140 F. 495 | D. Del. | 1906
Jacob F. Brown, Samuel G. Adams and Edmund F. Leland, trading as Brown & Adams, have presented a petition for liquidation of an alleged claim against the United Button Company, a corporation of Delaware, bankrupt. The application is. made on the following facts. A petition in involuntary bankruptcy against the United Button Company was filed August 4, 1904, and the corporation was adjudicated a bankrupt August 10, 1904, and shortly thereafter the Security Trust and Safe Deposit Company, a corporation of Delaware, was appointed trustee. Brown & Adams filed a bill of complaint in the Superior Court of Massachusetts for Suffolk County, May 31, 1905, against the bankrupt and its trustee, in which it was alleged in substance, among other things,
Section 63b of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 563 [U. S. Comp. St. 1901, p. 3447]) provides that “unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be piroved and allowed against his estate.” If it be assumed that the petitioners have a claim provable and, after liquidation, allowable against the-estate of the bankrupt, and that the lapse of time since the adjudication has not operated as a bar, it is at least doubtful whether such liquidation would be effected in the Massachusetts suit. This court, of course, is without power to control or regulate the pleadings or practice to be observed, or the kind or measure of relief to be accorded, in that suit. The bill there seeks an account of all damages sustained by the complainants through the alleged “wrongful acts of the defendants” and a decree compelling the latter to pay to the former “the amount so found due.” These acts, it is- averred, were done by “the defendant The United Button Company and, later, the defendant Trust Company as its trustee”; and it is to be inferred from the bill that the acts complained of resulted in damage both before and after the filing of the petition in bankruptcy. Apparently it is the purpose of
Under the. power conferred on the court to direct the manner in which unliquidated claims against a bankrupt may be. ascertained in amount, ample authority, I have no doubt, exists to adopt any procedure appropriate to the particular case, whether it be submission to a jury on an issue framed, or production of evidence before the referee, or some other method. In'section 58 of the bankruptcy act of 1800 (2 Stat. 35, c. 19), it was provided:
“That any creditor of a person, against whom a commission, of bankruptcy shall have been sued forth, and who shall lay his claim before the commissioners appointed in pursuance of this act, majr at the same time declare his unwillingness to submit the same to the judgment of the said commissioners, and his wish that a jury may be impanneled to decide thereon: And in like manner the assignee or assignees of such bankrupt may object to the consideration of any particular claim by the commissioners, and require that the same should be referred to a jury. In either case, such objection and request shall be entered on the books of the commissioners, and thereupon an issue shall be made up between the parties, and a jury shall be impanneled, as in other cases, to try the same in the circuit court for the district in which such bankrupt has usually resided.”
It was further provided in the section that the verdict of the jury, if not set aside, “shall be certified to the commissioners, and shall ascertain the amount of any such claim.” In section 1 of the bankruptcy act of 1841 (5 Stat. 446, c. 9), it was provided with respect to “proof of debts or other claims by creditors entitled to prove the same by this act”:
“But all such proofs of debts and other claims shall be open to contestation in the proper court having jurisdiction over the proceedings in the particular case in bankruptcy; and as well the assignee as the creditor shall have a right to a trial by jury, upon an issue to be directed by such court, to ascertain the validity and amount of such debts or other claims; and the result therein, unless a new trial shall be granted, if in favor of the claims, shall be evidence of the validity and amount of such debts or other claims.”
Congress in thus specifically providing in the bankruptcy acts of 1800 and 1841 for the submission to a jury, on an issue framed, of alleged debts and claims against the bankrupt, in order that their validity and amount might be ascertained, recognized that the intervention of a jury for that purpose was an appropriate step in proceedings in bankruptcy. No such specific provision was contained in the bankruptcy act of 1861, nor is it to be found in the bankruptcy act of 1898. In section 19 of the act of 1861 (14 Stat. 526, c. 176), however, it was provided:
*499 “If any bankrupt shall be liable for unliquidated damage's arising out of any contract or promise, or on account of any goods or chattels wrongfully taken, converted, or withheld, the court may cause such damages to be assessed in such mode as it may deem best, and the sum so assessed may be proved against the estate.”
And section 63b of the act of 1898, as before stated, provides that “unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate.” A jury constitutes part of the. machinery of a district court of the United States, and the ascertainment of the amount of unliquidated damages is, in general, a function appropriate to a jury. The power of the court under the act of 1867 to cause unliquidated damages for which the bankrupt was liablq. “to be assessed in such mode as it may deem best,” and under the act of 1898 to “direct” the “manner” in which unliquidated claims against a bankrupt may “be liquidated,” was and is broad enough to include authority to provide for their submission to a jury.
