In re Natow Bros.

• Decision Date: 26 August 1922
• Docket Number: 5444.
• Citation: 283 F. 522
• Parties: In re NATOW BROS. Petition of KELTER et al. Petition of EAGLE FELT WORKS.
• Court: U.S. District Court — Eastern District of Michigan

283 F. 522

In re NATOW BROS. Petition of KELTER et al. Petition of EAGLE FELT WORKS.

No. 5444.

United States District Court, E.D. Michigan, Southern Division.

August 26, 1922

Fred H Aldrich and C. E. Kephart, both of Detroit, Mich., for petitioner.

Henry P. Seaborg, of Detroit, Mich., for bankrupt.

TUTTLE District Judge.

This is a petition by the above-named creditor of the bankrupt praying for an order permitting it to withdraw its claim from the bankruptcy proceedings herein and to bring suit against the bankrupt in a certain state court of Michigan upon said claim. The proof of said claim filed by petitioner stated that the bankrupt was--

'indebted to the said corporation (the petitioner) in the sum of $1,167; that the consideration of said debt is as follows Goods, wares and merchandise, as per statement attached delivered to the bankrupt in reliance upon a financial statement of September 10, 1921, and the same became due on the 14th day of April, 1922, as per statement of said account hereto annexed and made a part hereof.'

The said statement shows charges and credits, leaving a balance due to the petitioner in the aforesaid sum.

The petition in bankruptcy, which was involuntary, was filed April 20, 1922. The schedules filed by the bankrupt April 25, 1922, listed the claim of petitioner in the aforesaid amount. On April 25, 1922, the bankrupt filed an offer of a composition of 20 per cent. cash of the claims of creditors allowed or to be allowed, except those entitled to priority. On May 8, 1922, the said proof of claim of the petitioner was filed, which claim was, on the same day, proved and allowed. On May 9, 1922, the said offer of composition was accepted, at a meeting of creditors, by a majority in number and amount of creditors whose claims had been allowed; the present petitioner, neglecting to vote in favor of such composition, was treated and counted the same as if voting in the negative. After the necessary proceedings had been taken and held, pursuant to the legal provisions applicable to a composition in bankruptcy, including the deposit by the bankrupt of the amount of money required for that purpose, and it appearing to this court that said composition was for the best interests of the creditors, on June 13, 1922, an order was duly made and entered confirming such composition. On the same day an order was entered, directing the distribution of the aforesaid deposit according to the terms of the composition.

On July 20, 1922, the present petition was filed. Petitioner alleges therein that it was induced to ship to the bankrupt the goods upon which its claim is founded, and to extend credit therefor, by a certain false financial statement made and furnished to it by the bankrupt, on which statement petitioner relied, and that from an examination of the statements and books of the bankrupt during the bankruptcy proceedings (after the delivery of said goods) petitioner believes that the said statement was false. It prays, as already stated, that it may be permitted to withdraw its claim filed in the bankruptcy proceedings, and to bring suit thereon against the bankrupt in the circuit court for Wayne county, Mich., for the reasons that said claim is not provable in bankruptcy and is not dischargable in bankruptcy.

The arguments of counsel have taken a somewhat wide range, and it may be helpful to point out what questions are, and what are not, properly before the court at this time.

1. In the first place, it seems too plain for discussion that it is not within either the power or the province of this court to authorize or to 'permit' the petitioner to bring suit against the bankrupt in the 'circuit court for the county of Wayne, Mich.,' as prayed, or in any other court. This court has not enjoined petitioner from bringing such a suit in any such court on this, or on any other, claim. This petition, therefore is not, and cannot be treated as, an application to dissolve an outstanding injunction of this court. Upon what basis or on what theory such an order could be issued, or, if issued, would be of any legal force or effect, it is difficult to understand.

2. Under section 63a (4), Bankruptcy Act (Comp. St. Sec. 9647) a debt founded 'upon a contract express or implied' is provable in bankruptcy. The language quoted includes a liability which may give rise to a right of action ex contractu, and a tort which, as here, has enriched the wrongdoer, may be waived by the victim, with a resultant cause of action in the latter to sue on the contract implied from such tort. Therefore a liability arising from such a tort is a provable debt within the meaning of the Bankruptcy Act. Crawford v. Burke, 195 U.S. 176, 25 Sup.Ct. 9, 49 L.Ed. 147; Tindle v. Birkett, 205 U.S. 183, 27 Sup.Ct. 493, 51 L.Ed. 762; Friend v. Talcott, 228 U.S. 27, 33 Sup.Ct. 505, 57 L.Ed. 718. Petitioner, therefore, is not entitled to any relief upon the ground that its claim is not based on a provable debt. Moreover,...