Troy v. Rudnick

Braley, J. This is an action of contract to recover the amount due on two promissory notes made by the defendants, and, while the answer sets up other defenses, unless the discharge in bankruptcy is a bar, the plaintiffs are entitled to hold their verdict. A certificate of discharge granted under the national bankruptcy act of 1867, c. 176, could not be collaterally attacked in an action brought upon a provable debt, even where the bankrupt had intentionally omitted the creditor from his schedules, as its validity could be impeached only by an application to the court having exclusive jurisdiction of the proceedings in bankruptcy. U. S. Rev. Sts. § 5119. Fuller v. Pease, 144 Mass. [567] 390, 392, and cases cited. But the U. S. St. of 1898, c. 541, § 17 a (3), as amended by the U. S. St. of 1903, c. 487, omits these provisions, and a discharge does not relieve the bankrupt from provable debts, if such debts “ have not been 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.” It accordingly is open to a creditor to avoid the effect of a discharge where the bankrupt fails to comply with this requirement, if he is not shown to have had either notice or actual knowledge that his debtor had gone into bankruptcy. Birkett v. Columbia Bank, 195 U. S. 345. The defendants, having been voluntarily adjudicated bankrupts, offered a composition which was confirmed. Upon confirmation, by force of § 14 c, they were discharged from the indebtedness represented by the notes, if the plaintiffs either were properly scheduled, or had notice of their bankruptcy. The bankrupt is required by § 7 (8) to prepare and file with other schedules a schedule containing a list of his creditors with their places of residence when known, or, if unknown, then this fact is to be stated. The importance of a strict compliance with this section is obvious. It is intended that, from the inception of the administration of the bankrupt’s estate until closed, the creditors shall have the opportunity not only of participation in the various proceedings, but, upon proof and allowance of their debts, to share in any liquidation of the indebtedness whether paid by the bankrupt in composition, or by the trustee in dividends. By the contents of the schedule, the court is informed , of those who as creditors are entitled under § 44 to be notified of the first meeting, when a trustee is to be appointed, or under .§ 12, if a composition is offered. The trustee also derives from this source information as to the liabilities of the estate, while •under § 17 a (3), as we have said, outside of the exception of actual knowledge, the conclusive effect of the bankrupt’s discharge as a bar has been confined to creditors who are made parties by having been properly scheduled. It was undisputed not only that a discrepancy existed between the name of the plaintiff’s firm and the name stated in the schedule, but also that the number of the street where they [568] carried on business was incorrectly described. Even if, as the defendants contend, there was evidence from which the jury could have found that, commercially, the firm were as well known by one name as by the other, still their place of residence neither had been designated nor stated to have been unknown. But if, upon the face of the schedule, as matter of law it might have been ruled that the statute had not been complied with, the submission of the question to the jury, whether upon the evidence the plaintiffs had been properly scheduled, was sufficiently favorable to the defendants, and the various requests relating to this issue, of which the first and second only have been argued, were rightly refused. Birkett v. Columbia Bank, 174 N. Y. 112; S. C. 195 U. S. 345. Custard v. Widgerson, 130 Wis. 412, 416. Under the answer returned, while the plaintiffs were not concluded by the record in bankruptcy, the further inquiry, whether they were estopped from contesting the discharge because either of notice or of actual knowledge of the proceedings before the confirmation of the composition, was rightly submitted to the jury. While it is clear that, when the petition to set aside the composition was filed, the period in which the plaintiffs could have participated by making proof of their claim had passed, it is to be presumed, although not expressly stated in the exceptions, that in compliance with § 58 (2), notice to creditors had been duly mailed. If this had been done, then the general practice of the mail carriers in the delivery of letters addressed to the plaintiffs as described in the schedule furnished evidence from which, notwithstanding the misdescription, they could have been found to have received notice of the meeting at which the composition was offered, and to have been informed of the bankruptcy of the defendants. Briggs v. Hervey, 130 Mass. 186. The admission in evidence of their petition to vacate the order confirming the composition, which contained a recital as to when they first knew the defendants had become bankrupts, even if competent to rebut any inference as to a waiver of their rights by acquiescence, had no tendency to contradict this testimony, for such a statement was in the nature of self-serving declarations by which the defendants were not bound. The jury, how [569] ever, having been directed to disregard the petition as furnishing any evidence of a failure to notify the plaintiffs, it is to be presumed they followed the instruction, and the defendants do not appear to have been prejudiced. Holbrook v. Jackson, 7 Cush. 136,146. Tapley v. Forbes, 2 Allen, 20,26. Costello v. Crowell, 133 Mass. 352. By § 12, subsections a, b, c, the bankrupt must first obtain the consent in writing of a majority in number and amount of creditors whose claims have been proved and allowed before he makes application for the confirmation of an offer of composition, and, under subsection e, upon confirmation “ the consideration is to be distributed as the judge shall direct, and the case dismissed.” But, as distribution must be made among creditors whose claims appear by the record to have been previously proved and allowed, proof of the plaintiff’s debt after the order had been entered was a mere nullity, and the refusal to give the sixth request affords no just ground of complaint. Doucette v. Baldwin, 194 Mass. 131, 135. We discover no error of law at the trial, and accordingly the exceptions must be overruled. So ordered.