154 N.Y.S. 431 | N.Y. App. Div. | 1915
The complaint alleges that on or about the 19th day of December, 1892, the defendants for a good and valuable consideration, and for the purpose of securing the payment to the plaintiff of the sum of $600, with interest thereon, made, executed and delivered to the plaintiff a mortgage sealed with their seals, whereby the said defendants did covenant, promise and agree to pay said sum and interest as in said mortgage specified; that this mortgage contained a bond clause, was duly recorded, and that the defendants have failed to comply with the conditions, with the exception of certain payments made thereon, and demands judgment accordingly. The answer puts in issue the material allegations of the complaint, and sets up as an affirmative defense that after this claim had accrued a petition in bankruptcy was duly filed in the United States District Court and that ££ such proceedings were thereafter had that on or about the 17th day of August, 1899, a decree was duly-entered and filed in said court, wherein and whereby this defendant was duly discharged of all of his debts, including the one stated in the complaint herein; that due notice of said bankruptcy proceedings was given to the plaintiff herein and the plaintiff had knowledge thereof and that by reason of the premises said debt or obligation mentioned in the complaint has been released and discharged.”
The court below held that the mortgage was a valid and subsisting obligation, but in its 15th finding of fact held that ££ in the fall of 1899 and also in the spring of 1900 the said Ezra B. Wheeler had actual knowledge and notice of the said proceeding in bankruptcy of the said defendant Parker
The learned trial court found as a fact that the mortgage in question was not listed or scheduled in the bankruptcy proceeding, and that Ezra B. Wheeler, in said bankruptcy proceeding and in said application for said discharge, was not notified by the service of any papers upon him; that the papers and records in the bankruptcy proceeding do not show that said Ezra B. Wheeler was ever notified, or that he ever had any knowledge or information concerning said matters; that in the fall of the year 1899, no approximate time being given, one E. 0. Bentley, a traveling salesman, who was in no way connected with the bankruptcy proceedings, and in no way interested in or connected with Ezra B. Wheeler or said Parker Newton, as agent or otherwise, told said Ezra B. Wheeler in a conversation in a hotel in the village of Greene, N. Y., that Mr. Newton had gone into bankruptcy; that again in the spring of 1900, no approximate time being given, the said E. 0. Bentley again said to Ezra B. Wheeler, in a conversation in said hotel, that Mr. Newton had gone into bankruptcy; that these conversations were the only information which the said Ezra B. Wheeler received that said Parker Newton had gone into bankruptcy; that it does not appear that the said Ezra B. Wheeler had any information as to when said proceedings in bankruptcy were instituted, or as to the time or place of meeting of creditors, or any knowledge or information of the applica
It thus appears that the only notice which the plaintiff had of the bankruptcy proceedings, under which it is claimed he was debarred from his rights in- the mortgage in suit, came to him through two incidental conversations with a stranger to the proceedings, and to both of the parties to the action, and the question is whether this, as a matter of law, relieved the defendant from the obligation. Section 11 of the Bankruptcy Act (30 U. S. Stat. at Large, 550)
This was a provable debt; it was not scheduled at any time , during the proceeding, and the bankrupt knew the name of the creditor, so that there was no discharge of this debt unless the fact is made to appear that the “creditor had notice or actual knowledge of the proceedings in bankruptcy.” The defense is an affirmative one, the defendant pleading on information and belief “ that due notice of said bankruptcy proceedings was given to the plaintiff herein and the plaintiff had knowledge thereof,” and it is difficult to understand, under the facts found at the request of the plaintiff, how it can be held that the defendant has established the defense. “ Due notice ” is such a notice as the Bankruptcy Act contemplates in the orderly administration of the proceeding, after the bankrupt has filed his schedules, and it is conceded that no such notice was given to the plaintiff, and we have only the question of whether the plaintiff had “ actual knowledge of the proceedings in bankruptcy. ” No such fact is pleaded. The allegation is that “due notice of said bankruptcy proceedings was given
While there are some points of distinction between the case at bar and Columbia Bank v. Birkett (174 N. Y. 112; affd., sub nom. Birkett v. Columbia Bank, 195 U. S. 345) the reasoning of the case tends strongly in the direction which we have held, and it seems clear that if persons are to have the benefit of the Bankruptcy Act they should substantially comply with the provisions of the law in those matters which involve the property rights of others, and it is not a substantial compliance where the debt is not scheduled and the creditor is left to discover the bankruptcy through an incidental conversation with one having no relation to the transaction, and who is not even shown to have had any knowledge of the facts himself.
The judgment appealed from should be reversed, and, as it does not appear that a new trial could change the result, judgment should be granted to the plaintiff, with costs.
All concurred.
Judgment appealed from reversed, with costs, and judgment directed for the plaintiff, with costs.
Since amd. by 32 U. S. Stat. at Large, 798, § 5.—[Rep.