Court Opinion

ID: 6565197
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:19:13.872763+00
Date Added: 2024-06-11T15:56:42.074694
License: Public Domain

Palmer, J.
The pleadings and findings in this record show that on the twenty-eighth day of August, 1878, the plaintiffs, as copartners under the name of M. D. Wells & Co., commenced an action upon an account for goods sold and delivered, against the defendant, by personal service of process, in the circuit court for Buchanan county, in the State of Iowa, which was a court of general -jurisdiction. The defendant made no appearance or answer, and at the October term of 1878, on the twenty-ninth day of October, judgment was rendered against him for §577.50, and costs. After the commencement of that action, and on the thirty-first day of August, 1878, the defendant filed his petition in bankruptcy in the United States district court for the Southern district of Iowa, and such proceedings were had therein that in April, 1880, he obtained a discharge in the usual form. This action was brought upon the judgment, and the only defense interposed by the defendant is the discharge in bankruptcy. The trial court held, for the purposes of this case, that the demand in judgment was discharged, and that the plaintiffs could not recover. Judgment dismissing *the action, and for costs, was entered against the plaintiffs, from which the appeal is taken.
The sole question presented upon this appeal is whether a discharge granted under the late bankrupt law impairs, or at *47all affects, a judgment recovered in a court of competent jurisdiction, subsequently to the filing of the petition in bankruptcy, which by the statute is “deemed to be the commencement of proceedings in bankruptcy.” Rev. St. U. S. § 4991. While there is some conflict in the cases, especially in regard to the doctrine of merger involved in the question, we are convinced, by the recent authorities cited, and the principles established by the courts of this country as to conclusive effect of a final judgment, that the defense here interposed should not prevail. In Bradford v. Rice, 102 Mass. 472, the action was like the case at bar, upon a judgment recovered in another state, pending proceedings in bankruptcy; and it was ruled that the certificate of discharge was no defense to the action. Gray, J., gives the opinion, the first paragraph of which contains the substance of the decision:
“The ruling of the court below was in accordance with a series of decisions of this court, by which it has been held that if, after the institution of proceedings in insolvency or bankruptcy, judgment is rendered upon a debt provable under those proceedings, the original debt is merged, and extinguished in the judgment, and the judgment is not provable against the estate of the debtor, nor discharged by the certificate; and this not merely because such a merger takes effect by the rules of the common law, but because the creditor, by taking judgment, and so changing the form of his debt, and securing to himself the benfit of conclusive aiid permanent evidence of it, and an extension of the period of limitation of an action thereon, is held, on his part, to have elected to look to the debtor personally, and to abandon the right to prove against his estate; and the debtor, on the other hand, who might have protected himself by moving the court in which the action was pending for a continuance, in order to afford him an opportunity to obtain and plead a certificate of discharge, is held, by omitting to make such a motion before judgement, to have waived the right to set up his certificate against the plaintiff’s claim; and therefore the rights of both parties must be governed by the judg*48ment which the one has moved for, and the other has suffered to be rendered.”
