Juden v. Nebham

Reed, J., delivered the opinion of the court. After the trial of this case, ending in a verdict for appellee, and after the filing of a motion for a new trial by appellants, another motion was filed by them for the court to continue the motion for a new trial for the reasons set out in affidavits annexed. It is shown by the affidavits that appellants after the ending of the trial of the case had received information that appellee had been adjudicated a bankrupt in the District Court of the United States sitting at Baton Rouge, La., on July 6, 1909; that appellants and their attorneys had used due diligence before the trial of the ease in an effort to discover all material evidence relevant to their defense. And it is shown by the affidavits filed in connection with the motion that appellee had not scheduled the notes sued on in the bankruptcy proceedings; that, in fact, there were no assets in the bankrupt estate, no trustee appointed; and that no composition was made with creditors. It is stated in 1 Remington on Bankruptcy, par. 996, that “property belonging to the estate, but not scheduled by the bankrupt, will nevertheless pass to the trustee, and its title does not revest in the bankrupt.” This rule is fully sustained in the case of Rand v. Iowa Central [89] Ry. Co., 96 App. Div. 413, 89 N. Y. Supp. 212, wherein it is stated: “Where, after plaintiff’s alleged cause of action against the defendant accrued, he filed his petition in bankruptcy, and prior to the commencement of the action was adjudged a bankrupt and obtained his discharge, and in the bankruptcy proceedings he did not disclose the existence of the claim upon which the action was founded, or any other asset, in consequence of which no trustee in bankruptcy was appointed, the complaint is properly dismissed, upon the ground that the plaintiff is not the real party in interest; the bankruptcy proceedings having divested him of the right to maintain the action.” Latjghlin, J., in his opinion in the case just cited, says: “I think it is the fair intent and true construction of the Bankruptcy Act and rules that, if no trustee be appointed because assets are not shown, yet that a trustee may and should be appointed upon the discovery of assets. It may be that the legal title to this chose in action remained in the bankrupt, but it is clear, I think, that he holds it as a trustee, and that the equitable title passed to the creditors and the custody and control passed to the court for their benefit, to be- administered through a trustee to whom the legal title will pass upon his appointment, and that, therefore, the plaintiff is not the real party in interest and cannot maintain this action.” In Saunders v. Mitchell, 61 Miss. 321, this court, speaking through Coopee, J., in discussing this subject, said: “In this case it is shown that the property sued for was not put on the schedule by the bankrupt. The estate actually surrendered was insufficient to pay the costs of the bankrupt proceedings, and there is nothing shown from which it may be inferred that either the assignee or the creditors had any notice of the bankrupt’s right to the land. The bankrupt was by law charged with the duty of making a -full disclosure and surrender of all the property owned by him. This he90 failed to do. Proof of debts by the creditors would have availed them nothing, if the whole estate had consisted of the property returned by the bankrupt, and their failure to prove their claims under such circumstances cannot be said to be a surrender of their debts. They were ■ warranted in assuming that there was no other estate than that described in the schedules, and neither the bankrupt or his heirs ought under these ■circumstances to be permitted to say that the creditors or the assignee abandoned the property to him or them. ” If it is true that the appellee has been adjudicated a bankrupt, then all property owned by him at the time ■of the adjudication, except his exemptions, belongs to the bankrupt estate, and should be administered through a trustee for the benefit of the creditors of the bankrupt. Unless ithe appellee, if he was adjudicated a bankrupt obtainejd some title to the note in this case sued on through^ the bankruptcy proceedings, say, through sale by a trustee and purchase by a person who afterwards transferred the note to appellee, then he has no title to or ownership of the note, and in such case has no right to recover from appellants in the case. He is given no right or title to the note by reason of the failure to disclose its existence when he filed his petition and schedule in bankruptcy, and by reason of the failure to appoint a trustee because there were no assets to be received and disposed of. If there is any value to his claim against appellants, such value should be for the benefit of his creditors. If appellants owed appellee any amount when he filed his petition in bankruptcy, then it was appellee’s duty to report and schedule that amount and surrender any benefit therefrom as a part of his estate. He cannot take advantage of any failure to do this. The fact of appellee having been adjudicated a bankrupt and the surrender of his estate in bankruptcy [91] is a defense, and when set up in the trial of the case, and shown in connection with his failure to schedule the indebtedness which he claims the appellants owed him and is the subject of this suit, should be a defense which will finally and conclusively dispose of the litigation. This may be classed an exceptional case to the rule relative to the court granting a new trial. Railway Co. v. Crayton, 69 Miss. 159, 12 South. 271. The showing made by appellants was sufficient to entitle them to a new trial. It is proper to state that the record in this ease does not set forth with sufficient clearness and fullness the testimony relating to the contents of certain letters ■claimed to have been written to appellee by appellants renewing their promise to pay the note sued on, and the signatures thereto. •Reversed and remanded.