In re McCarthy Portable Elevator Co.

RELLSTAB, District Judge.

The claim in controversy was proved by Joseph P. McKiernan within the year alter adjudication. On its face no one else had any interest in it. In the taking of testimony on objection to such claim, it appeared that Frederick C. Keeney had purchased it before such proof was made. The referee disallowed the claim on the ground that it had not beep proved by the owner, as required by section 57a of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 560 (U. S. Comp. St. 1901, p. 3443). tie summarized the evidence underlying his order as follows:

“The testimony shows that McKiernan had a claim against the bankrupt for the sum mentioned in his proof of claim; that in the month of June, 1907, Frederick O. Keeney paid to him the amount of said claim, and that Mc-Klernan at the same time gave to Keeney a receipt for the amount of said claim, stating that it was for the purchase of said claim; that it was then and there agreed, by and between the said McKiernan and Keeney, that Mc-Kiernan should prove the claim and file it with the referee, and account and pay over to said Keeney whatever he might receive on account thereof as dividends; that in accordance with such understanding between them said McKiernan filed his claim for §1,076 with the trustee. * * * ”

In addition to the foregoing, the testimony discloses that the attorney who acted for McKiernan in the sale of such claim to Keeney sub - sequeutly became the trustee of said estate, and that he prepared the proof of the claim .at the time it was presented to him as trustee. He therefore, as trustee, knew that McKiernan had no pecuniary interest in said claim, and that he in presenting it was acting in the interest of Keeney.

[1] The controversy involves the following provisions of the Bankruptcy Act and the general orders:

Section la, cl. 9;

“ ‘Creditor’ shall include any one who owns a demand or claim provable in bankruptcy, and may include his duly authorized agent, attorney, or proxy.”

Section 57a:

“Proof of claims shall consist of a statement under oath, in writing, signed by a creditor setting- forth the claim, the consideration therefor, and whether’ any, and, if so wbat, securities are held therefor, and whatever any, and, if so what, payments have been made thereon, and that the sum claimed is justly owing from the bankrupt to the creditor.”

Section 57n:

"Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication. * * * ”

General Order 21:

“1. Depositions to prove claims against a bankrupt’s estate * * * when made by an agent, the reason the deposition is not made by the claimant in ;oerson must he stated; * * *

“3. Claims which have been assigned before proof shall be supported by a deposition of the owner at the time of the commencement of proceedings, setting forth the true consideration of the debt. * * *

“5. The execution * * “ of an assignment of claim after proof, may be proved or acknowledged before a referee, or a United States commissioner, or a notary public. * * ” (18 Sup. Ct. vii.)

[2] These provisions contemplate that the claim shall be proved within one year after the adjudication; that it may be assigned before the commencement of the bankruptcy proceedings, or after the claim is proved; that it should be presented in the name of the owner at the' time of making proof; that it should be supported by his oath, or that of his agent, and that when by- the latter the deposition should show the reason why it was not made by the claimant in person; that if assigned after the commencement of such proceedings, and before proof, it should also be supported by the oath of the owner at the time such proceedings were begun, setting forth the true consideration of th.e debt. The proof of claim filed in this case ignored all but one of these requii-ements. Of the real facts surrounding such claim it disclosed only the true consideration of the debt. As Keeney became the owner of this claim after the commencement of the bankruptcy proceedings and before proof was made, it should have been presented in his name and supported either by his deposition or that of his agent. McKiernan, at the time he deposed to such claim, was in fact the agent of Keeney, and his deposition should have disclosed the change in ownership, and the reason why he, and not his principal, made the proof. Not having done so, is it too late to supply the required proof because more than a year has expired since the adjudication? The clause excluding claims not proved within the year applies only to an original filing. It does not prohibit the amending of a claim presented within such period. Hutchinson v. Otis, 190 U. S. 552, 555, 23 Sup. Ct. 778, 47 L. Ed. 1179. Amendments may be made- at any time, if the claim proved presents, in substance, that which the amendment seeks to make .effective. In re Mercur (D. C.) 116 Fed. 655, affirmed s. c., 122 Fed. 384, 58 C. C. A. 472. See, also, In re McCallum & McCallum (D. C.) 127 Fed. 768.

One, if not the main, object of the Bankruptcy Act is to secure equality of distribution 'of the bankrupt’s estate among his creditors. Keppel v. Tiffin Savings Bank, 197 U. S. 356, 361, 25 Sup. Ct. 443, 49 L. Ed. 790; In re J. M. Mertens & Co., 147 Fed. 177, 180, 77 C. C. A. 473; In re Basha & Son, 29 Am. Bankr. Rep. 225, 200 Fed. 951. The clause requiring the proving of claims within the year, while in the nature of a limitation upon the creditors’ rights, is clearly intended to facilitate the liquidation of bankrupts’ estates. To administer such estates, it is needful to know the amount of the claims that are to share the assets, and the year limit for proving such claims is primarily for such purpose. That it operates to exclude claims not proven within such period is but incidental. To refuse recognition of a meritorious claim, though filed within the prescribed year, because not presented by the then owner, is not justified by the language of such clause, and to do so would be to do violence to the spirit and purpose of the enactment. In the present case the claim proved disclosed its true nature and consideration. It having been filed within the year, it gave all the needed information to permit the carrying out of the primary purpose of the year’s limitation. The trustee who prepared the proof of the claim knew that it was owned by the present claimant; and he knew what prompted the making of proof by the assignor, and that in presenting the claim he was acting as the agent for the present claimant. Keeney is but exercising the right of a principal to adopt the act of his agent, and no good reason appears why he should not he permitted to do so.

The order of disallowance oí his claim is reversed and the record remanded, with instruction to permit Keeney to file supplemental proofs, in the nature of an amendment to the proof of claim on file, that a formal compliance with the requirements of proof of claims assigned between the commencement of the bankruptcy proceedings and the making of proof thereof may be had.