In re Skidmore, 4484.

• Decision Date: 25 August 1939
• Docket Number: No. 4484.,4484.
• Citation: 29 F. Supp. 293
• Parties: In re SKIDMORE.
• Court: U.S. District Court — Middle District of Alabama

29 F. Supp. 293

In re SKIDMORE.

No. 4484.

District Court, N. D. Alabama, Middle Division.

August 25, 1939.

M. F. Lusk, of Guntersville, Ala., for trustee.

Claude D. Scruggs, of Guntersville, Ala., for plaintiffs.

William D. Denson, of Birmingham, Ala., for petitioner.

MURPHREE, District Judge.

This matter comes before the court on a review of (1) certain orders of the Referee entered on July 12, 1939, authorizing Lydia Nation Shed and others to proceed in the Circuit Court of Marshall County, Alabama, to enforce their rights by virtue of attachments levied in aid of pending suits, and (2) of certain orders denying the trustee's motions to disallow certain amended claims of said parties. By stipulation of the parties all of such matters have been consolidated in one petition of review and certificate of the Referee.

At the time the voluntary petition in bankruptcy was filed on November 25, 1938, in this cause, five parties plaintiff had pending in the Circuit Court of Marshall County, Alabama, five separate suits for damages against the bankrupt. Said suits were aided by attachments levied on four acres of land which appear in all respects regular and under Section 6196 of the Code of Alabama created liens on the four acres of land of the bankrupt, which liens have existed since September, 1933.

After a discharge in bankruptcy was granted, said plaintiffs filed one day prior to the expiration of six months' period for filing claims, (1) their separate petitions in the Bankruptcy Court for leave to proceed with said suits in the State Court for the enforcement of their liens and the liquidation of their claims, and (2) their separate "affidavits" or "notices of claim" containing the following words, to-wit:

"* * * said deponent files this notice of claim for the sole purpose of protecting any rights said deponent may have in the property of said bankrupt now in the possession of this Honorable Court, and because of the fact that said H. M. Skidmore has scheduled the undersigned as a creditor of the bankrupt estate.

"At Blountsville, in said District of Alabama, on the 22 day of May, 1939, came G. M. Alldredge, who sues as Administrator of the Estate of Eva Alldredge, deceased, of Blountsville, in the County of Blount, in said District of Alabama, and made oath, and says that H. M. Skidmore, the person by whom a petition of adjudication of bankruptcy has been filed, was at and before the filing of said petition and still is, justly and truly indebted to said deponent in the sum of One Hundred Thousand Dollars, ($100,000.00); that the indebtedness arose as follows: * * *"

It is presumed that it was their intent to file "Proofs of Claim" for some purpose in compliance with Section 57a of the Chandler Act of 1938, 11 U.S.C.A. § 93(a). The Referee duly allowed certain objectionable averments of the same to be stricken by amendment.

At the time said "petitions for leave to proceed" and purported "proofs of claim" were filed, the Trustee had taken possession of the sum of $2,249.23 in money and the said four acres of land, and there were several other unsecured creditors of the bankrupt estate whose claims had been duly proven and allowed. It further appears, though not stated, that the estate could be distributed and closed were it not for the disposition of the litigation of the five suits in the state court, which have up to this time existed for some five years, and just how much time in the future will be taken cannot be estimated closely.

The Trustee filed written objections to the allowance of either the petitions for leave to proceed or the "Proofs of Claim".

Briefly summarized, his contention is that the defense of the suits in the State Court would unduly delay the administration of the bankruptcy estate and that said plaintiffs should be required to prosecute their claims before the bankruptcy court or, at least, that the referee should set or direct a limited time for the liquidation of them.

The Trustee contends that as to the purported "Proofs of Claim" filed by said parties plaintiff with their said petitions that they are really not in form claims, that they do not comply with the provisions of the bankruptcy law, that they are barred by six months' limitation under Section 57n, 11 U.S.C.A. § 93(n) or that the Referee should not have allowed amendments to them.

The Referee's certificate of review states the questions raised as follows:

(1) Does this court have jurisdiction to entertain a plenary action to determine the validity of an attachment lien levied more than four months prior to bankruptcy proceedings?

(2) Did this court commit error in allowing the filing of the amendment to said claims and in allowing said claims to be filed as amended?

Regardless of whether these are all of the questions naturally arising from the application of the Bankruptcy Act to the above statement of facts, it would seem that both questions should be answered in the negative.

The attachment liens being regular on their face and having existed for a long time prior to four months of bankruptcy, the bankruptcy court was without jurisdiction other than to examine into their prima facie existence and validity, to pass upon the question of allowing the claimants to proceed in the State Court, and to direct the Trustee to prosecute or defend the suits involving the liens in a proper forum, if he so determines. Section 23 of the Chandler Act, 11 U.S.C.A. § 46. Section 67a of the Chandler Act, 11 U.S. C.A. § 107(a). Straton v. New, 283 U.S. 318, 51 S.Ct. 465, 75 L.Ed. 1060. In re Cherokee Pub. Service Co., D.C., 20 F. Supp. 195, affirmed 8 Cir., 94 F.2d 536.

The right to amend, after the bar time, claims properly filed within the limitation period is well established. Amendments must be germane to the claim and facts filed originally and must not be a complete departure or set up entirely new claims, and the matter is largely discretionary. Cook v. Union Trust Co., 4 Cir., 71 F.2d 645; 8 Corpus Juris Secundum, Bankruptcy, p. 1297, § 433; In re Soltmann, D.C., 238 F. 241; In re Whicker, 5 Cir., 47 F.2d 106; U. S. Code Annotated Title 11, § 93(a) notes 19 and 20.

Prior to the enactment of the Chandler Act unliquidated claims for negligence not reduced to judgment were not provable in bankruptcy. Subdivision 6½ of Section 63a of the Bankruptcy Act of 1898 was enacted June 7, 1934, 11 U.S.C.A. § 103(a) (6½), adding the words — "as evidenced by a judgment of a court of competent jurisdiction, in any action for negligence instituted prior to adjudication of defendant in such action in bankruptcy and pending at the time of the filing of petition in bankruptcy, whether voluntary or involuntary."

The present Chandler Bankruptcy Act has eliminated the requirement that "damages" be liquidated by judgment before becoming provable, providing as follows: "The right to recover damages in any action for negligence instituted prior to and pending at the time of the filing of the petition in bankruptcy." Section 63a, Subdivision (7), 11 U.S.C.A. § 103(a) (7).

Therefore, ...