The counsel for the trustee contends that the alleged claim of Brown & Adams is not a provable debt or claim and, further, that, if heretofore provable, it is barred by section 57n, which, subject to a proviso not pertinent to this case, is as follows:
“Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication; or if they are liquidated by litigation and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment.” Act July 1, 1898, e. 541, 30 Stat. 561 [U. S. Comp. St. 1901, p. 3444].
Assuming for the present that the above limitation would not bar the alleged claim, if otherwise provable, and that the partial or imperfect proof filed July 24, 1905, might be supplemented by an amendment allowed after liquidation (Hutchinson v. Otis, 190 U. S. 552, 555, 23 Sup. Ct. 778, 42 L. Ed. 1179; Buckingham v. Estes, 128 Fed. 584, 63 C. C. A. 20), there remains the question whether the alleged claim is of a provable nature. Section 1 provides that the word “debt” shall include “any debt, demand, or claim provable in bankruptcy”, and section 63a (30 Stat. 563 [U. S. Comp. St. 1901, p. 3447]) contains an enumeration of debts, demands and claims made so provable, and provides that “debts of the bankrupt may be proved and allowed against his estate which are * * * (4) founded upon an open,account, or upon a contract expressed or implied.” Clearly the alleged claim would not be provable by virtue of section 63a, considered independently of the provisions of section 63b and section 17, unless and save in so far as it is founded upon “a contract expressed or implied.” The claim, however, if any exists, is not based upon nor does it grow out of an expressed or implied contract. The only agreement or arrangement suggested was on the part of the trustee in bankruptcy, no breach of which could originate or support a claim against the bankrupt. On the facts as alleged no contract on the part of the bankrupt can be implied in fact, and no circumstances are disclosed giving rise to a contract implied in law or quasi-contract. It does not appear that the tort feasor obtained
“Section 63a provides for debts which may be proved, which, among others, are (1) ‘a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date or with a rebate of interest on such as were not then payable and did not bear interest;’ (4) ‘founded upon an open account, or upon a contract express or implied.’ In section 63b provision is made for unliquidated claims against the bánkrupt, which may be liquidated upon application to the court in such manner as it shall direct, and may thereafter be proved and allowed against his estate. This paragraph b, however, adds nothing to the class of debts which might be proved under paragraph a of the same section. Its purpose is to permit an unliquidated claim, coming within the provisions of section 63a, to be liquidated as the court shall direct.”
The counsel for the petitioners lay much stress upon section 17 as amended by Act Feb. 5, 1903, c. 487, § 5, 32 Stat. 798 [U. S.
“See. 17. Debts not Affected by a Discharge. — a. A discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as (1) are due as a tax levied by the United States, the State, county, district, or municipality in which he resides; (2) are judgments in actions for frauds, or obtaining property by false pretenses or false representations, or for willful and malicious injuries to the person or property of another; (3) have not been duly scheduled in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; or (4) were created by his fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.”
While it was the intention of Congress in enacting section 17 to determine and declare the effect of a discharge in bankruptcy upon demands against the bankrupt provable against his estate, it reasonably may be assumed, in the absence of pursuasive evidence to the contrary, that Congress did not intend in and by that section to render so provable demands not possessing that nature or quality under other provisions of the act. Section 1 (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3419]) provides that “discharge” shall mean the release of a bankrupt from “all of his debts which are provable in bankruptcy, except such as are excepted by this act,” and, further, as has been stated, that “debt” shall include “any debt, demand, or claim provable in bankruptcy.” A discharge thus means, subject to qualification with respect to demands due or owing to the United States, the release of the bankrupt from all of the debts, demands and claims against him which are provable in bankruptcy except such of them as are by the act excepted. The exception necessarily relates to provable demands, and, to indulge in tautology, is equivalent to the phraseology, “except such provable debts, demands and claims against the bankrupt as are by the act excepted.” It is doubtless true that the words “provable debts” in section 17 are there used in a sense broad enough to include, in the case of taxes, demands against a bankrupt which, although not strictly or technically “provable,” are nevertheless allowable out. of his estate. It is an elementary proposition that a discharge in bankruptcy is no bar to the enforcement of demands against a bankrupt not provable under the act. To undertake to except such demands from the operation of a discharge is an absurdity. Hence it is argued that the inclusion of certain demands in the exception contained in section 17, while not in form, was in effect a legislative recognition of their provability; although not releasable by virtue of the discharge, of the bankrupt. This deduction is sound, but has been misapplied by counsel. Section 17 did not provide that there should be excepted from the operation of a discharge all taxes due from the bankrupt “levied by the United States, the State, county, district, or municipality in which he resides,” or all “judgments in ac
“It certainly could not have been the intention of Congress to extend the operation of the discharge under section 17 to debts that were not provable under section 63a.”