This decision is followed and approved in later cases in the same court. Cutter v. Evans, 115 Mass. 27; Ray v. Wright, 119 Mass. 426. In Boynton v. Ball, 105 Ill. 627, the same conclusion was reached in the circuit, appellate, and supreme court upon the question here involved. The supreme court reviews the question upon both the grounds stated in the Massachusetts case, and, while recognizing the conflict which has existed in the courts concerning the doctrine of merger by judgment, says on this point: “We are satisfied the better doctrine, and that, too, established by the later decisions! is that a judgment rendered after an adjudication in bankruptcy creates a debt which cannot be proved against the bankrupt’s estate; that the indebtedness existing prior to the recovery' becomes merged in the judgment.” Then, referring to the other ground of decision in the Massachusetts case, the court says: “The circuit court did not lose jurisdiction of the case because Boynton was adjudged a bankrupt; but, as was held in Eyster v. Gaff, 91 U. S. 521, it was the duty of the court to proceed with the cause until, by some pleadings, the court was informed of the changed relations of the parties. See, also. Holden v Sherwood, 84 Ill. 92. The circuit court could do nothing less than proceed with the case to final judgment; and as the judgment is to be regarded as the joint act of Boynton, who, of his own choice, allowed it to be rendered, and of the plaintiff, upon whose motion it was rendered, the rights of these two parties must be regarded as finally settled by that judgment. We are rot aware of any case that holds that where a defense might have been made to a pending cause of action, but was not set up, solely through the negligence of a defendant, such defendant may afterwards interpose the same defense to the judgment which has been rendered against him. It is ordinarily enough that a party has had a day in court and an opportunity to plead his defense. The bankrupt act in clear terms provides for the stay of an action which may be instituted against the bankrupt until his discharge is passed upon. This statutory provision *49was incorporated into the law for the purpose of enabling a defendant, situated as was appellant, to plead his discharge in bar of the action; but as appellant gave no heed whatever to the law, and through his own negligence allowed a judgment to be rendered against him, what reason can be urged for holding that the judgment shall not be binding upon him? None is perceived.” The same question has recently been decided in Bowen v. Eichel, 91 Ind. 22, in harmony with the decisions above cited; and this decision is based mainly upon the proposition that if a defendant fails to interpose a stay of proceedings, upon the intervention of bankruptcy, he must abide the consequences of the judgment.
These decisions are sustained by numerous authorities in like cases. In re Williams, 2 N. B. R. 80, by Judge Shipman; In re Gallison, 5 N. B. R. 353, by Judge Lowell; In re Mansfield, 6 N. B. R. 388; Hollister v. Abbott, 31 N. H. 442; Holbrook v. Foss, 27 Me. 441; Pike v. McDonald, 32 Me. 418; Sampson v. Clark, 2 Cush. 173; Faxton v. Baxter, 11 Cush. 35; Cutter v. Evans, 115 Mass, supra; Steadman v. Lee, 61 Ga. 58; Revere Copper Co. v. Dimick, 90 N. Y. 33. The cases cited contra, appear to have been decided upon a limited' and exceptional view of the doctrine of merger.
But, independently of this doctrine of merger, we are clearly of the opinion that the defense here interposed cannot prevail without violating another principle, that the judgment is final and conclusive as to every matter of defense existing at the time. That the act of 1867 provides an ample remedy whereby the suit in the Iowa court might, upon the application of the defendant, have been stayed to await the determination of the court in bankruptcy on the question of the discharge, and judgment therein prevented, is no longer an open question. Rev. St. U. S. § 5106; Hill v. Harding, 107 U. S. 631; S. C. 2 Sup. Ct. Rep. 404; Ray v. Wright, 119 Mass. 426; Page v. Cole, 123 Mass. 93. But no such application having been made, that court retained complete jurisdiction, and could properly proceed to judgment. Doe v. Childress, 21 Wall 642; Eyster v. *50Gaff, 91 U. S. 521; Holden v. Sherwood, 84 Ill. 92; Amador C. & M. Co. v. Michell, 59 Cal. 168; Cutter v. Evans, 115 Mass. 27; Ray v. Wright, 119 Mass, supra; Hill v. Harding, 107 U. S. supra.
