Summary
In Matter of Peterson (137 App. Div. 435, 438), referring to section 21, subdivision f, of the Bankruptcy Act (30 U.S. Stat. at Large, 552), the court said: "Under this provision it would be presumed that the debts in question were scheduled properly, and that the appellants had notice of the bankruptcy proceedings."
Summary of this case from Harris v. SteinwaxOpinion
March 9, 1910.
Henry Donnelly and Fred L. Eaton, for the appellants.
Creighton S. Andrews, for the respondent.
The decree should be affirmed, with costs.
The appellants during the lifetime of the intestate recovered judgments against him. Thereafter he went into bankruptcy and received his discharge in the ordinary form. The judgments were upon claims of a nature dischargeable in bankruptcy, and were never paid. Upon the final accounting these judgments were presented, were disputed and were disallowed upon the sole ground that by the discharge in bankruptcy they were no longer enforcible against the intestate or his estate. Two points are made upon the appeal.
First. That the surrogate had no jurisdiction to determine whether the judgments were really discharged in bankruptcy.
Second. There was no proof upon which the surrogate could properly find they were so discharged.
First. I think there is no trouble about the jurisdiction of the surrogate if he merely did what he claims to have done, that is, enforced the judgments of two courts having jurisdiction respectively to render them. The State courts rendered the judgments in favor of the creditors upon their claims. Full effect was given to such judgments. The United States court in proceedings in bankruptcy discharged the judgments and released the intestate from all liability thereon during his lifetime. Full effect was given to this determination also. The surrogate claims to have done this and nothing more and makes this very pertinent illustration: "Assume that after the rendition of each of these judgments actions had been brought upon them, respectively, in equity, to set them aside, and such actions had been prosecuted to final judgment, determining the invalidity of such judgments, would or could it be contended that the Surrogate's Court upon final distribution of the funds of the estate had no right or jurisdiction to observe the determination of such court of equity and apply the same in making distribution?" ( 64 Misc. Rep. 217.) It is claimed that the United States court had jurisdiction in the bankruptcy proceedings and had power to release the judgments as effectually as a court of equity would to set them aside in the manner above suggested.
Second. But the real difficulty is not one of jurisdiction in the surrogate to do what he assumed to do. It is claimed by appellants that he has given an effect to the determination of the United States court which he was not justified in doing; that he has held in the absence of extraneous proof that the discharge itself operated to release the intestate and, therefore, his estate from all liability upon the judgments; while the respondent claims that until some evidence was given by the appellants to limit the effect of the discharge, the respondent could rely upon that and needed to give no other proof.
The discharge recited that the intestate had been duly adjudged a bankrupt and appeared to have conformed to all the requirements of law in that behalf, and, therefore, ordered that he be forever discharged from all debts and claims which by the act were made provable against his estate when the petition was filed excepting such debts, if any, as were by law exempted from the operation of a discharge in bankruptcy.
The controversy is over this exception. Was it necessary for the respondent to show that the judgments in question were not exempted, or was it the duty of the appellants to show the judgments were so exempted? No question is raised but that the judgments were claims in their nature provable under the act, and, therefore, would ordinarily be discharged, but subdivision 3 of section 17 of the Bankruptcy Act (30 U.S. Stat. at Large, 550) provides that a debt is not discharged which was not 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, and the question is whether the respondent should have proved these judgments were so scheduled or that the creditors had such notice or knowledge, or whether, if the appellants claimed exemptions of their judgments from discharge for the reason that they were not so scheduled, and they had no such notice or knowledge, the burden was upon them to give the proof before the surrogate as a foundation for their claims. No proof on that subject was given by either party, and the surrogate held the discharge operated to release the judgments regardless of the exception clause therein. Subdivision f of section 21 of the act (30 U.S. Stat. at Large, 552) provides that a certified copy of an order granting a discharge, not revoked, shall be evidence of the jurisdiction of the court, the regularity of the proceedings and of the fact that the order was made. Under this provision, it would be presumed that the debts in question were scheduled properly, and that the appellants had notice of the bankruptcy proceedings. ( New York Inst. for Instruction of D. D. v. Crockett, 117 App. Div. 269, 273.)
