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City Hall Building and Loan Association of Newark v. Star Corp.

Decided: April 28, 1933.

THE CITY HALL BUILDING AND LOAN ASSOCIATION OF NEWARK, NEW JERSEY, A CORPORATION, PLAINTIFF-APPELLEE,
v.
STAR CORPORATION, A NEW JERSEY CORPORATION, DEFENDANT, AND IRA BELL, DEFENDANT-APPELLANT



On appeal from the Essex County Circuit Court.

For the defendant-appellant, Benjamin Newman.

For the plaintiff-appellee, William Greenfield.

Heher

The opinion of the court was delivered by

HEHER, J. On July 8th, 1929, defendants executed and delivered to plaintiff their joint bond, conditioned for the payment of the principal sum of $85,000 in monthly installments, with interest. It provided that should there be a default in the making of any monthly payment, as therein provided, for a period of three months, the balance of the principal sum should become immediately due and payable. The corporate defendant, at the same time, executed and delivered to plaintiff, as security for the payment of the bond, a mortgage upon lands therein described. There was a default, and foreclosure proceedings were instituted. On September 29th, 1931, the mortgaged lands were sold at a sheriff's sale, pursuant to the direction of the final decree entered in the foreclosure proceedings, to plaintiff for $200. This action was brought on the bond to recover the deficiency, $84,279.07.

Appellant, Bell, answered that on November 17th, 1930, he was adjudicated a bankrupt under the acts of congress relating to bankruptcy, and was discharged on March 30th, 1931; that the claim of plaintiff upon said bond and mortgage

was duly scheduled; that it had knowledge of the bankruptcy, and that in the circumstances plaintiff is barred from recovery upon its said debt. A copy of the discharge was attached to the answer. He was thereby discharged from all debts and claims made provable by the Bankruptcy act against his estate, and which existed on November 17th, 1930, the day of the filing of the petition for adjudication, excepting such debts as were by law excepted from the operation of a discharge in bankruptcy.

On plaintiff's motion, this defense was struck out as frivolous, and judgment final was entered against appellant for the amount of the deficiency. It is plaintiff's contention that, at the time of the adjudication and discharge, there was no fixed or provable debt owing from appellant to plaintiff, and that the debt or obligation in suit was not discharged.

Counsel's argument is that a default had not occurred at the time of the filing of the petition and the adjudication, and did not occur until April, 1931; that appellant's undertaking was one of mere suretyship; that "there was nothing due" to plaintiff from the bankrupt at the time of the filing of the petition, and that it was impossible to ascertain as of that date the sum due from him, and plaintiff therefore did not have a provable debt or claim within the intendment of the Bankruptcy act. This argument is predicated upon an unwarranted assumption of facts. Plaintiff's complaint alleges that appellant and the corporate defendant jointly executed the bond to plaintiff, and there is no allegation of suretyship. The affidavit submitted by plaintiff on the motion to strike sets forth that both defendants applied for and obtained the loan from plaintiff, and that they defaulted. An affidavit submitted by Bell stated that a default had occurred prior to the filing of the petition and the adjudication, and continued until the filing of the foreclosure bill in June, 1931. This statement stands uncontradicted. But it is unnecessary to pursue this further. The factual situation thus assumed and the case made by the complaint and the affidavits call for the application of the same legal principles and rules, and with like result.

Section 17 of the Bankruptcy act (11 U.S.C.A., § 35) provides that a discharge in bankruptcy shall release a bankrupt "from all of his provable debts," with certain exceptions, none of which is here involved. A discharge in bankruptcy discharges the bankrupt from all such debts as were, under section 63 of the act (11 U.L.C.A., § 103), provable against his estate in bankruptcy, excepting such as fall within the exceptions of section 17. Crawford v. Burke, 195 U.S. 176; 25 Sup. Ct. 9; 49 L. Ed. 147; Tindle v. Birkett, 205 U.S. 183; 27 Sup. Ct. 493; 51 L. Ed. 762. Section 1 (11) provides that "'debt' shall include any debt, demand, or claim provable in bankruptcy." 11 U.S.C.A., § 1.

Subdivision (a) of Section 63 provides that debts of the bankruptcy may be proved and allowed against his estate which are "(1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date, or with a rebate of interest upon such as were not then payable and did not bear interest," and "(4) founded upon an open account, or upon a contract, express or implied." Subdivision (b) provides that "unliquidated claims against the ...


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