BIRKETT
v.
COLUMBIA BANK

U.S. | 1904-11-28
No. 26
195 U.S. 345 Supreme Court of the United States (1904) Negative Treatment
Also reported at: 49 L. Ed. 231 · 25 S. Ct. 38 · SCDB 1904-031 · 1904 U.S. LEXIS 723
Cited by 43 cases

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Synopsis

In a bankruptcy dispute, the Supreme Court held that a creditor's "actual knowledge" of bankruptcy proceedings under Section 17 of the Bankrupt Law of 1898 means timely knowledge that allows the creditor to participate in the administration of the bankrupt's estate and receive dividends, not merely knowledge gained after the discharge has already been entered. The Court affirmed that a creditor who learned of the bankruptcy proceedings only after the debtor's discharge had been granted did not have the requisite actual knowledge to exclude an undisclosed debt from the discharge, thereby protecting creditors from being deprived of their remedies through the debtor's concealment of assets.

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Opinion of the Court
Mr. Justice McKenna,

Mr. Justice McKenna,

after making the foregoing statement, delivered the opinion of the court.

The judgment was' successively confirmed by the Appellate Division of the Supreme Court and the Court of Appeals. 174 N. Y. 112. Thereupon judgment was entered in the Supreme Court in accordance with the direction of the Court of Appeals. This writ of error was then sued out.

Section 7 of the Bankrupt Law of 1898 devolves a number of duties upon the bankrupt, all directed to the purpose of a full and unreserved exposition of his affairs, property and creditors. Among his duties he is required to “prepare, make oath to, and file in the court, within ten days . . a schedule-of his property, showing the amount and kind of property, the location thereof, its money value in detail, and a list of his creditors, showing their residences, if known, if unknown, that fact to be stated, .the amounts due each of • them, the consideration thereof, the security held by them, if any, and a claim for such exemptions as he may-be entitled to, all in triplicate, one copy of each for the clerk, one for the referee, and one for the trustee. . . .” To the neglect of this duty the law attaches a punitive consequence.

Section 17 provides: “A discharge, in bankruptcy shall release a bankrupt of all of his provable debts, except such as . . . have not been duly scheduled in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy. . .

But plaintiff in error urges that defendant in error did have actual knowledge of the proceedings in bankruptcy, and that Congress contemplated that there might be an intentional or inadvertent omission of the names of creditors from the schedule of debts, and provided against it by other provisions of the law, especially by that which makes it the duty of the referee to give notice to creditors (sec. 38), and by that which imposes the duty on the bankrupt to appear at the meeting of creditors for examination.

The finding of the trial court is that defendant “had no notice or actual knowledge, or other knowledge, of said proceedings in bankruptcy prior to the discharge of the bankrupt therein.” This is made more definite as to time by the Court of Appeals. Defendant in error, upon making an inquiry by • letter November 6, 1899, about Russell & Birkett, was informed that they had gone through bankruptcy, and subsequently,. (November 17), the Northern District was given as the district of the proceedings. The discharge was September 12, 1899. Knowledge, therefore, it is contended, came to defendant in error in time to prove its claim (section 65), and to move to revoke the discharge of the bankrupt (section 15).

It is hence argued that defendant in error must he held to have had “actual knowledge of the proceedings in bankruptcy,” as those words of section 17 must be construed. We do not think so, nor is that construction supported by the other provisions of the law urged by plaintiff in error. Actual knowledge of .the proceedings contemplated by the section is a knowledge in time to avail a creditor of the benefits of the law — in time to give him an equal opportunity with other creditors — not a knowledge that may come so late as to deprive him of participation in the administration of the affairs of the estate or to deprive him of dividends (section 65). -The provisions of the law relied upon by plaintiff in error are for the benefit of creditors, not of the debtor. That, the law should give a creditor remedies against the estate of a bankrupt, notwithstanding the neglect or default of the bankrupt, is natural. The law would be, indeed, defective without them. It would also be defective if it permitted the bankrupt to experiment with it — to so manage and use its provisions as to conceal his estate, deceive or keep his creditors in ignorance of his proceeding without penalty to him. It is easy to see what results such looseness would permit — what preference could be accomplished and covered by it.

Judgment affirmed.

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Citator

Cited By (13 total)

  • Perry Naval Stores Co. v. Caswell, 63 Fla. 552 (Fla. 1912)
    …th other creditors — not a knowledge that may come so late as to deprive him of participation in the administration of the affairs of the estate or to deprive him of his share of the dividends if any are to be declared. See Birkett v. Columbia Bank, 195 U. S. 345, 25 Sup. Ct. Rep. 38. In this case the cashier, who was also director, and other directors of the bank, had actual knowledge of the bankruptcy proceedings in time for the bank to have an equal opportunity with the other creditors. If the knowledge…
  • Kreitlein v. Ferger, 238 U.S. 21 (U.S. 1915)
    …l notice of the bankruptcy proceedings, unless the omission or incorrect statement was fraudulent or intentional. (See the cases under the, former act, collected in Black on Bankruptcy, § 727.) As this court pointed out in Birkett v. Columbia Bank, 195 U. S. 345, the Act of 1898 devolved upon the bankrupt certain duties, “all directed to the purpose of a full and unreserved exposition of his affairs, property and creditors.” Under § 7, he is required to prepare, make oath to, and file in the court, within t…
    1 / 5
  • Hunt v. Pick, 240 F.2d 782 (10th Cir. 1957)
    …s efforts his rights will vanish upon entry and location by another. He cannot ride through upon the efforts and sacrifices of another or others. If the latter earn the title, it is theirs, not his.” And in Patterson v. Hewitt, supra [195 U.S. 309, 25 S.Ct. 38]: “ * * * If appellants had expected a share in this property they should either have brought a bill promptly to enforce their rights, or at least contributed their proportionate share to the subsequent work and labor, and the expenses then incurre…

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