In re Hawk, No. 21

No. 21 | 8th Cir. | Apr 14, 1902

SANBORN, Circuit Judge.

William J. Hawk was adjudged a bankrupt on June 21, 1899. On October 5, 1899, he received his discharge in bankruptcy. His estate produced no assets that were not exempt from execution, and there were no dividends to his creditors. He owed the Van Dusen-Harrington Company, a corporation, upon his promissory notes, $2,320.12 and interest from some date in the year 1896. He did not include this creditor or these notes in his schedule of liabilities, and this creditor was not aware of the proceedings in bankruptcy until some time hi the month of August, 1900. During the month of June in that year Van Dusen, Harrington & Co. became indebted to Hawk through business transactions conducted in that month in the sum of $1,-944.77. On August 11, 1900, upon the application of the bankrupt, showing that he had forgotten to include the claim of Van Dusen-Harrington Company against him in his schedule, and without any notice to that creditor, the court made an order that he be permitted to amend his schedule by inserting the name of the Van Dusen-Harrington Company as one of his creditors, with a proper description of the nature and consideration of his debt to it, and directed that the discharge in bankruptcy be set aside, and the case be referred to the referee. On October io, 1900, after hearing the creditor and the bankrupt, a new order was made to the effect that the order of August xi, 1900, he vacated and set aside, and that the discharge in bankruptcy of October 5, 1899, be reinstated. The bankrupt presents these facts and proceedings by petition for review, and alleges that the order of October 10, 1900, was illegally issued.

The court below granted the order of October 10, 1900, on the ground that it had no jurisdiction to make the original order' of August nth, because the term of the district court at which the bankrupt was discharged had expired in the preceding May. It is unnecessary to determine in this case, and we do not decide, whether or not the terms of the United States district court arc the terms of the courts of bankruptcy established by the bankruptcy law of 1898, so that the ordinary rule at law and in equity that the court has 110 jurisdiction to vacate or modify its judgments in matters of substance after the expiration of the term is applicable. Whether the judgment of discharge was subject to this rule or not, the order of August xi, 1900, was clearly void upon another ground. The adjudication in bankruptcy was made on June 21, 1899. Section 5711 provides that “claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication.” The year within which the claim of the Van Dusen-Harrington Company against the estate of this bankrupt could be proved had expired on June 21, 1900. It had become indebted to the bankrupt, Hawk, in the sum of $1,944.77, against which it had the legal and moral right to offset its claim upon the promissory notes of Hawk. The order of August nth avoiding the discharge of the bankrupt, and permitting him to insert in his schedule of debts this claim of Van Dusen-Harrington Company, would, if effectual, deprive this creditor of $1,944.77 without notice or hearing. It would, in the ordinary course of proceedings, result in the discharge of the bankrupt from liability on his promissory notes held by this creditor, while it would- leave the creditor liable to the bankrupt for the debt of $1,944.77 which it owed him. The court below had no jurisdiction to make such an order without notice to the creditor, because its effect would be to deprive the creditor of a valuable right of property without due process of law (In re Rosser, 101 Fed. 562, 567, 41 C. C. A. 497, 502), and because the time within which a claim against the estate of the bankrupt could be proved had expired under section 57n of the bankrupt law.

There was no error in the order of October 10, 1900, which vacated and set aside the order of August 11, 1900, and it is approved and confirmed.