236 U.S. 549 (1915), 80, Williams v. United States Fidelity & Guaranty Company

Docket NºNo. 80
Citation236 U.S. 549, 35 S.Ct. 289, 59 L.Ed. 713
Party NameWilliams v. United States Fidelity & Guaranty Company
Case DateFebruary 23, 1915
CourtUnited States Supreme Court

Page 549

236 U.S. 549 (1915)

35 S.Ct. 289, 59 L.Ed. 713

Williams

v.

United States Fidelity & Guaranty Company

No. 80

United States Supreme Court

February 23, 1915

Argued January 18, 1915

ERRROR TO THE COURT OF APPEALS

OF THE STATE OF GEORGIA

dg:syll*

Syllabus

Statutes should be sensibly construed with a view to effectuating the legislative intent.

It is the purpose of the Bankruptcy Act to convert the assets of the bankrupt into cash for distribution among creditors and then relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh free from obligations and responsibilities consequent upon business misfortunes. Within the intendment of the bankruptcy law, provable debts include all liabilities of the bankrupt founded on contract, express or implied which at the time of the bankruptcy were fixed in amount or susceptible of liquidation. Under the provisions of the Bankrupt Act, the surety of the bankrupt either shares, or enjoys due opportunity to share, in the principal's

Page 550

estate, and therefore the discharge of the bankrupt acquits the obligation between them incident to the relationship.

A discharge in bankruptcy acquits the express obligation of the principal to indemnify his surety against loss by reason of their joint bond conditioned to secure his faithful performance of a building contract broken prior to the bankruptcy, although the surety did not pay the consequent damage until thereafter.

11 Ga.App. 635 reversed.

The facts, which involve the construction of the Bankruptcy Act and effect of a discharge in bankruptcy, are stated in the opinion.

Page 552

MCREYNOLDS, J., lead opinion

MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

This cause presents the following question: does a discharge in bankruptcy acquit an express obligation of the principal to indemnify his surety against loss by reason of their joint bond, conditioned to secure his faithful performance of a building contract broken prior to the bankruptcy when the surety paid the consequent damage thereafter?

R. P. Williams and J. B. Carr, as partners, entered into a contract with certain school trustees -- April, 1900 -- to construct a building in Florida, and, with defendant in error company as surety, gave a bond guarantying its

Page 553

faithful performance. Contemporaneously with the execution of the bond, and as a condition thereto, the partners made a written application to the company in which they obligated themselves

to indemnify the said United States Fidelity & Guaranty Company against all loss, costs, damages, charges, and expenses whatever resulting from any act, default, or neglect of ours that said United States Fidelity & Guaranty Company may sustain or incur by reason of its having executed said bond or any continuation thereof.

November 9, 1900, the partners abandoned the contract; the trustees took possession and completed the structure April 13, 1901, and on May 14th following they made adequate demands for payment of the amount expended beyond the contract price. This being refused, they brought suit and recovered a judgment against the company July 1, 1904, which it satisfied February 20, 1905, by paying $5,475.36.

Voluntary petitions were filed by partnership [35 S.Ct. 290] and members May 28, 1901, and all were immediately adjudged bankrupt. The schedules specified the building contract, its breach and the bond, and their adequacy is not now questioned. In due time, the school trustees proved their claim and it was allowed. October 5, 1901, the petitioners received their discharges. No dividend was declared, all the assets being required for administration expenses.

Defendant in error brought suit in the City Court of Atlanta against the firm and its members -- August, 1911 -- setting up the written promise made to it when the bond was executed and asking judgment for the amount paid in satisfaction of the recovery thereon, together with attorneys' fees. The matter was submitted upon an agreed statement of facts, and judgment went in favor of the company; this was affirmed by the Court of Appeals of Georgia (11 Ga.App. 635), and the cause is here upon writ of error.

Page 554

The state court treated the written contract of indemnity between the bankrupts and the surety company as the expression of what would have been implied, and declared:

The bankrupts owed the surety nothing at the time the petition in bankruptcy was filed, because the surety had paid nothing for their benefit, and the relation of debtor and creditor did not exist between them until after actual payment by the surety. . . . The surety had no claim against the bankrupts which it could file in its own name. . . . The liability to the surety by the bankrupts was altogether contingent,...

