This appeal is from an order of the bankruptcy court, vacating a stay which the bankrupt had procured enjoining the prosecution of proceedings against him in
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a state court. The facts are as follows. Herbst, the bankrupt, by profession a dentist, had been appointed receiver of a parcel of real property in a suit of foreclosure in the Supreme Court of New York. He received allowances of $42,000, and when the property was sold, presented his intermediate account for settlement, which the court passed and allowed him $5,674.54 in addition to what he had already had. Without waiting for the time to appeal from this order to expire, or consulting the plaintiff in foreclosure as to whether it intended to appeal, he withdrew this money and has spent it. The plaintiff appealed to the Appellate Division (Central Hanover B. & T. Co. v. Williams,
Arguendo we shall assume that Herb-st’s withdrawal of the money was neither a “fraud,” “embezzlement,” nor “misappropriation,” for we think that in any event it was a “defalcation.” Under the Act of 1800, 2 Stat 19, 30 (section 34), a discharge relieved bankrupts of all their debts without exception, provided they conducted themselves properly; but the statute applied only to those engaged in commerce and was confined to involuntary bankruptcies. Under section 4 of the Act of 1841 (5 Stat. 443) a discharge also relieved bankrupts of all their debts, but for the first time and after much dissension voluntary bankruptcy was provided for. The word, “defalcation,” first appears in section 1 of that act (5 Stat. 440) and only as part of the definition of those who might become voluntary bankrupts; they were those who did npt owe debts “created in consequence of a defalcation as a public officer; or as executor, administrator, guardian or trustee, or while acting in any other fiduciary capacity.” Colloquially perhaps the word, “defalcation,” ordinarily implies some moral dereliction, but in this context it may have included innocent defaults, so as to include all fiduciaries who for any reason were short in their accounts. It mu§t be remembered that the “fiduciary capacity” was limited to “special” or “technical” fiduciaries. Chapman v. Forsyth,
It does not seem to us, however, that this linkage of “fraud” and “embezzlement” to “defalcation” need change its meaning in the Act of 1867. It is true that “embezzlement” certainly, and perhaps “fraud” too, become redundant when the suffix is at
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tributed to them; Crawford v. Burke, supra,
We must give the words different meanings so far as we can, especially when a contrary interpretation would wrest “defalcation,” if not from its original meaning, at least from that which it must have had in the Act of 1867. The authorities are not indeed very satisfactory, but so far as they go, they uniformly accord with this view, and indeed go farther. City of Syracuse v. Roscoe,
In the case at bar the bankrupt had not been entirely innocent — not, for instance like the victim of an employee — though possibly one may acquit him of deliberate wrongdoing. A judge had awarded him the money, and prima facie he was entitled to it; but he knew, or if he did not know, he was charged with notice (having held himself out as competent to be an officer of the court), that the order would not protect him jf it were reversed; and that it might be reversed until the time to appeal had expired. He made no effort to learn from the plaintiff whether it meant to appeal, and he did not wait until it could no longer do, so; he took his chances. We do not hold that no possible deficiency in a fiduciary’s accounts is dischargeable; in Re Bernard,
All we decide is that .when a fiduciary takes money upon a conditional authority which may be revoked and knows at the time that it may, he is guilty of a “defalcation” though it may not be a “fraud,” or'an “embezzlement,” or perhaps not even a “misappropriation.”
The second point need not detain us; it is that when Herbst took the money he had already been discharged as receiver, and that his “defalcation,” if there was any, was not therefore “in a fiduciary capacity.” This curious play on words ignores the fact that the order discharging him as receiver, was conditional upon its surviving an appeal. The appellate court always had power to reinstate him as its officer for the purpose of disciplining him in any appropriate way; he was therefore really never finally discharged at all.
Order affirmed.