If all debts, dischargeable by proceedings in bankruptcy, were provable exclusively under section 63, it fairly may be inferred, in the
“We are clear that the debt of the plaintiff was embraced within the provision of paragraph a, as one ‘founded upon an open account, or upon a contract, express or implied,’ and might have been proved under section 63a had plaintiff chosen to waive the tort, and take his place with the other creditors of the estate. * * * We think that section 63a, defining provable debts, must be read in connection with section 17, limiting the operation of discharges, in which the provable character of claims for fraud in general is recognized, by excepting from a discharge claims for frauds which have been reduced to judgment, or which were committed by the bankrupt while acting as an officer, or in a fiduciary capacity. If no fraud could" be made the basis of a provable debt, why were certain frauds excepted from the operation of a discharge?- We are, therefore, of opinion that if a debt originates or is ‘founded upon an open account or upon a contract, express or implied’ it is provable against the bankrupt’s estate, though the creditor may elect to bring his action in trover as for a fraudulent conversion, in•stead of in assumpsit for a balance due upon an open account. It certainly could not have been the intention of Congress to extend the operation of the discharge under section 17 to debts that were not provable under section 63a. It results from the construction we have given the latter section that all debts originating upon an open account or upon a contract, express or implied, are provable, though plaintiff elect to bring his action for fraud.”
“(2) are liabilities for obtaining property by false pretenses or false representations, or for willful and' malicious injuries to the person or property of another, or for alimony due or to become due, or for maintenance or support of wife or child, or for seduction of an unmarried female, or for criminal conversation.”
Here again, it is to be observed that the section as now in force provides, not that all “liabilities for obtaining property by false pretenses or false representations” &c. shall be excepted from the operation of a discharge, but substantially that such liabilities only in so far as they are “provable debts” shall be excepted. The contention that because “liabilities * * * for willful and malicious injuries to the * * * property of another” are mentioned in the excepting clause, all liabilities for injuries to the property of another are rendered provable is untenable. On the assumption that the limitation in that clause of liabilities for injuries to the property of another to such as are “willful and malicious” is wholly consistent with the provability of demands based upon liabilities for wrongful, but not wilful or malicious, injuries to such property, the question yet remains whether in a given case the liability is a provable debt, demand or claim. The term “liabilities” undoubtedly includes judgments as well as claims not reduced to judgment. It is not to be supposed that Congress intended that provable open demands for injuries to the property of another should be excepted from the operation of a discharge, but that judgments for such injuries should be barred. The provability, however, of a claim for such an injury, whether consisting of a judgment or of an open demand, must be determined by reference to the requirements of section 63a liberally but legitimately construed. This point is accentuated by the seeming disinclination of the. Supreme Court, notwithstanding the amendatory act, to regard claims for arrears in alimony as provable,- though not dischargeable, in bankruptcy. Wetmore v. Markoe, 196 U. S. 68, 77, 25 Sup. Ct. 172, 49 L. Ed. 390; Dunbar v. Dunbar, 190 U. S. 340, 353, 23 Sup. Ct. 757, 47 L. Ed. 1084. It is highly improbable that Congress intended, by the mere substitution in section .17 of “liabilities” for “judgments in actions,” to render or recognize as provable all claims for torts, unliquidated as well as liquidated. I am not
“Words and phrases are often found in different provisions of the same statute, which, if taken literally, without any qualification, would be inconsistent, and sometimes repugnant, when, by a reasonable interpretation,— as by qualifying both, or by restricting one and giving to the other, a liberal construction, — all become harmonious, and the whole difficulty disappears; and in such a case the rule is, that repugnancy should, if practicable, be avoided, and that, if the natural import of the words contained in the respective provisions tends to establish such a result, the case is one where a resort may be had to construction for the purpose of reconciling the inconsistency, unless it appears that the difficulty cannot be overcome without doing violence to the language of the law-maker.”
But there is nothing in section 17 requiring the application of the above-mentioned rule of construction to secure harmony between that section and section 63a. It contains no ambiguous or doubtful words or phrases, nor do its provisions, when naturally and fairly read, clash in any particular with those of the other section. Each may have its appropriate and full operation without interfering.with the other. While section 17 limits the exception from the operation of a discharge to such of the demands or liabilities it mentions as are “provable debts,” section 63a limits provability to the classes of demands or liabilities therein defined. Section 17, since the amendment, no more countenances the idea of the provability of a demand or liability, not provable under and by virtue of section 63a, than it did before its amendment. If a tort injuriously affecting the person or property of another is of such nature or is committed under such cir