In re Dixon

• Decision Date: 17 June 1927
• Citation: 21 F.2d 565
• Parties: In re DIXON. In re RICE.
• Court: U.S. District Court — Western District of New York

21 F.2d 565 (1927)

In re DIXON In re RICE.

District Court, W. D. New York.

June 17, 1927.

George F. Bodine, of Waterloo, N. Y. (Harris, Beach & Matson, of Rochester, N. Y., of counsel), for bankrupts.

James M. E. O'Grady and James D. Harris, both of Rochester, N. Y., for judgment creditors.

HAZEL, District Judge.

This a motion on a show cause to restrain plaintiffs from issuing execution against the person of the separate defendants on judgments recovered against them et al., in the Supreme Court of this state for large amounts. Both applications arise on the same facts, and may be decided together. All the defendants have appealed from the judgment against them to the Appellate Division, Fourth Department, but Rice and Dixon, now bankrupt, were unable to give security on appeal to stay execution, and levies were made and sales advertised. A stay of execution against the personal property was, however, granted by the Appellate Division on condition that the appeal be argued at the ensuing September term. Both Rice and Dixon were adjudicated bankrupt on April 28, and May 5, 1927, respectively, and they now invoke sections 11, 63a, and 17, of the Bankruptcy Act (11 USCA §§ 29, 35, 103), contending that the judgments are provable debts and may be discharged, and hence the order enjoining threatened body executions should be continued for twelve months from the date of adjudication, or until their discharge is determined.

The single question is whether the judgments come within the exceptions enumerated in section 17. It is well settled that a judgment ex delicto is a fixed liability, and, if owing at time of filing petition in bankruptcy, a release may be had unless it constitutes a liability "for obtaining property by false pretenses or false representations, or for willful and malicious injuries to the person or property of another." To ascertain the character of the liability merged in the judgment, recourse must be had to the pleadings and findings of fact by the trial court. Plaintiffs maintain that the liability arose out of willful and malicious injuries to the person and property of the bank in whose behalf the judgment was recovered. It is not claimed that the relations of the directors were that of fiduciaries. The action was brought for violation of section 5200 of the U. S. Rev. St., as amended (12 USCA § 84) which, in so far as material, prohibit a banking association from making loans or discounts or investments in excess of 10 per cent. of its capital stock and surplus fund, provides that its total liabilities should not exceed 25 per cent. of the debt in the unimpaired capital stock and surplus, and by section 5239 (12 USCA § 93), the officers and directors of the bank were liable to it for their failure to honestly, intelligently, and carefully administer its affairs.

The gist of the inquiry at the trial was whether the directors of the Geneva National Bank permitted or suffered officers and employees of the bank to make loans in excess of the amount allowed by law, resulting in a loss to the bank, and (quoting from question No. 7 submitted to the jury) "knowing the same to be excessive, or which, by the exercise of reasonable diligence, they could have known to be excessive." This question, and kindred questions, were answered by the jury in the affirmative, and thereafter Judge Hill, who presided at the trial, adopted their answers, and generally and specifically embodied them in his findings of facts. The bill does not aver any willful disregard of the duties and obligations imposed by the statute, but apparently stresses negligent omissions to administer the affairs of the bank by suffering and permitting excessive loans to various persons, in some instances to...