In re Mercedes Import Co.

• Decision Date: 15 December 1908
• Docket Number: 85.
• Citation: 166 F. 427
• Parties: In re MERCEDES IMPORT CO.
• Court: U.S. Court of Appeals — Second Circuit

166 F. 427

In re MERCEDES IMPORT CO.

No. 85.

United States Court of Appeals, Second Circuit.

December 15, 1908

The following is the opinion of Hough, District Judge, to review which the petition was filed:

The language of section 11 of the bankruptcy act (ActJuly 1 1898, c. 541,30 Stat. 549(U.S. Comp. St.1901, p. 3426)) regarding stays after adjudication is permissive, and it seems to me that this is enough to require the court to examine into the equities of any application made under this part of the section in question.The language of the bond given by the Mercedes Company to secure the claim of Smith &amp Mabley clearly requires the entry of a judgment against the Mercedes concern as a condition precedent to recovery against the surety.The motion, then, is made under facts entirely similar in legal effect to those appearing in Re Rosenthal (D.C.)108 F. 368, Hill v. Harding,107 U.S. 671, 2 Sup.Ct. 404, 27 L.Ed. 493, andKlipstein & Co. v. Allen-Miles Co.,136 F. 385, 69 C.C.A. 229.I assume, therefore, that if the Mercedes Company obtains a discharge, and if it also obtains the right to plead that discharge, there can never be a judgment against it, and consequently no judgment against the surety.

Assuming that the Mercedes Company has so conducted itself, and will hereafter so behave, as to entitle it to a discharge, and shall elect to apply for the same; is there any equitable reason why the Smith & Mabley Company should be permitted, by expediting its proceedings, to obtain now what in a few months it may not be able to procure, viz., a judgment?I perceive none of the equitable grounds reviewed and considered in Re Tiffany (D.C.)147 F. 314, and cases there cited.It seems to me, also, that the view taken in Klipstein v. Allen-Miles Co., supra, of section 16 of the act, is correct, and that that section does not, and was not intended to, affect the liability of such a surety as is the one in this matter.The language of Wolf v. Stix,99 U.S. 8, 25 L.Ed. 309, applies.The question, then, is narrowed to this: Is there any reason why a creditor, who may lose all or part of his claim against the principal debtor by the operation of a remedial statute, should be given a larger remedy against that debtor's surety?It seems to me no such reason exists.The Smith & Mabley Company voluntarily received this bond, knowing that it secured no more than the legal liability of the corporation defendant in the action at law.The bond was executed and delivered after the passage of the bankruptcy act.Plaintiffs, therefore, accepted the legal results, whatever they might be, of compliance with that act.One of those results was the possible prevention of any judgment against the defendant, and it results, therefore that plaintiff must wait to ascertain whether its alleged principal debtor belongs to the class of bankrupts immune from judgment or liable thereto.It cannot, however, be permitted that the stay to be granted shall be used otherwise than provided by the bankruptcy act for the benefit of defendant or its surety.

Upon the filing of a stipulation by counsel of record for the Mercedes Company in the state court suit that no motion to dismiss for lack of prosecution or other steps inimical to plaintiff shall be taken pending the year from adjudication, the stay prayed for will be granted.

Kenneson, Emley & Rubino(Thaddeus D. Kenneson, of counsel), for petitioners.

Howard Taylor and John D. Fearhake, for respondent.

Before LACOMBE, COXE, and WARD, Circuit Judges.

WARD Circuit Judge.

In the year 1906 Smith & Mabley, Incorporated, brought suits against the Mercedes Import Company, both in New York and New Jersey taking out an attachment on property of defendant in the latter state.The parties subsequently stipulated that these...