102 N.Y.S. 412 | N.Y. App. Div. | 1907
The judgment sought to be discharged is a deficiency judgment obtained in an action to foreclose a mortgage given by the defend-, ant Crockett, the petitioner, and one John S. Roddy. The inov-’ ing papers show that on the 5th day of August, 1902, more than, one year prior to-the application for cancellation of the judgment, the petitioner, in voluntary bankruptcy proceedings duly instituted by him in the month of-June, 1902, in the United States District Court for the Southern District of Hew York, where he had resided for more than six months, was duly discharged from all debts and claims which existed against him on the 9th day of June, 1902, and were provable in bankruptcy. The motion was resisted by the plaintiff, and evidently denied, upon .the theory, that the judgment was on a copartnership obligation of the petitioner and Roddy,- who were partners in business; that the business of the copartnership had never been finally-settled; that there remained copartnership, assets; that there, was no application for or adjudica* tion in bankruptcy against the copartnership firm and that a copartnership firm obligation cannot be discharged in bankruptcy instituted voluntarily or involuntarily by or against a single member of the firm.
The correctness of the legal propositions upon which the objections to the cancellation of the judgment are evidently based aré neither conceded nor established by any controlling precedent; and the propositions of fact asserted are not sustained by the evidence.
First. The decisions, in the Federal courts on some of. these questions are conflicting and the decisions in the State courts,, while, tending toward-the doctrine that .a discharge in bankruptcy of an
Neither in the petition in bankruptcy nor in the schedules of assets and liabilities is there any reference to a copartnership. That petition showed that the petitioner- owed debts which he was unable to pay in full, and that he was willing to surrender all of his property for the benefit of his creditors, except such as was exempt by law, and that he desired to obtain the benefits of the acts of Congress relating to bankruptcy; that Schedule “A,” thereto annexed, showed, among other things, a full and true statement of all his debts, the names and places of residence of his creditors, and that Schedule “ B ” contained an accurate inventory of all his property, both real and personal. Schedule “ A ” showed three debts, the first to the plaintiff, whose residence is given, and that it is a deficiency judgment for $1,414.58, after foreclosure of a mortgage; the second is a similar judgment to another creditor for $1,420.70, and the third is to another creditor for moneys advanced. Schedule “ B ” showed no property except property of the value of $30, which was therein claimed to be exempt from the operation of the bankruptcy statute. The order of the District Court, granted on the 5th day of August, 1902, discharging the petitioner, recites that whereas he “ has been duly adjudged a bankrupt under the Acts of Congress relating to bankruptcy, and appears to have conformed to all the requirements of law in that behalf, it is, therefore, ordered by this Court that said William F. Crockett be discharged from all debts and claims* which are made provable by said acts against his estate, and which existed on the 9th day of June, A. D. 1902, on which day the petition for adjudication was filed by him, excepting such debts as are by law excepted from the operation of a discharge in bankruptcy.” The proceedings in bankruptcy, intermediate the filing of the petition and schedules and the order discharging the petitioner, were not presented either in support of or in opposition to the motion. The petitioner, however, showed by affidavit that the plaintiff had notice of the bankruptcy proceedings in accordance with the provisions of section 58 of the Bankruptcy Act of 1898,
The record does not show whether or not the plaintiff appeared in the bankruptcy proceedings or proved its judgment therein.- I regard that, however, as quite immaterial, because by virtue of the provisions of section 39 of the Bankruptcy Act,
The United States District Court is a court of record, and on proof of the order discharging tiie bankrupt the presumption would arise that the court obtained jurisdiction and that its proceedings were had in conformity to law; hut we are not required to rest on this presumption, for a certified copy of the order granting the discharge was presented on the motion, and by virtue of the provisions of subdivision f of section 21 of the Bankruptcy Act,f that is declared to be “ evidence of the jurisdiction of the court, the regularity of the proceedings, and of the.fact that the order was made.” It must, therefore, be presumed that the plaintiff had notice of the bankruptcy proceedings and that its judgment, since the petitioner was not otherwise indebted to it, was scheduled as one of the debts from which he would seek a discharge. This is not controverted; but the plaintiff says that the judgment, being a partnership obligation, it was entitled to- notice as a copartnership creditor that he was seeking a discharge from his copartnership obligations. Support for this contention is found in some of the authorities which, while conceding that a member of a copartnership firm may, on liis individual petition in bankruptcy, obtain a discharge from the copart
