In re Blumberg

94 F. 476 | E.D. Tenn. | 1899

CLARK, District Judge.

For the purpose of tbis case, the debt due to the creditors of Paletz may be identified as the “original debt,” and his creditors as the “original creditors,” and the judgment on the replevin bond executed in the attachment suits in order to release the property may be called the “replevin bond judgment” or “replevin bond debt.” In regard to the effect of a discharge in bankruptcy, the language of the bankruptcy act, so far as it affects the matter now under consideration, is:

“A discliarge in bankruptcy shall release a bankrupt from all of his provable debts, except such as (1) are duo as a tax levied by the United States, the state, county, district, or municipality in which he resides; (2) are judgments in actions for frauds, or obtaining property by false-pretenses or false representations, or for willful and malicious injuries to the person or property of another.”

It is not to be doubted that the purpose of this statute is the same as a, similar provision found in the former bankruptcy law, and that the word “fraud” means moral turpitude or intentional wrong, and that a part of the purpose of the statute was to discourage and punish such moral turpitude or intentional wrong. There is, of course, a difference in the phraseology between the former and the present statute; the former law designating the debt as one created by fraud or embezzlement, etc., while, as will be observed, the language of the present act is “judgments in actions for frauds,” etc. Under the former bankruptcy law it was-not, and could not he, doubted that the debt which could not be discharged was one based upon the fraud and the injury resulting from such fraud; the fraud itself being the foundation of the right and of the recovery, if a recovery was had. In my opinion, there is nothing in the present statute to warrant the conclusion that any different meaning is to be attached to the language used. The statute, besides specifying judgments in actions for frauds, also enumerates, in the disjunctive, judgments for willful and malicious injuries to the person or property of another, or for obtaining property by false pretenses or by false representations. The meaning in each one of the cases thus enumerated, and following each oilier, is exactly the same, and means a judgment based on a right or injury growing out of the fraud, false pretenses, false representations, or willful and malicious injuries to the person or property of another. It could not possibly, I think, have any application to a case where the judgment is not based upon the fraud as a ground of recovery, or a willful or malicious injury as a ground for recovery.

Take the case I am now dealing with: The judgment is not one in an action for fraud, and the recovery, in the original attachment: suits, was based upon a bona fide account and an unquestioned debt, having no connection with any fraud, even suggested,in its original creation. The action was one to collect a bona fide debt, and, as an obstruction in the way of collecting such debt, the suit sought to set aside the conveyance or concealment of property. There was not, in these suits, any judgment rendered against any one which represented an injury done by any fraud. The judgment was for a perfectly just debt, and nothing more, and incidentally, in tbe way of collecting that judgment, a sale of the property was set aside as fraudulent; but the judgment was in no wise based upon that fraud, but, as stated, was for, and represented exactly, the original account made with the creditors of Paletz; nor was there, nor could there be, anything connected with the replevin bond judgment which could be called a fraud. That was a statutoty obligation, provided for in an attachment proceeding, by which a money obligation is substituted for property, in specie, in order to release the property to the claimant; and the judgment rendered on that bond was not on account of the fraudulent conveyance, but because the obligors on that bond had distinctly agreed that if the fraudulent sale should be set aside, and the property demanded for the purpose of satisfying the original debt, they would either return the property, pay its value, or pay the original debt. It was not open to the original creditors of Paletz, at any time, to assert that their debt was one in an action for fraud, in which the recovery would represent the injury done by a fraud. Their suit was one based upon a just debt, having its origin back • of any suggestion of fraud, in which there was sought the incidental relief of. setting aside a fraudulent conveyance. Such a fraudulent conveyance itself, under the law of the state, gave nobody a right to a money judgment in the first instance. It simply rendered the sale void, and enabled any creditor against whom it was declared void to have it set aside, just as if it never had been made, and to reach the property and subject it to a debt not created at all by the fraudulent conveyance, but created prior thereto, and to obstruct collection of which the fraudulent conveyance was made. If the fraudulent vendee had disposed of the property, so that a judgment might be rendered against him for the value of the property, such a judgment would be for the property, on the ground that, the fraudulent sale being void, it belonged to his fraudulent vendor, and that his disposition of it was a conversion.

I do not think that I need to elaborate further to make plain my view that, conceding that the creditors now objecting are substituted to the original debt due the creditors of Paletz, with all the rights, including the right to make any objection which the original creditors might have made, it seems -to me quite clear that the objection to the discharge of the petitioner in this case is not well founded. The creditors of Paletz could not come, if their judgments had not been satisfied, and say that they had a judgment in an action for fraud. It would obviously be a complete answer to this to say that their judgment was based upon an account for goods sold and delivered, and that the judgment was based upon this right, and not upon any injury done to them by a fraud, or (if their case had been different) for obtaining any money by false pretense, or for willful or malicious injury to their person or property. The objection to the petitioner’s discharge is not, in my opinion, well taken; and to so hold would be an entire misapplication of the purpose, as well as the very language, ,of the statute, upon any fair construction which must be given to it. Willing as the court is at all times to punish persons íor a contemptible fraud, this must only be done when it is reasonably clear that it is authorized by law.

In regard to the other ground of objection to this discharge, such an objection goes to the effect of the discharge, rather than to the right to such a discharge. It is doubtful, therefore, if I have the right, even by consent, to adjudge this question. It appears that the attachment suit pending at Jasper, Teim., was brought during February, 1898, while the petition for discharge in this case was filed the 16th day of December, 1898. The statute, by clear language, does not affect any right acquired by a proceeding in rem, or partly in rem, at an earlier date than within four months next before filing the petition. So far as creditors of Blumberg may have acquired a lien upon property by attachment levied more than four mouths before the petition was filed, it is not affected by the discharge, and the right to proceed to subject any property validly attached by levy cannot be questioned; and, if the creditors can satisfy their debt in that method, their right to do so is (dear, and is not in the least affected by this proceeding. It is only the debt, with the right to proceed against Blumberg in personam. Hint is discharged. Ordered accordingly.

Since writing the above I find U. S. v. Rob Roy. I Wood, 42, 27 Fed. Cas. 873 (No. 16, 179), and Brown v. Broach, 52 Miss. 536, which seem to settle the question.