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362 practice notes
  • 196 B.R. 329 (Bkrtcy.W.D.Va. 1996), 7-96-00020, In re Butler
    • United States
    • Federal Cases United States Bankruptcy Courts Fourth Circuit
    • May 21, 1996
    ...the Court notes that the Bankruptcy Code generally is to be liberally construed in favor of the debtor. See Williams v. USF & G, 236 U.S. 549, 35 S.Ct. 289, 59 L.Ed. 713 (1915); Roberts v. W.P. Ford & Son Inc., 169 F.2d 151, 152 (4th Cir.1948) (citing Johnston v. Johnston, 63 F.2d 2......
  • 222 B.R. 816 (S.D.Ohio 1998), C-3-94-101, In re Richard Potasky Jeweler, Inc.
    • United States
    • Federal Cases United States District Courts 6th Circuit Southern District of Ohio
    • March 31, 1998
    ..." Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) (quoting Williams v. U.S. Fidelity & Guar. Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 59 L.Ed. 713 (1915)); see also SEN. REP. NO. 989, 95th Cong., 2d. Sess. 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5......
  • 320 B.R. 493 (Bkrtcy.S.D.N.Y. 2005), 03 B 22150, In re Hyman
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • January 21, 2005
    ...the obligations and responsibilities consequent upon business misfortunes.' " (quoting Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554, 555, 35 S.Ct. 289, 290, 59 L.Ed. 713 (1915))). Congress reiterated this viewpoint when it passed the Bankruptcy Reform Act in 1978, co......
  • 367 B.R. 332 (Bkrtcy.E.D.N.Y. 2007), 05-16137, In re Suarez
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • March 23, 2007
    ...discouragement of pre-existing debt. Local Loan Co., 292 U.S. at 244, 54 S.Ct. 695 (quoting Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 59 L.Ed. 713 (1915) (citations But the "fresh-start policy does not apply to all debts and debtors." Andy W......
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355 cases
  • 196 B.R. 329 (Bkrtcy.W.D.Va. 1996), 7-96-00020, In re Butler
    • United States
    • Federal Cases United States Bankruptcy Courts Fourth Circuit
    • May 21, 1996
    ...the Court notes that the Bankruptcy Code generally is to be liberally construed in favor of the debtor. See Williams v. USF & G, 236 U.S. 549, 35 S.Ct. 289, 59 L.Ed. 713 (1915); Roberts v. W.P. Ford & Son Inc., 169 F.2d 151, 152 (4th Cir.1948) (citing Johnston v. Johnston, 63 F.2d 2......
  • 222 B.R. 816 (S.D.Ohio 1998), C-3-94-101, In re Richard Potasky Jeweler, Inc.
    • United States
    • Federal Cases United States District Courts 6th Circuit Southern District of Ohio
    • March 31, 1998
    ..." Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) (quoting Williams v. U.S. Fidelity & Guar. Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 59 L.Ed. 713 (1915)); see also SEN. REP. NO. 989, 95th Cong., 2d. Sess. 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5......
  • 320 B.R. 493 (Bkrtcy.S.D.N.Y. 2005), 03 B 22150, In re Hyman
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • January 21, 2005
    ...the obligations and responsibilities consequent upon business misfortunes.' " (quoting Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554, 555, 35 S.Ct. 289, 290, 59 L.Ed. 713 (1915))). Congress reiterated this viewpoint when it passed the Bankruptcy Reform Act in 1978, co......
  • 367 B.R. 332 (Bkrtcy.E.D.N.Y. 2007), 05-16137, In re Suarez
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • March 23, 2007
    ...discouragement of pre-existing debt. Local Loan Co., 292 U.S. at 244, 54 S.Ct. 695 (quoting Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 59 L.Ed. 713 (1915) (citations But the "fresh-start policy does not apply to all debts and debtors." Andy W......
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