In re Palmer

18 F. Cas. 1014 | U.S. Circuit Court for the District of Eastern Virginia | 1876

WAITE, Circuit Justice.

No discharge can be granted under section 29 of the bankrupt act, “if he (the bankrupt), or any person in his behalf, has procured the assent of any creditor to a discharge, or influenced the action of any creditor, at any stage of the proceedings, by any pecuniary consideration or obligation.” In this case the assets of the bankrupt were not equal • to thirty per centum of the claims against his estate, upon which he was liable as principal debtor. In order to obtain his discharge it became necessary for him to procure the assent of one-fourth of his creditors in number and one-third in value. 18 Stat. 180.

The case shows that the debts proved amounted to one thousand two hundred and sixty-four dollars and ninety-three cents, and that the creditors were five in number. On the 3d of February, 1876, the bankrupt procured the required assent of two of his creditors having claims to the amount of five hundred and seventy-five dollars. He had then all that was necessary in number and value of creditors to entitle him to a discharge, notwithstanding the deficiency of assets. Before asking a hearing upon his petition for discharge,- however, on the 7th day of February, he made application to another creditor, having a claim of eighty-two dollars and thirty-four cents, for his assent, and, in order to procure it, executed to him a note for forty dollars, with an in-dorser as security. On the 9th of February, he went to a hearing upon his petition for discharge, presenting a paper signed by three creditors assenting thereto. It was objected that the assent of one of the creditors had been procured for a pecuniary consideration or obligation. The court overruled the objection, and granted the discharge, upon the ground that the assent of the creditor to whom the compensation was paid or obligation given was unnecessary, as a sufficient number of creditors had already signed. The judge, in delivering his opinion, remarked that “the bankrupt having already become entitled to his discharge an opposing creditor should not be allowed to defeat it by exacting or accepting a new promise for his claim.”

The testimony shows clearly that the'bankrupt made application to the creditor for Ills assent. This application was at first refused. but finally granted upon the execution of the note. There was no fraud or concealment on the part of the creditor. The bankrupt was desirous to obtain his signature. and for that purpose was willing to assume the required obligation. The right of a bankrupt to his discharge depends entirely upon the statute. He can only demand it when he has complied with all the conditions prescribed. The courts are as- much bound by the provisions of the act as the bankrupt himself. If it appears in the regular course of proceedings that an applicant for a discharge has failed in any particular to perform his duty as a bankrupt, the application must be refused. His discharge is not forfeited, for he never had it. His position is that of one who is unable to bring himself within the provisions of an act granting discharge from debts upon certain conditions. Here it is unquestionable that a pecuniary obligation was incurred to obtain the assent of one creditor, before any attempt was made to use the assents which had before been given. It is not the necessity for the act which makes it a fraud upon the law, but the act itself. Perfect equality among creditors is the fundamental principle upon which the bankrupt law proceeds; anything which defeats that is a fraud upon the law. The obligation incurred to the one creditor, as the price of his assent, is as much a fraud upon those who had before signed the certificate of assent as upon those who had not. The act of preference placed the bankrupt outside the statute, and made it the duty of the court to withhold the discharge. The court is not to inquire whether the act complained of has been productive of harm, but whether it has been done. If done, one of the conditions precedent to the discharge has not been performed, and the case is not brought within the statute.

The order of the district court granting the discharge in this ease is reversed, and the cause remanded, with instructions to refuse a discharge upon the showing made.

The following was the decree; “This cause came on this day to be heard upon the petition of M. II. Rogers and- Rogers, partners, under the style of Rogers & Co., for a review of the order of the district court, entered on the 10th February, 1870, granting the bankrupt a discharge, and was argued by counsel, upon consideration whereof, it being the opinion of the court, for reasons set forth in a note in writing, filed with the papers in the cause, and ordered to be made a part of the record, that the bankrupt is not entitled to be discharged upon the showing made, the court doth adjudge, order, and decree that the order of the district court granting the discharge in this case be reversed, and the cause remanded, with instructions to refuse a discharge (upon the showing made), and that the petitioners recover of E. V. Palmer their costs by them about their petition in this behalf expended.”