These cases show the remedy of the statute is in the nature of a personal privilege on the part of the bankrupt. It is said by Justice Gray, in the last case cited, as he had before declared, when chief justice of the Massachusetts court, (Ray v. Wright, 119 Mass. 428,) that if neither the bankrupt nor his assignee in bankruptcy applies for a stay of proceedings, the court may of course proceed to judgment. And the extent of this statutory remedy is to afford a complete defense in the action. The stay of proceedings is to await the determination of the court in bankruptcy “on the question” of the discharge, “evidently for the purpose of enabling the bankrupt to obtain his discharge, and plead it in bar of the action.” It is so held in the Indiana, Illinois, and Massachusetts cases, and assumed, or conceded to be so, in the other cases cited. In Ray v. Wright, supra, the court plainly says that one of the objects of this provision is ‘ ‘to protect the bankrupt, in case he obtain his certificate, from having his original cause of action against him merged in a judgment.” And the same principle is declared by the court of appeals in Revere Copper Co. v. Dimock, 90 N. Y. 37, Where the discharge was obtained after default, and five days before the entry of judgment. The court there says: “The defendant was not without a remedy. He could have applied to the Massachusetts court to open his default and permit him to set up his discharge. ”
This remedy of the statute, therefore, being in the nature of a personal privilege, and the defendant having waived it as he did, how can he now avoid the legal consequences of the obligation created by the judgment of the court? This obligation no longer rests upon contract or consent, for ‘ ‘judicium rednitur in invitum. ” A judgment is essentially different from a contract in its nature and elements, and is deemed in law an ‘ ‘obligation of record.” 2 Amer. Lead. Cas. 819, 820; O’Brien v. Young, 95 N. Y. 428, and cases cited; State v. City of St. New *51Orleans, 109 U. S. 285; S. C. 3 Sup. Ct. Rep. 211. From the time the supreme court, in Mills v. Duryee, 7 Cranch, 481, (1813,) decided that nil debit is not a good plea to an action upon a judgment of another state, it has been uniformly held that a party, bound by such an obligation, is estopped from alleging or proving that at the time he did not owe the debt. Christmas v. Russell, 5 Wall. 290; Cromwell v. County of Sac, 94 U. S. 351; Revere Copper Co. v. Dimock, supra; Jordan v. Phelps, 3 Cush. 545; Fuller v. Shattuck, 13 Gray, 70; Stevens v. Howe, 127 Mass. 164; Patrick v. Shaffer, 94 N. Y. 423. And, within the general principle of res adjudícala, it is well established that the judgment of a court of competent jurisdiction is final and conclusive, not only as to any matter of defense actually determined, but as to every other defense or remedy to defeat or diminish the recovery, which might have been interposed, but was omitted or otherwise waived. Jordan v. Van Epps, 85 N. Y. 427, and cases cited; Wells, Res. Adj. § 251, 67; Marriott v. Hampton, 7 Term R. 269; Le Guen v. Gouverneur, 1 Johns. Cas. 492; Walker v. Ames, 2 Cow. 428; Binck v. Wood, 43 Barb. 320; Clemens v. Clemens, 37 N. Y. 74; Noble v. Merrill, 48 Me. 140; Bridge Co. v. Sargent, 27 Ohio St. 233; Bates v. Spooner, 45 Ind. 493; Kelly v. Donlin, 70 Ill. 378; Dewey v. Peck, 33 Iowa, 242; Bank v. Stevens, 46 Iowa, 429; Mally v. Mally, 52 Iowa, 654; Parnell v. Hahn. 61 Cal. 131.
In Jordan v. Van Epps, supra, the plaintiff sought to recover dower in certain lands. In a former partition suit she had neglected to assert her statutory remedy for the admeasurement of dower, and it was held that the judgment was conclusive of the matter omitted in her defense. The court there states the rule: ‘ ‘The judgment is final and conclusive between the parties, not only as to the matter actually determined, but as to every other matter which the parties might have litigated and have decided as incident to or essentially connected with the subject-matter of the litigation,'within the purview of the original action.” And in the Sac County Case, 94 U. S. 352, it is said that, where the former judgment wras upon the same claim or demand in any subsequent action, ‘ ‘it is a finality as to the *52claim or demand in controversy, concluding parties not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. ” Thus, for example, a judgment rendered upon a promissory note is conclusive as to the validity of the instrument and the amount due upon it, although it be subsequently alleged that perfect defenses actually existed, of which no proof was offered; such as forgery, want of consideration, or payment. If such de-' fenses were not presented in the action and established by competent evidence, the subsequent allegation of their existence is of no legal consequence. The judgment is as conclusive, so far as future proceedings at law are concerned, as though the defenses never existed.
We conclude, therefore, that the discharge of the defendant, which might, by obtaining a stay of proceedings, have been pleaded in bar of the former action, is no defense to an action on the judgment, and that the plaintiffs are entitled to recover.
Judgment reversed.