Ellis v. Fiske

• Decision Date: 20 November 1930
• Docket Number: No. 5824.,5824.
• Citation: 232 N.W. 891,60 N.D. 142
• Parties: ELLIS v. FISKE et al.
• Court: North Dakota Supreme Court

60 N.D. 142

232 N.W. 891

ELLIS

v.FISKE et al.

No. 5824.

Supreme Court of North Dakota.

Oct. 21, 1930.

Rehearing Denied Nov. 20, 1930.

Syllabus by the Court.

A judgment for a provable debt docketed more than four months prior to the adjudication in bankruptcy of the judgment debtor does not attach as a lien on nonexempt real estate acquired by inheritance, interim the adjudication and the final discharge.

Appeal from District Court, Barnes County; M. J. Englert, Judge.

Action by S. P. Ellis, doing business under the firm name and style of the Reidman-Ellis Company, against William Fiske and another. Plaintiff recovered judgment. From an order granting application of E. N. Johnson, administrator of the estate of William Fiske, deceased, for the discharge from record of said judgment on ground that judgment debtor had been discharged in bankruptcy, plaintiff appeals.

Affirmed.

J. O. Hanchett, of Valley City, for appellant.

A. F. Greffenius, of Valley City, for respondent.

NUESSLE, J.

This appeal is from an order granting an application for the discharge from record of a judgment pursuant to the provisions of section 7710, Comp. Laws 1913, on the ground that the judgment debtor had been discharged in bankruptcy.

In 1923, the appellant, suing on certain promissory notes executed by William Fiske, recovered a judgment against him. This judgment was docketed in Barnes county on November 13, 1923. On June 11, 1926, Fiske filed a voluntary petition in bankruptcy in the United States District Court for the District of North Dakota and was adjudicated a bankrupt. His entire assets were set aside to him as exempt property. No trustee was appointed. Appellant's judgment was listed in Fiske's schedule of liabilities and notice was given to him but no proof of claim was made. On August 30, 1926, Fiske acquired certain real property situated in Barnes county by inheritance. On November 29, 1926, Fiske received his discharge in bankruptcy. He died on May 12, 1928. At the time of his death he owned the real property that he had acquired by inheritance subsequent to the time of his adjudication. The respondent Johnson was appointed administrator of Fiske's estate and, as such, made the instant application for a discharge from the record of appellant's judgment pursuant to the provisions of section 7710, Comp. Laws 1913.

The facts are undisputed. It is conceded that the appellant's judgment was a debt provable in bankruptcy (U. S. Bankruptcy Act 1898, §§ 17 and 63 [11 USCA §§ 35 and 103]); that it was listed in the bankrupt's schedule; and that in so far as it was simply a debt the remedy therefor was annihilated by the final discharge received by Fiske on November 29, 1926. John Leslie Paper Co. v. Wheeler, 23 N. D. 477, 137 N. W. 412, 42 L. R. A. (N. S.) 292, 32 A. B. R. 688;De Walt v. Heeren, 50 N. D. 804, 197 N. W. 868;Hamilton v. First State Bank of Garrison, 57 N. D. 143, 220 N. W. 644;Blake v. Alswager, 55 N. D. 776, 215 N. W. 549, 55 A. L. R. 298. Appellant contends, however, that such judgment had become a lien on the real property of Fiske acquired by inheritance prior to the entry of his discharge in bankruptcy and that such lien was not in any way affected by such discharge.

Section 7710, Comp. Laws 1913, under which the instant application was made, provides a means whereby a judgment barred by a discharge in bankruptcy may be cleared from the record so it will not appear as a cloud against any title of the bankrupt subsequently acquired. See John Leslie Paper Co. v. Wheeler, supra; Hamilton v. First State Bank of Garrison, supra.

Thus the question here presented is as to whether a judgment against a bankrupt debtor docketed more than four months prior to the adjudication in bankruptcy attaches as a lien on nonexempt real estate acquired by inheritance, interim the adjudication and the final discharge. The trial court answered this question in the negative and granted the respondent's application. Thereupon this appeal was perfected.

We are agreed that the trial court was right in granting the application.

