the facts set, out in the complaint it was unnecessary for the plaintiff, before bringing this action, to obtain a judgment against the corporation, issue execution thereon, and have the, same returned unsatisfied. '
For these reasons I think the interlocutory judgment appealed from should be reversed and the demurrers overruled, with leave to the defendants to withdraw their demurrers and answer on payment of costs in this court and in the court below.
Judgment affirmed, with costs, with leave to plaintiff to amend on payment of costs.

 See 30 U. S. Stat. at Large, 550, § 14, subd. c.— [Rep.