Case Name: IN RE MORITZ AUGENSTEIN, VOLUNTARY BANKRUPT
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1875-09
Citations: 2 MacArth. 322
Docket Number: No. 210
Parties: IN RE MORITZ AUGENSTEIN, VOLUNTARY BANKRUPT.
Judges: 
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 9
Pages: 322–327

Head Matter:
IN RE MORITZ AUGENSTEIN, VOLUNTARY BANKRUPT.
Bankruptcy. —
No. 210.
I. A bankrupt discharge will be set aside and annulled for fraud in obtaining it.
II. It is irregular to set aside a decree or final determination without an application or showing of some kind, and upon due notice to the parties to be affected thereby.
STATEMENT OE THE CASE.
Moritz Augenstein filed his petition as a voluntary bankrupt on the 5th day of September, 1872. He was subsequently adjudged a bankrupt, an assignee appointed, and on the 26th day of November he received his discharge.
In May, 1874, Philip Montegriffo, a judgment creditor of the bankrupt, filed a petition to set aside the discharge as having been obtained by fraud on the part of Augenstein, the grounds of fraud being fully set forth in the petition. The bankrupt filed an answer, denying generally all fraud in relation to his property, and to this there was a replication. On the 19th day of October, 1874, it was ordered by the court that the issues raised by the petition of Montegriffo should be referred to the register, to take such testimony therein as either party should produce. A summary of the evidence is as follows: Theresa Augenstein testified that she is the wife of the bankrupt,* that he owed her from $2,500 to4>3,000 in borrowed money; cannot tell how long he had owed it, or at what times and in what amounts he had borrowed it. Being asked where she got the money from, she refused to answer. This question was certified by the register into court, and on the 10th of December, 1874, it was ruled by Justice Humphreys that the witness should not answer said question. It was further ruled that the bankrupt, who had also been summoned by the petitioner, should not be required to answer any question tending to prove his own fraud or criminality.
George Steurnagel testified that, in 1872, Augenstein offered some of these instruments (saccharometers) for from forty to-sixty dollars each. Witness understood that they belonged to Augenstein; he offered to sell them to witness on two occasions.
W. W, Kirby testified that, in June, 1872, Augenstein had certain instruments called saccharometers at his store in Washington City. Witness went to the store and saw them; himself; there were a great many of them. Augenstein said they were his, and wanted to sell witness some of them; he said he had sold some of them to the Government. He talked to me as if they were absolutely his own property.
Anna Montegriffo testified that she is the wife of petitioner j that petitioner has resided in Cincinnati from 1866 to date. Witness acted as her husband’s agent in bringing the attachment suit against these saccharometers; she learned that Augenstein had a contract with the Government to furnish saccharometers, and came on to Washington in 1872 to collect the judgment against him. Witness discovered from officials-in the Treasury Department that Augenstein had been paid about seven thousand dollars two or three days before her arrival. She then attached the saccharometers in question. Augenstein said to witness at that time: u These machines are mine, but I will fix it so that you will not get anything of them.” Witness did not, nor did her husband to her knowledge, receive any notice of said bankruptcy proceedings until June or July, 1871. Witness has known Theresa Augestein since 1865; she (Theresa) has been poor ever since witness has known her; she never had any money except what her husband gave her. • At one time, when she was sick, she borrowed fifty dollars from witness’ brother-in. law to pay rent, and has never repaid it. Mauritz Augenstein’s name is engraved on each of those saccharometers.
Phillip Montegriffo, the petitioner, testified that he resides; in Cincinnati, where he has constantly lived since 1865, Never received any notice from Augenstein about bankruptcy j knew nothing of it until about a year ago, when witness’s brother wrote him in regard to it. On cross-examination, witness said that he had never been in New York since 1865; that his wife, during the period from 1865 to date, has re sided part of the time in Cincinnati and part in Newark, according to witness’s knowledge. The petitioner also introduced a certified copy of Treasury draft No. 3468, for $7,500, payable to the order of Moritz Augenstein, and paid to him on the 8th day of July, 1872. Also, a private act of Congress, approved J une 8, 1872, appropriating $7,500 to the relief of Moritz Augenstein. Also, a certified copy of an assignment by Augenstein of letters-patent for said saccharometers to himself and three others, each being assignee of one-fourth interest therein.
The bankrupt offered no evidence, and the cause was set for hearing, by order of the court, for the ISth day of May, 1875. The cause was heard at length on said day, and was argued by counsel for petitioner and respondent. Whereupon Mr. Justice Humphreys passed a decree, finding that the said discharge was fraudulently obtained, annulling the same, and referring the cause to the register, “ with instructions to proceed therein according to the provisions of the bankrupt act.” <
The register proceeded, under this decree, to take testimony, offered by the bankrupt, upon the issues which had been passed upon by the decree setting aside the discharge. This was excepted to by the counsel for Montegriffo, and the objection wras certified to the court, and without any additional evidence than that already mentioned, and without notice to such counsel, the court passed an order vacating and setting aside the order of May 18,1875, which annulled the discharge, and which, in effect, re-instated said discharge in full force. The cause is now here on appeal from this order.
