In re Faulkner

161 F. 900 | 8th Cir. | 1908

ADAMS, Circuit Judge

(after stating the facts as above). Section 57 of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 561 [U. S. Comp. St. 1901, p. 3444]) provides that:

“Proof of claims shall consist of a statement under oath in writing signed by a creditor setting forth the claim, the consideration therefor and whether any and if so what securities are held therefor and whether any and if so what payments have been made thereon and that the sum claimed is justly owing from the bankrupt to the creditor.”

It matters not what the paper filed with the referee on July 5, 1905, was styled. Scrutiny of it discloses that it contained every essential statement required by section 57 to constitute proof of a claim, and fully and accurately informed the court of the amount of petitioner’s claims and the securities held for their payment. The referee by his order made a finding of the exact sums due the petitioner, as well as the amount of interest thereon, and ordered the collateral sold and the proceeds to be applied on “said indebtedness,” and that report of sale be made to him for confirmation. All this was done within 1he year following the date of the adjudication, and it cannot be denied that it constituted a complete scheme by the execution of which the balance due the petitioner after application of the proceeds of sale of the collateral could be ascertained from the court records. No further act on the part of the petitioner was necessary to definitely fix the balance due him. Notwithstanding this, however, he, after the year expired, out of abundant precaution made a resume of the proceedings taken and the result thereof, and definitely stated the same, and formally asked for an allowance of the balance so found to be due him, in order that he might participate pro rata with other unsecured creditors in the assets of the bankrupt’s estate. This was denied, and his claim was expunged. We think this was wrong. The limitation of time within which proofs of claim should be made must necessarily be observed. Such disposition of bankruptcy cases that creditors may expeditiously realize what they may is important and necessary; hut the substance of things, and not the forms merely, should be observed. Bankruptcy proceedings are equitable in their nature, and should be as far as possible conducted on broad lines to accomplish the ultimate purpose of distributing the assets of a bankrupt pro rata among his creditors. Atchison, T. & S. F. Ry. Co. v. Hurley, 82 C. C. A. 453, 153 Fed. 503, 508.

In this case everything necessary to determine the balance due the petitioner was done before the year expired within which proof of claims could be made. All the statements required by section 57 had been made, the debt had been judicially determined and stated, the collateral had been ascertained, an upset: price fixed, a sale ordered, and provision had been made for "the application of the proceeds of sale to the satisfaction of the debt pro tanto'. The working out of this scheme necessarily and accurately resulted in the amount due the petitioner. “Id cerium est quod certum reddi potest.” Assuming, however, but not deciding, that the proceedings taken and orders made did not constitute technical proof of petitioner’s claims within the year, as required by section 57, we have no doubt they constituted such substantial showing of it as warranted the amendment of the original proof of claim as made by the petitioner in his affidavits filed July 18, 1906. Love-land on Bankruptcy (3d Ed.) § 92, where many supporting authorities are cited, lays down as an accepted principle that the courts should be liberal in awarding amendments to subserve the ends of justice, and says that:

“An amendment may be allowed at any stage in the proceedings as justice may require.”

This court held, in Re Plymouth Cordage Co., 68 C. C. A. 434, 135 Fed. 1000, that the fact that the petition contained no averment that the alleged bankrupt was not a wage earner or farmer is remediable by amendment, and in Taft Co. v. Century Savings Bank, 72 C. C. A. 671, 141 Fed. 369, 372, that even jurisdictional facts may be supplied by an amendment of the petition after an appeal to this court. The Court of Appeals for the Second Circuit, in Re Roeber, 62 C. C. A. 122, 127 Fed. 122, held that a petition filed within a year after adjudication, containing averments that there was due and owing to the petitioner a certain suni of money for the payment of which a certain fund then in court was security, which was obviously intended to secure an appropriation of that fund only, contained the substance of a proof of claim, which was amendable after the year expired, although the petition as filed was not sworn to by the claimant and was otherwise technically defective. Judge Lacombe, speaking for the court, said:

“Bankruptcy courts have the usual power of courts of justice, upon motion and for good cause, to allow amendments. All parties were advised of the claim within the year. There is no dispute that the amount claimed is justly owing from the bankrupt. The amendment was in furtherance of justice, and within a legitimate exercise of the power of amendment, under the authorities.”

In Buckingham v. Estes, 63 C. C. A. 20, 128 Fed. 584, the Court of Appeals for the Sixth Circuit considered a case where a petition had been filed within a year after the adjudication of bankruptcy to establish a resulting trust in some land standing in the name of the bankrupt, and also for an accounting concerning rents received by him. The case resulted in a decree as prayed for, but the rents were not ascertained until after the year expired when proof was made in usual form. Objection was made to its allowance on the ground that the proof was made too late, but thé court held that the‘original petition stated the substance of a claim, and that it was amendable after the year expired, when the amount actually due had been ascertained. Judge Lurton, speaking for the court, said:

“It would be a narrow construefioii of sections 57 and 57n which would not regard a claim so presented and litigated in a bankrupt proceeding as ‘proven’ within the limitation of the section. A claim ‘proven’ within the year is amendable after the lapse of the year, and the court below probably regarded her petition as a ‘statement under oath, in writing, signed by a creditor, setting forth the claim,’ etc., and therefore subject to amendment, to comply with the further formalities of section 57. In this the court did not err.”

Hutchison v. Otis, 190 U. S. 552, 555, 23 Sup. Ct. 778, 47 L. Ed. 1179, is cited.

None of the cases, supra, presented so complete a proof of debt, such an accurate compliance with the requirements of section 57 within the permissible year, as is disclosed by the record in this case. Both reason and authority we think unite in favor of permitting Faulkner to make formal proof of the balance due him as undertaken by him. The learned district judge erred in not permitting him to do so. Accordingly the orders of the referee disallowing the claims, and the order of the district judge made on September 16, 1907, approving and confirming the orders of the referee, must be set aside, with directions given to the bankruptcy court to consider the amended claims as made, and, if found valid, to allow them.

It is so ordered.

PHILIPS, District Judge, dissents.