In Matter of Freund (supra) the opinion of the referee, which was adopted by the United States District Court, Horthern District • of Iowa, in January, 1899, shows that the question presented for decision was whether the bankrupt had complied with the law and was entitled to a discharge. That was a voluntary proceeding by an individual partner and the only debts scheduled- were firm obliga- . tions, although they were not scheduled as such. There had been no request to have the firm adjudged bankrupt, and the other members of the firm did not have notice of the proceeding. The application for a discharge was denied upon the ground that the Bankruptcy Act of 1898, as interpreted by the United States Supreme Court in prescribing rule 8 of the General Orders in Bankruptcy, fairly contemplates and requires that if an individual who has ■ been a member of a firm, the affairs of which have not been finally settled, petitions in bankruptcy, he must set forth in. his petition the existence of the partnership, and ask to have the other members brought"in and apply for a discharge from both classes of debts, by which, I presume, is meant that he must specify in his applica
Rule 8 of the General Orders in Bankruptcy, adopted by the Supreme Court of the United States at the October term, 1898, is as follows : “ Any member of a partnership who refuses to join in a petition to have the partnership declared bankrupt shall be entitled to resist the prayer of the petition in the same manner as if the petition had been filed by a creditor of the partnership, and notice of the filing
It is manifest that this rule has no application to a petition by an individual who is a member of a firm to have himself and not the firm adjudicated a bankrupt. (See Collier’s note to Matter of Freund, 1 Am. Bank. Rep. 31-33.)
It is evident that an individual may be a member of a solvent firm and at the same time be insolvent himself.
This rule shows quite clearly that the firm cannot be declared insolvent .unless it is such in fact. In such circumstances, unless therefore, the individual may by his own petition obtain a discharge in bankruptcy; even though insolvent, he could obtain no relief under the Bankruptcy Act. Where a firm is solvent and an individual member thereof' is insolvent and desires to be discharged in bankruptcy, it is manifest that he is entitled to such discharge and that the business of the firm should, be wound up and his surplus interest applied in liquidation of his individual debts.. This is fairly contemplated and provided for by subdivision h of section 5 of the Bankruptcy Act,
Second. I am also of opinion that even though the foregoing rule be unsound, the petitioner was entitled to have the judgment canceled, for it does not satisfactorily appear that this was a firm obligation or that the firm has any remaining assets. It has been seen-that the obligation on which the deficiency judgment was recovered was a joint obligation of the petitioner and Roddy, but that alone does not make it a firm debt although the firm property might have been sold thereon, at least if the partners did not object and there was no fraud as against firm creditors. (Saunders v. Reilly, supra ; Davis v. President, etc., D. & H. Canal Co., 109 N. Y. 47.) Under the Federal bankruptcy decisions, which, on this point, appear to be uniform, it would not have been competent even if the firm had gone into bankruptcy, to have shown that the obligation upon which this judgment was recovered was in fact an obligation on which credit was given to the firm, or that the firm had- the use or benefit of money borrowed thereon, to thereby make it a firm charge (Matter of Jones, 8 Am. Bank. Rep. 626; Strauss v. Hooper, 5 id. 225; Collier Bankr. [3d ed.] 72, 73), nor has it been
It follows that the order should be reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.
Ingraham, J., concurred; Clarke and Scott, JJ., concurred in result.
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs. Order filed.
30 U.. S. Stat. at Large, 561.— [Rep.
30 U. S. Stat. at Large, 555.— [Rep. † 30 U. S. Stat. at Large, 552.— [Rep.
See 30 U. S. Stat. at Large 546, § 3, subd. b; Id. 547, § 4; Id. 551, § 18, subds. a, g.— [Rep.
See 30 U. S. Stat. at Large, 545, § 3, subd. 1.— [Rep.
See 30 U. S. Stat. at Large, 547, § 4, subd. a; Id. § 5, subd. a.— [Rep.
See Collier Bankr. [5th ed.] 598.— [Rep.
30 U. S. Stat. at Large, 548.— [Rep.
See 14 U. S. Stat. at Large, 517, chap. 176, as amd.; Collier Bankr. (5th ed.) 911 et seq.— [Rep.
30 U. S. Stat. at Large, 550.— [Rep.
30 U. S. Stat. at Large, 550,— [Rep.
See Bankr. Act (30 U. S. Stat. at Large, 547), § 5, subd. a.— [Rep.
30 U. S. Stat. at Large, 559.— [Rep.