Court Opinion

ID: 8640315
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:52:07.864927+00
Date Added: 2024-06-11T16:56:04.723315
License: Public Domain

BLATCHFOKD. District Judge.
The creditors, Knowles & Forster, cannot be allowed to examine the bankrupt, to prove the nature of the transaction out of which the indebtedness *659•due to them arose, and that such indebtedness was created by the false and fraudulent representations of the bankrupt and his late partnership, for the purpose of showing that the debt cannot be discharged under the proceedings in bankruptcy. The examination proposed is wholly irrelevant. The question of fraud in the creation of the debt cannot be litigated in these proceedings. A debt which is, by section S3 of the act, excepted from the •operation of a discharge, as is a debt created by the fraud of the bankrupt, can be collected notwithstanding the discharge. The question whether the discharge affects the debt in question can only arise and be determined between the parties in a suit prosecuted to collect the debt, in which the discharge, after it shall have been granted, shall be pleaded or set up as a bar to a recovery. There is nothing in the proof of debt in this case which can in any manner conclude or prejudice either party in any suit pending in any other tribunal, so far as regards the issue of fraud in the contracting of the debt. The creditors cannot be prejudiced by proving their debt, if it was in fact a debt created by fraud, for section 33 of the act expressly saves all their rights, even though they prove their debt. Nor, e converso, can any thing in the proof of debt affect or conclude the bankrupt on any issue as to the creation of the debt by fraud. Section 21 of the act, in so far as it declares that a creditor who proves his debt shall be deemed to have waived thereby all right of action and suit against the bankrupt, and that all proceedings already commenced, or unsatisfied judgments already obtained thereon, shall be deemed to be discharged and surrendered thereby, cannot be held to apply to or include a debt which is by section 33 excepted from the operation of a discharge; otherwise, sections 21 and 33 would be directly repugnant to each other, and while section 33 declares that such a debt shall not be discharged under the act, even though the creditor proves it, the creditor would, by seetion 21, be deprived forever of bringing any suit against the bankrupt to recover the debt, and would be held to have discharged any unsatisfied judgment for it already obtained. The provision referred to in section 21 applies only to a debt which will be discharged by a discharge.