Freedom Hutchinson v. Otis, Wilcox Company

• Citation: 190 U.S. 552,23 S.Ct. 778,47 L.Ed. 1179
• Decision Date: 01 June 1903
• Docket Number: No. 634,634
• Parties: FREEDOM HUTCHINSON, Trustee, Appt. , v. OTIS, WILCOX, & COMPANY
• Court: United States Supreme Court

190 U.S. 552

23 S.Ct. 778

47 L.Ed. 1179

FREEDOM HUTCHINSON, Trustee, Appt.,

v OTIS, WILCOX, & COMPANY.

No. 634.

Submitted May 4, 1903.

Decided June 1, 1903.

Messrs.Frederick D. McKenney and Freedom Hutchinson for appellant.

Messrs. Roland Gray and John C. Gray for appellees.

Mr. Justice Holmes delivered the opinion of the court:

This is an appeal from a decree of the circuit court of appeals affirming, on appeal, a decree of the district court, which allowed a proof of a claim in bankruptcy by the appellee. 53 C. C. A. 419, 115 Fed. 937. The appeal to this court was allowed by a justice of this court under the bankruptcy act, § 25b, 1 [30 Stat. at L. 553, chap. 541, U. S. Comp. Stat. 1901, p. 3432], and rule 36, 2, on grounds to be explained, and now is before us on a motion to dismiss or affirm. The facts, shortly stated, are as follows: Otis, Wilcox, & Co., having an admitted claim for $4,421.64, sued the bankrupts in New York and Illinois, and attached debts due to them, by trustee process. This was within four months before the filing of the petition in bankruptcy, and therefore was ineffectual as against the appellant by § 67 of the act. But Otis, Wilcox, & Co., supposing that they had valid attachments, took judgments by default, and collected their debt from the parties trusteed, agreeing to save the latter harmless from liability to others. Satisfaction was entered of record in each suit. Subsequently the trustee in bankruptcy demanded payment of these debtors of the bankrupt, and, as they had no defense, Otis, Wilcox, & Co. paid over to the trustee the full amount of the respective debts. Otis, Wilcox, & Co. filed a claim in bankruptcy, and were allowed to prove their claim.

The trustee in bankruptcy took the ground before the referee, and seems to have adhered to it, that full faith and credit to the record of satisfaction forbade the allowance of the proof. It was because of this contention that the writ of error was allowed. The jurisdiction of this court is established, and the motion to dismiss must be overruled. But so little attention was paid to the question, and the contention seems to us so unmeritorious, that we think that there was color for the motion, and we therefore take up the motion to affirm.

No one denies the fact or effect of the record of satisfaction. N. Y. Code Civ. Proc. § 1264; Crotty v. McKenzie, 10 Jones & S. 192, 201. What is said is that, although it is true that on a certain day a judgment on the appellee's claim was satisfied, since that time the satisfaction had been undone and the money restored. It is objected that Otis, Wilcox, & Co. did not purport to restore to the appellant what they had received from the parties indebted to the bankrupt estate, but simply paid the debts of those parties. But names make no difference in this case. There was no identified fund. When Otis, Wilcox, & Co. paid the debts out of which they had received satisfaction, they undid the satisfaction, and the trustee in bankruptcy knew it. We see no sufficient ground on which he can deny the consequence that the right to prove revived. That right cannot be made to depend on the views which the New York and Illinois courts may entertain as to the propriety of correcting the record of satisfaction to conform to present conditions, it having been right when it was made. Whether the record is corrected or not, it cannot be conclusive as to events of a later date. If it had been vacated, it would have restored the rights of the creditors by relation. Taylor v. Ranney, 4 Hill, 619, 623, 624.

The only difficulty is this: The adjudication of bankruptcy was on April 27, 1900. A petition and the original proof of claim of Otis, Wilcox, & Co. were filed on March 9, 1901. At this time the trustee in bankruptcy was suing for the debts in question, but, by agreement, time was given to the counsel for Otis, Wilcox, & Co. to look into the matter. The payment to the trustee by the last-named firm, although agreed upon before, was not made until April 29, 1901, more than a year after the adjudication, so that, technically, the record of satisfaction really was a bar until the time for proof had gone by. Subsequently, on November 12, 1901, an amended proof was filed by consent of the trustee, and was allowed as of November 4. We are of opinion that when the trustee accepted payment from Otis, Wilcox, & Co. in pursuance of his previous agreement, with this proof on file, and in this way undid the satisfaction of record, he must be taken to have done so on the understanding that he accepted the consequence that the bar to the proof was removed. We follow the interpretation of the circuit court of appeals, that the admitted belief of Otis, Wilcox, & Co. that they had been paid, was due to a mistake of fact, and the agreement to settle seemingly having been made within the year, the delay of actual payment for a day or two beyond, for convenience of counsel, ought not to affect the result.

The appeal being here, the trustee argues two other questions. The first concerns the amended proof. The proof of debt originally filed is admitted to have been defective. A substituted proof was filed...