197 N.Y. 161 | NY | 1910
The plaintiff seeks to recover of the defendants the purchase price of certain shares of capital stock of the Waterbury Marshall Company. The agreement, set out in the complaint as the basis of its demand, was made in 1894 between it and the defendants Waterbury and Marshall. In it, these defendants, as parties of the first part, "jointly and severally promise and agree to purchase from the party of the second part, (this plaintiff), on the first day of May, 1900, or on any earlier date, at their option, two hundred and fifty *164 (250) shares of the preferred capital stock of the Waterbury Marshall Company, a corporation incorporated under the laws of the State of New Jersey, and to pay therefor to the party of the second part the sum of Twenty-five thousand ($25,000) dollars, and interest on said sum, at the rate of six per centum per annum from the second day of April, 1894, to the said first day of May, 1900, or to such earlier date as the parties of the first part may elect to purchase said stock." On its part, the plaintiff "promises and agrees to sell and deliver to the parties of the first part said two hundred and fifty (250) shares of said stock on the first day of May, 1900, or on such earlier date as the said parties of the first part may elect to purchase the same, upon receiving payment therefor as aforesaid." Further provisions of this agreement relate to the events of cash, or stock, dividends, or of redemption of the stock sold, and are not material to the controversy. The defendants admitted making the agreement and, as a defense to the action, pleaded a discharge in bankruptcy from all their debts, including their indebtedness under the said contract. Upon the trial, the defendants admitted their failure to perform their agreement and proved their adjudication as bankrupts on March 6, 1899, and the decree discharging them, in May, 1900, from all debts and claims, "made provable" by the Bankruptcy Act "and which existed on the 6th day of March, 1899." The trial court directed a verdict for the plaintiff and that determination has been affirmed at the Appellate Division, by a divided court.
I think that the determination made below, that the defendants' discharge in bankruptcy did not affect their obligations under the contract, is correct. The question, necessarily, turns upon the construction, which must be given to that provision of the Bankruptcy Act, which defines what are a bankrupt's provable debts, from which his discharge in bankruptcy will release him. The provision is found in section 63 and reads that "debts of the bankrupt may be proved and allowed against his estate, which are (1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at *165 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 upon such as were not then payable and did not bear interest." The balance of the section is not material to the discussion.
By this provision of the Bankruptcy Act, it is evident that two things must concur, in order that a debt of the bankrupt shall be provable. There must be a fixed liability, as evidenced by a judgment, or a written instrument, and it must be absolutely owing at the time of the filing of the petition in bankruptcy; however the time of payment may be deferred. Looking at the contract in question in the light of the provision, we find that there was neither a present sale, nor a present purchase, of the stock by the parties, when making it, and if that be so, how could there arise any "liability", "absolutely owing", until, by efflux of time, or an exercise of the defendants' option, the contract matured? The agreement of each party was one which had relation, exclusively, to the future, whether as to obligation, or as to payment. The defendants promised to purchase the stock in 1900, (reserving an option to do so at an earlier date), at a price measured by the sum of $25,000 and the amount of interest, at the rate of six percent, which would have accrued on that sum from April 2d 1894. The plaintiff promised to sell the stock to the defendants in 1900, (or at an earlier date, if the defendants exercised their option). The agreement provided for a future transaction and, meanwhile, if the stock described was then held in plaintiff's possession, its property in it remained unaffected. Until May 1st, 1900, the plaintiff undertook to be ready to sell and deliver such an amount of stock, if called for, and could have no claim against the defendants, prior thereto, or to such a call. The defendants were under no obligation to purchase the stock from the plaintiff before May 1st, 1900; unless they chose to do so. When, therefore, as the result of the filing of the petition in bankruptcy, the defendants were adjudicated bankrupts, in 1899, the situation *166
under the contract was that, as yet, no liability had arisen, which, within the very precise definition of the Bankruptcy Act, could be said to be one "absolutely owing" by them. Ordinarily, the insolvency of a party to an executory contract of sale is not equivalent to a breach. (Pardee v. Kanady,
In the case of Ames v. Moir, (
For these reasons, as for those well expressed by Mr. Justice SCOTT, speaking for the majority of the Appellate Division, I think that the judgment should be affirmed.
CULLEN, Ch. J., EDWARD T. BARTLETT, HAIGHT, WILLARD BARTLETT, HISCOCK and CHASE, JJ., concur.
Judgment affirmed, with costs.