Court Opinion

ID: 6601944
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:08:28.45613+00
Date Added: 2024-06-11T15:58:02.876926
License: Public Domain

Cole, J.
Tbis is an action on a promissory note. Tbe defendant set up in bis answer, as a defense, bis discharge in bankruptcy, and upon tbe trial gave in evidence tbe certificate of bis discharge in due form. Tbe plaintiff then gave in evidence, against tbe objection of tbe defendant as to their admissibility, tbe proceedings in bankruptcy, for tbe purpose of showing that be was not named as a creditor in tbe schedule of debts filed by tbe bankrupt; that bis name did not appear in such proceedings; and that no notice in writing of those proceedings was ever personally served upon or mailed to him. It did, however, appear that tbe usual notice of tbe bankruptcy proceedings was published in tbe newspapers, and tbe plaintiff' testified that be knew by hearsay of tbe pendency of tbe proceedings some months before tbe discharge was granted. Tbe question therefore is, whether, upon such a state of facts, tbe discharge in bankruptcy is a bar to this action.
Tbe counsel for tbe plaintiff insists that tbe certificate of discharge is not conclusive, but may be attacked for fraud.or want of jurisdiction, in the state court. We will say at tbe *127outset, that to our minds there is no evidence in tbe case wbicb will warrant the inference that the bankrupt omitted the plaintiff’s name from his schedule for any fraudulent purpose. The omission might have been entirely unintentional, a mere accident; and it is. but fair to assume upon this record that it was. The question is not presented which was before the court in Batchelder v. Low, 43 Vt., 666, and in Beardsley v. Hall, 36 Conn., 270, as to the effect of a discharge obtained through fraud. In those cases it was held that where the bankrupt had been guilty of a fraudulent omission of a debt from his schedule, or had fraudulently omitted property from his schedule of assets, the discharge could be collaterally attacked or impeached on that ground in a state court. But the doctrine of these cases is manifestly not considered sound in Corey v. Ripley, 57 Me., 69; Way v. Howe, 108 Mass., 502; The Ocean Nat. Bank v. Olcott, 46 N. Y., 12; and Oates v. Parish, 47 Ala., 157, where the courts in effect hold that the certificate cannot be impeached in a state court on the ground that it was- improperly granted, but the remedy given under the bankrupt law, by application to the district court of the United States to set aside the discharge, is exclusive of any other mode of impeaching its validity. And we are inclined to adopt this view of the law as the correct one. But, without dwelling upon that point, which is not in this case, what is the effect of the discharge as against a creditor whose name was omitted from the schedule without any fraudulent purpose or design on the part of the bankrupt, and who consequently was not personally notified of the pendency of the bankrupt proceeding? Can such creditor impeach the validity of the discharge, in a state court, for that reason; or is the discharge conclusive upon him? It was undoubtedly the duty of the bankrupt to make ■ out and deliver to the messenger a correct schedule of his creditors, and an inventory of his estate, verified as required by the act (sections 11 and 42), in order that each creditor might have *128notice of the proceeding and an opportunity to be beard in respect to it. But an unintentional failure to name a creditor in tbe schedule, or failure to receive personal notice of the proceeding, does not, we think, render the discharge void as against the creditor omitted. For, in addition to the notice by mail or personally, the law provides for the publication of notices in such newspapers as the warrant designates, and the publication of that notice must have the effect of making the proceeding binding on the plaintiff so far as the state courts are concerned. The publication of the notice is binding upon all persons, whether they have or have not actual knowledge thereof, so that the subsequent payment of a debt or the delivery of property to the bankrupt affords no protection as against the assignee. Stevens v. Mechanics’ Savings Bank, 101 Mass., 109; Burpee v. Sparhawk, 108 id., 111. In Burnside v. Brigham, 8 Met., 75, it was decided that a creditor could not avoid a discharge in bankruptcy, under the law of 1841, by merely showing that the bankrupt in his petition omitted his name in the sworn list of creditors, and that by reason of such omission he had no notice of the jiroceedings, and could neither prove his claim against the bankrupt, nor oppose granting his discharge. It was held that, in order to avoid such discharge by reason of such omission, the creditor must show that the omission was willful and fraudulent. Although that case arose under a different statute, yet the reasoning of O. J. Shaw is strictly applicable to the question before us (see also Re Needham, 1 Lowell, 309); and we follow it as a correct exjiosition of the law of 1867.
The counsel for the plaintiff invokes the aid of the rule that every person is entitled to his day in court, and that, in order to bind him by a^ judicial proceeding, he must have notice thereof and an opportunity to be heard. This, as a general principle, is true, but it has its exceptions. Burnside v. Brigham, supra; Shawhan v. Wherritt, 7 How. (U. S.), 627.
In this case the only question to be considered was, whether *129a discharge 'bad been granted tbe defendant; and if so, it was conclusive upon tbe plaintiff in tbe state court. Tbis view disposes of tbe case.
By the Court. — Tbe judgment of tbe circuit court is affirmed.