Bibb Mfg. Co. v. Pope

AUGUSTUS N. HAND, District Judge.

The plaintiff moves for judgment on the pleadings. The defendant is a guarantor under an agreement to make various payments by monthly installments of sums of money in discharge of a judgment recovered by the plaintiff herein against C. H. Pope & Go., Inc. These payments were met up to May 15, 1923, when the first default occurred. Similar monthly defaults occurred up to December 24, 1923, when the defendant filed his voluntary petition in bankruptcy. He thereafter filed a petition for a discharge. On October 16, 1923, an involuntary petition in bankruptcy was, filed against C. H. Pope & Co., Inc., and it was thereafter adjudicated a bankrupt but has received no discharge. At the time the defendant filed his petition in bankruptcy there were installments aggregating $14,000, due and unpaid by C. H. Pope & Co., Inc., under its agreement, and $43,000 thereafter to become due.

On December 32, 1923, the defendant herein executed a so-called confession of judgment for $57,000, reciting the $14,000 then due and the $43,000 thereafter to become due. By the terms of the agreement of guaranty with the defendant herein the Bibb Manufacturing Company was to be at liberty to take such proceedings as it might be advised to collect its original judgment against C. H. Pope & Co., Inc., in full, in case the latter should fail to pay any of the installments, or a trustee in bankruptcy should be appointed either of C. TI. Pope & Go., Inc., or of C. II. Pope.

It is entirely clear that there is no proof of an election on the part of the Bibb Manufacturing Company that unpaid installments should be due. There is, therefore, the not uncommon case of a claim against a guarantor who has guaranteed the payment of installments payable after the petition was filed, whereupon he was adjudged a bankrupt. Installments due and unpaid by his principal before the petition was filed are provable claims against a guarantor or surety, and those falling due thereafter are contingent liabilities, unaffected by a discharge. In re Merrill & Baker (C. C. A.) 186 F. 312.

The confession of judgment in no way altered the situation in regard to the installments falling due after C. H. Pope filed his petition in “bankruptcy. Section 545 of the New York Civil Practice Act, which provides that execution can only be issued upon a judgment like the one confessed as the installments become due shows its contingent nature. Such a judgment does not, in my opinion, create an indebtedness presently owing but is as contingent a liability as was the guaranty to meet the unpaid installments for which the judgment was entered. See Moore v. Douglas (C. C. A.) 230 F. at page 402.

The'stay, affecting this action is vacated, and the motion for judgment and execution as to the amount of the installments due and unpaid since December 24, 1923, is granted.