Opinion
Decided March 31, 1930.
Bankruptcy — Adjudication cannot be collaterally attacked — Bankrupt's indebtedness to payee of note, Sufficiently scheduled — Co-maker's liability on note not affected by maker's bankruptcy discharge.
1. Bankruptcy adjudication cannot be collaterally attacked, and proceeding to vacate it must be brought in federal court.
2. Where bankrupt's indebtedness to payee of $5,000 note on which partial payment had been made was scheduled as $4,000 on note, indebtedness held sufficiently scheduled to work release of bankrupt by discharge in bankruptcy (Title 11, Section 25, U.S. Code).
3. Maker's discharge in bankruptcy from liability on note held not to affect liability of co-maker (Title 11, Section 34, U.S. Code).
APPEAL: Court of Appeals for Lucas county.
Mr. H.P. Whitney and Mr. Paul H. Shank, for plaintiff.
Mr. Warren L. Smith, for defendants.
The plaintiff, Rebecca Molloy, as guardian of Frances Molloy, an insane person, brought an action to recover on a promissory note of $5,000, dated January 8, 1920.
The defendants, David Molloy and Amanda Molloy, set up in answer that Frances C. Molloy, when sane, had agreed to become a partner with the defendant, David Molloy, and that he should purchase and remodel certain property and open a store business, and this note was executed to her to secure her for any money to be advanced, and that she did not pay the sum of $5,000 to him, but did turn over to him in cash the sum of $2,000, and that thereafter he returned the $2,000 to her. David Molloy also set up in defense that he had been fully discharged in bankruptcy in a proceeding in the District Court of the United States for the Northern District of Ohio, Western Division. The trial resulted in a verdict and judgment in favor of the defendants.
The bill of exceptions is very meager, necessarily so from the fact that the parties were unable to testify. It does, however, contain a stipulation showing that Frances C. Molloy had been adjudged insane prior to the time that David Molloy is claimed to have been adjudged a bankrupt. The stipulation further shows that of the indebtedness listed in the bankruptcy proceedings there was an indebtedness to Frances C. Molloy on a note, the indebtedness being given as the amount of $4,000 and her residence given as No. 43 East Central avenue, and that a proper affidavit was filed showing notice was given by mail to that address.
David Molloy was adjudicated a bankrupt on February 15, 1928, and the record contains a duly certified copy of his discharge in bankruptcy. It is well settled that such adjudication cannot be attacked collaterally, and that, if it is to be vacated and set aside, the proceeding therefor should be brought in the federal court. It is claimed, however, that the adjudication does not amount to a discharge of the promissory note in this case, for the reason that it was not properly scheduled as a debt of the bankrupt. Section 7 of the Bankruptcy Act of 1898, now Title 11, Section 25, U.S. Code, requires the bankrupt to file a list of his creditors, showing their residences and the amount due each of them, together with the consideration thereof and the security held by them, if any, and the creditors so listed receive thereafter the notices required in bankruptcy proceedings. The indebtedness to Frances C. Molloy as scheduled was $4,000 on a promissory note, while the note sued on is for the amount of $5,000. There is, however, evidence in this case to show a payment of $2,000 on the note shortly after it was executed, and, computing interest on the note to the time the bankruptcy proceedings were filed, the amount due would then be approximately $4,000, so that the argument that the $4,000 listed may have been for indebtedness on another note is hardly tenable. In addition to all this, a creditor, being listed as such for any amount, would receive notice of the bankruptcy and that she was listed as a creditor. The case in this respect is similar to Blake v. Alswager, 55 N.D. 776, 215 N.W. 549, 55 A.L.R., 298, 10 A.B.R. (N.S.), 672. In that case, in the course of the opinion, at page 779 [215 N.W. 550, 55 A.L.R., 298, 10 A.B.R. (N.S.), 674], the court uses the following language: "The fact that in his schedule of creditors and liabilities the defendant listed the plaintiff as a creditor and some of her claims as liabilities, but did not list the claims sued upon, does not make them exempt from the bankruptcy proceedings."
We think that the indebtedness was sufficiently scheduled, and that the defendant David Molloy was duly released from the indebtedness by his discharge in bankruptcy.
That discharge, however, would not affect the liability of Amanda Molloy, the co-maker on the promissory note. Section 16 of the Bankruptcy Act of 1898, now Title 11, Section 34, U.S. Code, provides that the liability of a person who is a co-debtor with, or guarantor, or in any manner a surety for a bankrupt, shall not be altered by the discharge of such bankrupt. So far, therefore, as the bankruptcy proceedings are concerned, the defendant Amanda Molloy still remains liable on the obligation.
We have read with care the evidence contained in the bill of exceptions, and, beyond the fact that it contains evidence of a repayment of $2,000 in cash, we find no facts or circumstances sufficient to justify the rendition of a verdict and judgment in favor of the defendant Amanda Molloy. On the contrary, as to her, the verdict is manifestly against the weight of the evidence.
For the reasons given, the judgment will be affirmed as to David Molloy, and reversed and remanded for a new trial as to Amanda Molloy.
Judgment accordingly.
WILLIAMS and LLOYD, JJ., concur.