This should be so when the discharge recites that the petitioner had conformed to all the requirements of law which includes the proper scheduling of the debts, and clause 4 of subdivision a of section 39 of the act (30 U.S. Stat. at Large, 555) makes it the duty of the referee to serve all notices, which duty it will be presumed he performed. Barber v. Winslow (12 Wend. 102); Jenks v. Stebbins (11 Johns. 224), and Develin v. Cooper ( 84 N.Y. 410, 417) are old cases holding these same principles. (See, also, Bosworth v. Vandewalker, 53 N.Y. 597, 600; Smith v. Reid, 134 id. 568, 571; Columbia Bank v. Birkett, 174 id. 112, 120, dissenting opinion, VANN, J.; Stevens v. King, 16 App. Div. 377; Meyer v. Bartels 56 Misc. Rep. 621, 622.)
In Columbia Bank v. Birkett ( supra), VANN, J., said in his dissenting opinion: "A discharge in bankruptcy is presumptive evidence that every provable debt contracted prior to the date when the petition was filed is discharged thereby. * * * In order to defeat the discharge, not only duly pleaded and proved by the defendant but found by the court, the burden was upon the plaintiff to establish by sufficient evidence and an appropriate finding that its claim was one of those excepted from the effect of a discharge. This was the rule under prior bankruptcy acts, which excepted certain debts from the operation of a discharge, and there is no reason why it should not be applied to the one now in force" (citing a large number of cases).
This principle was not controverted in the prevailing opinion. The decision was not placed upon the effect of the discharge as evidence, nor the question of the burden of proof as to the debts alleged to have been excepted. The facts were all proven and the question was whether in view of those facts the debt was discharged. The court held that it was not properly scheduled, was scheduled to a person other than the real creditor and, therefore, was not discharged.
Graber v. Gault ( 103 App. Div. 511) is much relied upon by the appellants as holding that the burden of proof was upon the respondent instead of the appellants. That was a motion under section 1268 of the Code of Civil Procedure for the discharge of record of a judgment against a bankrupt, and the court on appeal held the motion was improperly granted by the court below because the moving party did not show by evidence outside the discharge that the debt was not one excepted, in that it was duly scheduled, and the creditor had notice or actual knowledge of the bankruptcy. I do not think that a well-considered decision. None of the cases holding a contrary doctrine were called to the attention of the court. No case in this State was cited as authority for the rule except Columbia Bank v. Birkett ( supra), which as I have said did not pass upon any such question, and moreover precisely the contrary doctrine was expressly stated in the same Appellate Division in the subsequent case of New York Inst. for Instruction of D. D. v. Crockett ( supra). I quote the language as follows: "The United States District Court is a court of record, and on proof of the order discharging the bankrupt the presumption would arise that the court obtained jurisdiction and that its proceedings were had in conformity to law; but 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, 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 * * * was scheduled as one of the debts from which he would seek a discharge." And this was a unanimous decision of the court. A certified copy of the order for a discharge was presented to the Surrogate's Court in this case.
I have no hesitancy in holding that the surrogate properly held the judgments were discharged. If the appellants claimed their debts were excepted because not properly scheduled, and they had no notice or knowledge of the bankruptcy proceedings, they had the burden of showing the facts upon which their claim rested, and very likely if a controversy arose on these facts the surrogate would have had no jurisdiction to determine whether the judgments were discharged.
Third. The claim that it should have been shown that the judgments were discharged on application to the State courts, pursuant to section 1268 of the Code of Civil Procedure, is not well made. The effect of an order on such a proceeding is not to discharge the judgment for that is already accomplished by the order in the bankruptcy proceedings. Its object is to remove a cloud from the record and procure the cancellation of the judgment on the record. ( Pickert v. Eaton, 81 App. Div. 423; Graber v. Gault, supra.)
The decree should be affirmed.
All concurred.
Decree affirmed, with costs.