Opinion
May Term, 1902.
James R. Baumes and William H. Johnson, for the appellants.
Wordsworth B. Matterson, for the respondent.
Except for the written agreement made by James R. Baumes to pay any final judgment rendered against the defendants in this action, or so much of such judgment as remains unpaid after execution shall be returned, I think leave to serve a supplemental answer making the discharge in bankruptcy a defense should be granted. The claim belongs to that class which the Bankruptcy Law declares provable, and, hence, is barred by a discharge. The claim is upon a promissory note. The defendants have by answer set up matter in defense, and the bankruptcy court on that account has treated it as "unliquidated" and directed that it be liquidated in this action. This is only a means taken to determine how much, if anything, is owing by the bankrupts on the note, how much the trustee in bankruptcy shall allow in distribution of the assets.
The case I think is a proper one for the exercise of judicial discretion. ( Holyoke v. Adams, 59 N.Y. 233.) The situation seems to be this: If the application were granted it would be possible for defendants to prevent the entry of any judgment against them, and by so doing defeat such right of action as the plaintiff may have against Baumes on the written agreement. That writing contemplates a judgment and execution to be issued thereon and a right of action for the uncollected amount. Until the return of execution the right to sue is suspended. On the other hand, if the application is denied, the defendants may, through the well-recognized equity practice, procure a perpetual stay upon any judgment rendered, a practice wherein the interest of all parties in such a stay will be considered. ( McDonald v. Davis, 105 N.Y. 508; West Philadelphia Bank v. Gerry, 106 id. 467; Monroe v. Upton, 50 id. 593.) Or the defendants may apply under section 1268 of the Code of Civil Procedure for a cancellation of the judgment. That section provides that "at any time after one year has elapsed since a bankrupt was discharged from his debts * * * he may apply upon proof of his discharge to the court in which a judgment was rendered against him * * * for an order directing the judgment to be cancelled and discharged of record. If it appears upon the hearing that he has been discharged from the payment of that judgment or the debt upon which such judgment was recovered, an order must be made directing said judgment be cancelled and discharged of record." In any case it would seem that the defendants are provided with a remedy sufficient for their personal protection aside from the remedy here sought, namely, leave to amend their answer setting up the discharge, and in compelling defendants to resort to such other remedy, the rights of plaintiff may be saved. The defendants received a benefit through the making of the agreement, and they ought not to be aided unreasonably in any effort to make the contract nugatory as between plaintiff and Baumes.
The order should be affirmed, with ten dollars costs and disbursements.
All concurred.
Order affirmed, with ten dollars and disbursements.