“The determination of the status of the honest and unfortunate debtor by his liberation from encumbrance on future exertion is matter of public concern.” Hanover National Bank v. Moyses, 186 U. S. 181, 22 S. Ct. 857, 862, 46 L. Ed. 1113. “It is the twofold purpose of the bankruptcy act to convert the estate of the bankrupt into cash and distribute it among creditors, and then to give the bankrupt a fresh start with such exemptions and rights as the statute left untouched. In the light of this policy the act must be construed.” Burlingham v. Crouse, 228 U. S. 459, 33 S. Ct. 564, 568, 57 L. Ed. 920, 46 L. R. A. (N. S.) 148. The Bankruptcy Act “necessarily contemplates: (1) That a voluntary petitioner will be discharged from the burden of his debts; and (2) that all the property owned by him at the time he filed his petition will be distributed among his creditors.” Bank of Elberton v. Swift (C. C. A.) 268 F. 305, 306, 46 A. B. R. 75. Accordingly, it has been uniformly held that under the provisions of section 70 of the Bankruptcy Act (11 USCA § 110), property acquired by the bankrupt subsequent to the filing of his petition, although before the granting of his discharge, or even before the adjudication, is not appropriated to the payment of the bankrupt's debts excepting those not affected by the discharge or incurred subsequent to the commencement of the proceedings. In re Seal (D. C.) 261 F. 112, 44 A. B. R. 556;In re Burka (D. C.) 104 F. 326, 5 A. B. R. 12;In re Elmira Steel Co. (D. C.) 109 F. 456, 5 A. B. R. 487; Collier on Bankruptcy (2d Ed.) § 1132, et seq., and cases cited; note to section 110, 11 USCA. Likewise, to effectuate the purposes of the act, a “bankrupt's discharge is from all provable debts and claims which existed on the day on which the petition for adjudication was filed. Zavelo v. Reeves, 227 U. S. 625, 630, 631, 57 L. Ed. 676, 33 S. Ct. 365.” Everett v. Judson, 228 U. S. 474, 33 S. Ct. 568, 569, 57 L. Ed. 927, 46 L. R. A. (N. S.) 154. And such is the wording of the form of discharge prescribed by the Supreme Court of the United States pursuant to section 30 of the act (11 USCA § 53), authorizing and empowering the court to prescribe all necessary rules, forms, and orders as to procedure, and for carrying the act into force and effect. See Form 59, 32 C. C. A. p. lxxxii, 89 F. p. lviii, 11 USCA p. 102, § 53. Consistent with the rule last above stated, no debts created subsequent to the filing of the petition, though before the discharge in bankruptcy, are affected thereby. In re Burka, supra; Van Tuyl v. Schwab, 174 App. Div. 665, 161 N. Y. S. 323, affirmed 220 N. Y. 661, 116 N. E. 1081;Rice v. Murphy, 109 Me. 101, 82 A. 842,Wight v. Gottschalk (Tenn. Ch. App.) 48 S. W. 140;Jersey City Insurance Co. v. Archer, 122 N. Y. 376, 25 N. E. 338; 7 C. J. 399.

We conclude then that the petitioner's judgment under which he claims a lien, and which is the subject of the application in the instant proceeding, was discharged as of date June 11, 1926, by virtue of Fiske's discharge in bankruptcy on November 29, 1926. The discharge related back to the time of the filing of the petition. Rate v. American Smelting & Refining Co., 56 Mont. 277, 184 P. 478, 44 A. B. R. 332;Schexnailder v. Fontenot, 147 La. 467, 85 So. 207, 45 A. B. R. 658; Bank of Elberton v. Swift, supra. In the interim, between the date of the filing of the petition and the date of the discharge, the debt was, so to speak, in a state of suspended animation. “The bankruptcy law does not continue a dischargeable debt for the purpose of permitting a lien to be created after the adjudication, but only to preserve and enforce a lien in existence at the date of the adjudication.” Collier on Bankruptcy (13th Ed.) p. 600; In re Harrington (D. C.) 200 F. 1010, 29 A. B. R. 666. Accordingly, it is clear to us that subsequent to June 11, 1926, no lien could have been acquired by virtue of the plaintiff's judgment on any property of which Fiske became the owner after that date.

The appellant, in the main, seeks to sustain his contention on the authority of the case of Powers Dry Goods Co. v. Nelson, 10 N. D. 580, 88 N. W. 703, 58 L. R. A. 770, followed in Mayer Boot & Shoe Co. v. Ferguson, 19 N. D. 497, 126 N. W. 110. We think, however, that whatever may have been said in these cases the facts clearly distinguish them from the instant case. In the Powers Case the property on which the lien was claimed by attachment...