R. Ross Perry, for petitioner, contended:
1st. That the matters alleged as facts in the petition, and relied on as grounds- for the annulling of the discharge, have been satisfactorily established by the evidence adduced by the petitioners.
2d. That these facts so established are such as invalidate and annul said discharge, according to the letter and intent of the bankrupt law.
Chester for bankrupt.

Opinion:
Mr. Justice MacArthur
delivered the opinion of the court:
Upon reviewing the testimony in this case, the court are entirely satisfied with the decree annulling the bankrupt's discharge. The fraud of the bankrupt in relation to his property is too clear for doubt or discussion.' He is shown to have possessed considerable property, of which he gives no rational account, no assets came to the hands of the assignee, and his wife, when interrogated as to how she came to have a large sum of money, refused to give any explanation. The traces of fraud are apparent upon the slightest examination of the evidence, and little or nothing need be said upon the subject.
Aside, however, from the order annulling the discharge being unexceptionable, there is no ground shown for sotting it aside. An objection to taking certain testimony had been certified to the court by the register for decision. That was the matter before the court. There had been no application for a rehearing or to set the decree aside for any cause. It was therefore irregular to vacate it. That decree had been made upon pleadings and proofs, and the case had been argued and determined. We know of no practice that would justify the court in setting aside a decree passed in this way without a showing of some kind, and upon due notice to the parties affected thereby. The order vacating the decree annulling the discharge must be reversed.
Mr. Justice Humphreys
delivered the following separate opinion:
I think there should be a change in both orders and decrees.
The decree setting aside the discharge was too harsh and severe, and was not authorized by the state of the proofs. The decree re-establishing the certificate of discharge may have been too hastily signed; surely the decree annulling the discharge was.
There had been a discharge after the ordinary proceedings in bankruptcy. This was a decree binding upon the world until set aside for some of the causes pointed out by the bank rupt act. The cause alleged was fraud. It is a serious consideration whether any cause which might have been urged against an original discharge can be set up to annul one which has been granted. I do not think these questions were fully considered by the justice who passed upon the decrees which are now the subject of review. The present appellate decree, reversing the last unqualifiedly, of course sets up the former, and precludes any further investigation. The only thing gained by the creditor is that, in a suit at law or equity against the debtor, the creditor is not estopped by the planning and production of the certificate of discharge. This action here leaves no estate to be administered in bankruptcy. Nothing is settled in favor of the creditor, save a .naked claim against a bankrupt creditor without any assets. This decree does not establish the right of an assignee to the property in dispute; it only confirms the decree annulling the discharge, and leaves creditor and debtor to contend at law, and the creditor to seek the claimant also at law. The proper course would be to modify the two decrees, by reversing and holding for naught the last and suspending the decree annulling the discharge, and also suspending the certificate of discharge until the question was determined between the assignee and the claimant. The bankrupt act proceeds upon the theory, and expressly provides, that the debtor must settle fairly, though he pays nothing. The act has no sympathy with any manner of action except fair dealing • neither has the common law. A decree of discharge is of as much force as any other judgment, and is made by the act an absolute bar to any suit, except such causes as are specified in the act, and the same court that granted it can alone set it aside, and that on specified grounds. The alleged creditor in this suit has his suit at law against the property of the debtor, which suit is undetermined. This decree is premature, or, rather, the decree which the determination here sets up and establishes is premature. The creditor cannot go into both courts. If he had a judgment, he could rest upon that. The property in dispute must go to the assignee or to the creditor by virtue of a lien. The withholding the property levied upon by the attachment from the schedule of the debtor is one of the alleged causes of setting aside the discharge. In this case the debtor alleges that the supposed creditor is a fraud ; that he has no claim against him which he of right can prosecute; that the subject-matter of the alleged claim is still in controversy in the courts of the State of New York.
There are no witnesses to the fact of notice or no notice, as far as that question can enter into this controversy, except the alleged creditor and debtor. Where the oath of the plaintiff, or actor, and the defendant, or the respondent, are opposed, and the circumstances growing out of the evidence leave the matter in equipoise, the respondent's statement is to prevail. But the fact of the notice can have no effect, unless it could be shown that there was a fraudulent omission by the debtor.
The gravamen of the charge in this case is the withholding the saccharometers from assignee. There is a claimant to these. A suit of replevin is now pending. The issue has not beeu tried. If the claimant should get a verdict, then that verdict would establish, in law, that no fraud was committed, except that a debtor might be precluded from obtaining a discharge upon grounds which would not reach a bona fide purchaser. The two decrees of the j ustice holding the United States district branch of this court are therefore premature. There should be a reversal of the third decree, and a modification of the second, that is, the decree absolutely setting aside and annulling the decree of discharge; for we have not as yet properly arrived at the stage to determine that question. Section 21 of the bankrupt act, and the amendments thereto of 1864, might throw some light upon this case. We have, in the action taken in this branch of the court, gone ahead of and beyond the acts regulating the questions arising under the bankrupt proceedings. Creditor and debtor are both left by this determination to grope on in the road that leads to no definite point. This determination ascertains nothing which can benefit the alleged creditor or debtor, and without some specific directions the court below would be at a loss how to proceed.