Oliver C. Latimer, Respondent, v. Frank H. McKinnon and Walter R. Burrows, Appellants

Oliver C. Latimer, Respondent, v. Frank H. McKinnon and Walter R. Burrows, Appellants. Supplemental answer setting up a discharge in bankruptcy—not authorized where an agreement has been made by a third.person to pay the amount of any judgment entered. ' ' The plaintiff in an action having obtained judgment by default, the defendants' attorney, in consideration of the opening of the default, agreed “in case the plaintiff recover judgment against the defendants in this action, and the judgment so recovered shall be affirmed, if appealed from, and execution returned against the defendants unsatisfied, to pay the amount of said judgment or that part unpaid . by the defendants." A judgment subsequently rendered was reversed by the Court of Appeals and a new trial granted, pending which the defendants were discharged in bankruptcy. Held, that the court might properly refuse to allow the defendants to serve a supplemental answer setting up the discharge in bankruptcy, as, if the appiica ■ tion were granted, it would be possible for the defendants to prevent the entry of any judgment against them, and thus defeat the plaintiff’s right of action upon the agreement made with the defendants’ attorney; That, under the circumstances, the defendants should be relegated to their right to procure a perpetual stay upon any judgment rendered against them or to apply, under section 1268 of the Code of Civil Procedure, for a cancellation of ' such judgment. Appeal by the defendants, Frank H. McKinnon and another from an order of the Supreme Court, made at the Broome Special Term and entered in the office of the clerk of the county of Chenango on the 30th day of November, 1901, denying the defendants’ motion for leave to serve a supplemental answer alleging their discharge in' bankruptcy obtained since the action was commenced. In 1894 the defendants suffered default and a judgment in favor of plaintiff was directed. On an application to open the default, and in consideration of the consent of plaintiff’s attorney thereto. James R. Baumes, defendants’ attorney of record, executed and delivered to plaintiff a writing which thus reads : “SUPREME COURT. “ Oliver C. Latimer against Frank H. McKinnon and Walter R. Burrows. “For and in consideration of the consent of plaintiff’s attorney to open the default taken by the plaintiff herein on the 14th day of September, 1894. and upon which judgment was ordered in favor of the plaintiff for $2,002.69, damages and costs of the action, I hereby agree that in case the plaintiff recover judgment against the defendants in this action, and the judgment so recovered shall be affirmed, if appealed from, and execution returned against the defendants unsatisfied, to pay the amount of said judgment or that part unpaid by the defendants. It is fully understood that this agreement shall not make the said subscriber liable until the defendants have had full opportunity to appeal from any judgment that may be recovered against them, and only for the sum found due after said appeal or appeals are taken and decided; and this is intended to secure any sum that the plaintiff may recover finally' in this action. “ Dated, September 17th, 1894.. “JAMES R. BAUMES, “Defendants' Attorney, “ Sidney, N. Y.” A judgment was subsequently rendered, which was reversed by the Court of Appeals, and a new trial was granted. Pending the new trial, and on June 10, 1901, the defendants were discharged in bankruptcy from all provable claims, and they now seek to make such discharge a part of their answer. James R. Ba/umes and William U. Johnson, for the appellants. Wordsworth B. Matterson, for the respondent. [MAJORITY — Kellogg, J.;] Kellogg, J.; Except for the written agreement made by James R. Baumes to pay any final judgment rendered against the defendants in this action, or so much of such judgment as remains unpaid after execution shall be returned, I think leave to serve a supplemental answer making the discharge in bankruptcy a defense should be granted. The claim belongs to that class which the Bankruptcy Law declares provable, and, hence, is barred by a discharge. The claim is upon a promissory note. The defendants have. by answer set up matter in defense, and the bankruptcy court on that account has treated it as “ unliquidated ” and directed that it be liquidated in this action. This is only a means, taken to determine how much, if anything, is owing by the bankrupts on the note, how much the trustee in bankruptcy shall allow in distribution of the assets. The case I think is a proper one for'the exercise of judicial discretion. (Holyoke v. Adams, 59 N. Y. 233.) The situation seems to be this: If the ¡application were granted it would be possible for defendants to prevent the entry of any judgment against them, and by so doing defeat such right of action as the plaintiff may have against Baumes on the written agreement. That writing contemplates a judgment and execution to be issued thereon and a right of . action for the uncollected amount. Until the return of execution the right to sue is suspended. On the other hand, if the application is denied, the defendants may, through the well-recognized equity practice, procure a perpetual stay upon any judgment rendered, a practice wherein the interest of all parties in such a stay will be considered. (McDonald v. Davis, 105 N. Y. 508 ; West Philadelphia Bank v. Gerry, 106 id. 467 ; Monroe v. Upton, 50 id. 593.) Or the defendants may apply under section 1268 of the Code of Civil Procedure for a cancellation of the judgment. That section provides that “ at any time after one year has elapsed since a bankrupt was discharged from his debts * * * he may apply upon proof of his discharge to the court in which a judgment was rendered against him * * * for an order directing the judgment to be cancelled and discharged of record. If it appears upon the hearing that he has been discharged from the payment of that judgment or the debt upon which such judgment was recovered, an order must be made directing said judgment be cancelled and discharged of record.” In any case it would seem that the defendants are provided with a remedy sufficient for their personal protection aside from the remedy here sought, namely, leave to amend their answer setting up the discharge, and in compelling defendants to resort to such other remedy, the rights of - plaintiff may be saved. The defendants received a- benefit through the making of the agreement, and they ought not to be aided unreasonably in any effort to make the contract nugatory as between plaintiff and Baumes. The order should be affirmed, with ten dollars costs and disbursements. All concurred. ■ Order affirmed, with ten dollars and disbursements.