196 Misc. 811 | N.Y. Sup. Ct. | 1949
Motion to cancel and discharge judgment against bankrupt. The respondent, as surety, gave its bond pursuant to agreement with the movant. The bond was required by the
It is movant’s contention that judgment debt was discharged in bankruptcy. It is respondent’s contention that the bond was a penalty due the State and under the Bankruptcy Act (§ 57, subd. [j] ; H. S. Code, tit. 11, § 93, subd. [j]) was not dischargeable in bankruptcy, citing Matter of Abrahamson (210 F. 878).
The court finds that the debt was dischargeable in bankruptcy under the circumstances. As the debt was paid in full before bankruptcy, the surety became the creditor, and the State was eliminated. (Wright v. Rumph, 238 F. 138.) While it is true that the surety was subrogated to the rights of the State, it never sought to enforce those rights, and there is some question as to whether it could have in the view of the four-month limitation contained in the bond. (Continental Cas. Co. v. National Slovak Sokol, 269 N. Y. 283.)
The surety having obtained his judgment on the theory of indemnification, it is entitled to no better position than that of a general creditor. The protection of subdivision (j) of section 93 will be transposed from the State to the surety, only if the surety stands in the place of the State, and not when the surety has acted on its own agreement with the debtor. (Matter of Friedlin, 21 F. Supp. 542.) Accordingly the motion is granted. Settle order.