Lewith v. Irving Trust Co.

• Decision Date: 11 December 1933
• Docket Number: No. 216.,216.
• Citation: 67 F.2d 855
• Parties: LEWITH v. IRVING TRUST CO.
• Court: U.S. Court of Appeals — Second Circuit

67 F.2d 855 (1933)

LEWITH v. IRVING TRUST CO.

No. 216.

Circuit Court of Appeals, Second Circuit.

December 11, 1933.

Krause, Hirsch & Levin, of New York City (Sydney Krause, and Morris M. Marcus, both of New York City, of counsel), for appellant.

Joseph & Demov, of New York City (Charles L. Grad and Jacob S. Demov, both of New York City, of counsel), for appellee.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

L. HAND, Circuit Judge.

The creditor, whose claim is here in suit, was the owner of a shop in Pennsylvania which the bankrupt held under lease. The adjudication was on August 24, 1932, and on September 15, 1932, the lessor filed a general claim with the referee for rent in the sum of about $700, to which by amendment he added the heating charges on October 21, 1932, making a total of about $1,000. So matters stood when the six months within which claims could be filed, expired on February 24, 1933. Thereafter the trustee filed objections to the claim, which came on to be heard before the referee on May 23, 1933, when the parties composed their differences by a stipulation in open court that the claim should be allowed for $850. Upon this stipulation the referee allowed the claim generally for that amount. The common-law remedy of distress still exists in Pennsylvania, and under section 96 of its Insolvency and Assignment Law (39 PS, Pa.) a lessor has a priority in bankruptcy to the extent that his claim is so secured. This statute is incorporated into the Bankruptcy Law, § 64b (7), as amended by Act May 27, 1926, 11 USCA § 104 (b) (7). On May 27, 1933, the creditor petitioned the referee to direct the trustee to pay his claim in full, claiming priority on the ground that there were goods of the bankrupt on the premises at petition filed of the value of $850. The petition does not allege that the creditor was ignorant of the value of this property when the claim was originally filed, when it was amended, or when it was allowed; nor that he was ignorant of the Pennsylvania law giving him priority; it alleges no reason whatever why he should be relieved of the allowance. The referee did not grant the petition, but did allow the creditor to amend his claim so as to assert a priority for the reasons alleged. The judge reversed this order, and the creditor appeals.

The statute of limitations (Bankr. Act) section 57n, 11 USCA § 93 (n), does not prevent a creditor who has filed an unsecured claim, from amending it into a secured claim, and asserting his security, after the period for filing has expired. In re Ashland Steel Co., 168 F. 679 (C. C. A. 6); Maxwell v. McDaniels, 195 F. 426 (C. C. A. 4); In re Fisk & Robinson (D. C.) 185 F. 974; In re Hamilton Automobile Co., 209 F. 596 (C. C. A. 7); Ensley v. First National Bank (D. C.) 17 F.(2d) 603. Such an amendment does not change the cause of action, like that in Re Miller & Co., 45 F.(2d) 115 (C. C. A. 2); the claim rests upon the same debt as before. All that is added is a statement to show that for its payment some security is available either by agreement, or by force of law. The referee was therefore within his powers, and the only question is whether facts existed calling for their exercise. The Bankruptcy Act, § 57k, 11 USCA § 93 (k), gives power to the court to reconsider for "cause" claims allowed, "according to the equities of the case," until the estate has been closed. So far as concerns the formal allowance of the claim by mere filing, "the equities of the case" may require nothing more than that the creditor wishes to amend, and is not estopped. Maxwell v. McDaniels, supra (C. C. A.) 195 F. 426; Wuerpel v. Commercial, etc., Bank, 238 F. 269, 272 (C. C. A. 5); In re Myers (D. C.) 99 F. 691. It is true that in Re O'Gara Coal Co. (C. C. A. 7) 12 F.(2d) 426, 46 A. L. R. 916, the creditor was not allowed by amendment to set up a secured claim, but the case was exceptional; the creditor had been fully advised of all the facts and had in effect chosen to abandon the security which was worthless at the time. Except for the referee's allowance of the claim, we may therefore assume that the amendment would have been proper. But an allowance after objection is another matter; there has been a litigation upon issues, settled by the decision of a court. Such an allowance has all the substantial elements of a judgment, and has the effect of a judgment; it is res judicata between the...