Hoff v. Funkenstein

Department No. 2, Myrick, J.: This is an action on two promissory notes for $1,000 each, and for $200 loaned, each item being stated in a separate count. The notes are dated respectively April 1st, 1870, and June 22nd, 1870, payable on demand. September 20th, 1870, defendants filed their petition in bankruptcy in due form in the United States District Court, District of California, and were adjudged bankrupts about October 1st, 1870. On October 3rd, 1870, plaintiff made proof of his said debt and claim against the estate of defendants. March 31st, 1871, defendants applied to the United States District Court for final discharge as bankrupts. January 17th, 1873, the discharge was refused. June 27th, 1876, plaintiff commenced this action. Defendants demurred on the sole ground of the Statute of Limitations. The demurrer was sustained, and the plaintiff failing to amend, judgment went for defendants. Plaintiff appealed.

The sole question is, whether the time from October 1st, 1870, the date of the adjudication, to January 17th, 1873, the date of the refusal to discharge, is to be excluded in applying the Statute of Limitations ?

[235]Section 356, Code of Civil Procedure, is as follows: “ When the commencement of an action is stayed by an injunction or statutory prohibition, the time of the continuance of the injunction or prohibition is not part of the time limited for the commencement of the action.”

Chapter 5, § 5106, U. S. Revised Statutes, (title LXI, Bankruptcy) provides that “ no creditor proving his debt or claim shall be allowed to maintain any suit at law or in equity therefor against the bankrupt, but shall be deemed to have waived all right of action and suit against the bankrupt; and all pro ceedings commenced, or unsatisfied judgments already obtained therein, shall be deemed to be discharged and surrendered thereby; and no creditor whose debt is provable shall be allowed to prosecute to final judgment any suit,” etc.

It is claimed by defendants that it was the duty of plaintiff, if he wished to avoid the running of the Statute of Limitations, to have commenced his suit, and let the defendants, if they wished, plead the bankruptcy proceedings; that he should have applied to the United States Court for leave to proceed to judgment, if necessary to ascertain the amount due; and, having omitted so to do, he cannot have any benefit from the pendency of those proceedings.

Section 5106, as above, provides that “ no creditor proving his debt or claim shall be allowed to maintain any suit,” etc. Is not the commencement of a suit a part of the maintaining of it? “ Shall be deemed to have waived all Tight of action and suit against the bankrupt.” What right had he, then, to commence an action ? It is no answer to say that he might have applied to the United States District Court for leave. He might have applied, and that Court, in the exercise of its proper powers, might have denied the application. The theory of our Statute of Limitations is, that a creditor has four years, (or other time, as the case may be) on any day of which he may, of his own volition, commence an action.