Fed. Nat. Bank v. Koppel

• Decision Date: 29 June 1925
• Parties: FEDERAL NAT. BANK v. KOPPEL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

253 Mass. 157

148 N.E. 379

FEDERAL NAT. BANK

v.KOPPEL et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 29, 1925.

Appeal from Superior Court, Suffolk County; Stanley E. Qua, Judge.

Action of contract by the Federal National Bank against Harry M. Koppel and others, to recover on promissory note for money lent. Judgment for defendants, and plaintiff appeals. Affirmed.

S. L. Bailen and W. J. Kenney, both of Boston, for appellant.

J. A. Daly, of Boston, for appellee Rabinow.

H. A. Eyges, of Boston, for appellee Koppel.

RUGG, C. J.

This case was submitted to the superior court on what is termed in the record ‘Agreed Statement of Facts.’ It is in truth a ‘case stated.’ Frati v. Jannini, 226 Mass. 430, 115 N. E. 746. It belongs to the second class of cases described in Samuel v. Page-Storms Drop Forge Co., 243 Mass. 133, 137 N. E. 169. It comes before us rightly on appeal from an order for judgment made by a judge of the superior court. G. L. c. 231, § 96.

This is an action of contract against the makers on a promissory note, given for money lent, dated July 9, 1923, payable in three months. The note contained this clause:

‘Waiving all benefits of whatever kind or nature that any laws give or intend to give for the advantage or protection of the maker hereof.’

The indorsement contained the same clause. On July 14, 1923, an involuntary petition in bankruptcy was filed against the defendants and they were duly adjudicated to be bankrupts. The schedules filed by them as required by the Bankruptcy Act included the note here in suit. The plaintiff did not file proof of claim and received no dividend in the bankruptcy proceeding. The defendants on February 5, 1925, were duly discharged from all debts and claims provable under the Bankruptcy Act which existed on July 14, 1923. The claim of the plaintiff does not fall within any of the classes of debts excluded from the operation of a discharge in bankruptcy.

The question to be decided is whether a waiver of a discharge in bankruptcy made as a part of the promise on which the debt is founded is binding on the promisor after adjudication and discharge.

[2] It is provided by section 17 of the Bankruptcy Act, 30 U. S. Stats. at Large, 550 (U. S. Comp. St. § 9601), that ‘a discharge in bankruptcy shall release a bankrupt from all of his provable debts,’ with exceptions not here material. A discharge in bankruptcy does not extinguish the debt. It affords to the debtor a complete legal defense to an action on such debt if he chooses to avail himself of it. The remedy for the collection of the debt, but not its existence, is affected. Citizens' Loan Association v. Boston & Maine Railroad, 196 Mass. 528, 82 N. E. 696,14 L. R. A. (N. S.) 1025, 124 Am. St. Rep. 584,13 Ann. Cas. 365;Sibley v. Nason, 196 Mass. 123, 131, 81 N. E. 887,12 L. R. A. (N. S.) 1173, 124 Am. St. Rep. 520,12 Ann. Cas. 938. It follows that a new promise to pay a debt, to which a discharge in bankruptcy might be pleaded in bar, made after discharge, is supported by the moral though not the legal obligation arising out of the old debt and the debt can be enforced at law. The bar of the discharge thus can be waived. Nathan v. Leland, 193 Mass. 576, 79 N. E. 793;Custy v. Donlan, 159 Mass. 245, 246, 34 N. E. 360,38 Am. St. Rep. 419. A promise to pay a debt made by the debtor after the adjudication but before the discharge likewise is enforceable. Zavelo v. Reeves, 227 U. S. 625, 33 S. Ct. 365, 57 L. Ed. 676, Ann. Cas. 1914D, 664. These decisions do not reach to the facts of the case at bar. One purpose of the Bankruptcy Act is to enable debtors to secure a release from the legally enforceable obligation of every debt provable against their estates and not of the excepted classes. (Its design is both to secure a ratable distribution of the property of the bankrupt among his creditors, and to enable an honest and deserving debtor to get a fresh start in life.) Plainly the note here in suit was provable in bankruptcy against the estate of the defendants. It would be repugnant to the purpose of the Bankruptcy Act to permit the circumvention of its object by the simple device of a clause in the agreement, out of which the provable debt springs, stipulating that a discharge in bankruptcy will not be pleaded by the debtor. The Bankruptcy Act would in the natural course of business be nullified in the vast majority of debts arising out of contracts, if this were permissible. It would be vain...