The circuit court of the United States has no power to entertain
an original bill brought by a creditor, who has come in and proved
his debt against the bankrupt for the purpose of annulling or
vacating a discharge and certificate in bankruptcy, obtained in the
district court upon imputations of fraud done in contemplation of
bankruptcy by the bankrupt, or to give relief, either at law or in
equity, in a suit brought by a creditor who had proved his debt
under the commission, who had assented to the bankrupt's discharge
and certificate, and who had taken a dividend out of the bankrupt's
estate.
The district court which passed the decree in bankruptcy can
take cognizance of such a case.
Whether or not such a bill could be filed by a creditor who had
not come in and proved his debt, and who was not a party to the
decree in bankruptcy, is a question which the court does not now
decide.
Nor has the circuit court the power, under its general
jurisdiction over frauds, to give relief either at law or in equity
in a suit brought by a creditor who had proved his debt under the
commission, had assented to the bankrupt's discharge and
certificate, and had taken a dividend out of the bankrupt's
estate.
A demurrer only admits facts which are well pleaded.
This was a bill filed by the bank upon the equity side of the
circuit court against Buckner, under the circumstances fully
detailed in the opinion of the Court.
Page 61 U. S. 113
MR. JUSTICE WAYNE delivered the opinion of the Court.
The decision which we are about to give would not be
satisfactory, unless it shall be preceded by a statement of the
facts of the case as they are disclosed by the pleadings. We shall
adopt that which was given by the counsel who argued the cause,
with but little alteration or addition.
The appellants allege, in their bill that during the years 1841
and 1842, the defendant, Henry S. Buckner, together with M. B.
Hamer, who died in April, 1842, and Frederick Stanton, were
partners in trade, doing commercial business in New Orleans, under
the firm of Buckner, Stanton & Co., Buckner being the resident
partner there, and in Natchez under the firm of Stanton, Buckner
& Co., Stanton conducting it, and at Yazoo city under the firm
of M. B. Hamer & Co., Hamer being the resident partner at that
place. The three firms were distinct and separate, and kept their
books and accounts accordingly. It is alleged that the three firms
and the three members of them became hopelessly insolvent in the
year 1841, and that they continued to transact business together
until Hamer's death; that after his death, the two survivors
carried on the business of the three firms until their bankruptcy.
On the 21st July, 1842, Stanton filed his petition in the United
States District Court for the Southern District of Mississippi,
both individually and as a member of the three firms, was decreed a
bankrupt on the 8th November, 1842, and received his certificate of
discharge on the 21st February, 1843. On the 18th July, 1842,
Buckner made a similar application to the district court in New
Orleans, was decreed a bankrupt on the 5th September, 1842, and
received his certificate of discharge on the 5th December, 1842. It
is also said that their application for their discharges in
bankruptcy were made by Buckner and Stanton in concert, with a view
to future business.
It appears at the time of these applications, they were
indebted
Page 61 U. S. 114
to the appellants in the sum of $49,020.14, besides interest, on
twelve promissory notes and on one bill of exchange, all which had
become due in January, 1842. Three of them were payable on or
before the 6th January, 1839; three others on the 3d April, 1839;
four on or before the 3d March, 1841; and the last in the month of
January, 1842, six months before Buckner filed his petition in
bankruptcy. Buckner acknowledged the indebtment in his schedule
filed with his petition in bankruptcy. The complainants proved a
portion of their claim in the bankruptcy proceedings of Stanton. It
is admitted that they received a small dividend from the assets of
the firm, but they aver they did so in ignorance of the frauds upon
the bankrupt law, committed by Buckner and Stanton, of which they
knew nothing until the year 1853, when they discovered the frauds.
And they further allege that they would not have proved their
claim, nor have received a dividend, if they had known the frauds,
and they assert that the certificates of discharge are null and
void, by reason of the frauds.
It is then stated in the bill that the three firms had existed
before 1837, in which year they suspended payment, but that they
never recovered from their embarrassments, though they had resumed
business. It is again alleged that their affairs were hopeless in
1841, and that executions on judgments obtained against Stanton as
a member of the firm were in that year returned
nulla
bona.
That all the indebtment of the firms which made them insolvent
was due prior to the 1st March, 1842, at which time the frauds
began. That then, Buckner and Stanton had agreed that they would
take the benefit of the bankrupt law, and, in contemplation of
doing so, committed the fraud stated in the bill.
Twelve different charges of fraud are specified, all of them
being payments to preferred creditors, in fraud of the general
creditors -- contrary to the provisions of the act of the 19th
August, 1841. No charge of any other fraud is made, except a
transfer of some property in New Orleans, upon the understanding
that Buckner was to have the right to redeem it on payment of the
debt, and that the arrangement had secured for him an ultimate
profit, in fraud of creditors. They also say that it was because of
the fraud of Buckner and Stanton in concealing a knowledge of the
facts from them that they were induced to believe the discharges
valid, and so they did not proceed to enforce their claims at law
or in equity, but that they had found them out only within two
years. How or from what source they had made the discovery they do
not state distinctly, though to support the charge they file an
exhibit of
Page 61 U. S. 115
notes discounted for Stanton, Buckner & Co., by the
Commercial Bank of Natchez, which were applied to their credit, and
a list of protested notes of Stanton, Buckner & Co., taken up
by them in May, 1842 -- two months before Stanton filed his
petition in bankruptcy. Two letters from Stanton to Stephen Duncan
-- one of them dated at Natchez, on the 14th August, 1842, and the
other on the 14th September, 1842 -- are made exhibits; both relate
to the affairs of the firm, and to particular transactions of them,
which the appellants allege were frauds committed by Stanton and
Buckner, in giving preferences to certain creditors, in
contemplation of bankruptcy. And they further declare, that since
the bankruptcy of Stanton and Buckner, the books of Stanton,
Buckner & Co., had, by some means, passed into the possession
of Buckner; that if produced, the fraudulent preferences which had
been made would be shown, and that they would also disclose other
fraudulent preferences made by Stanton for himself and the firm of
Stanton, Buckner & Co., in the spring and summer of 1842, in
contemplation of bankruptcy.
The bill is closed with a prayer that the first decree of the
district court, discharging Buckner, should be declared void and of
no validity, as far as the rights of the complainants, as set forth
in the bill, could be affected by it, and that Buckner should be
perpetually enjoined from setting it up against their rights, and
that Buckner should be adjudged to pay them the original sum due by
him, with interest thereon, to which is added a prayer for general
relief.
The defendant demurred to the bill, and, for causes of demurrer,
says:
"I. That the said complainants have not, by their said bill,
made such a case as entitles this Court to entertain jurisdiction
of this cause under the Constitution and laws of the United
States."
"II. That the said complainants have not, by the said bill, made
such a case as entitles this Court to entertain jurisdiction, or
grant relief in equity; the remedy of complainants, if any they
have, being at law, and not in equity."
"III. That the said complainants having, by their own showing in
said bill, made proof of their claims, and received dividends
therein, in the bankruptcy proceedings which resulted in the
discharge of this defendant, are not permitted by law to impeach
the validity of said discharge in manner and form as sought by said
bill, and having been parties and privies to the judgment of
discharge in favor of this defendant, are forever precluded in law
from contesting the validity and effect of
Page 61 U. S. 116
said judgment, on any such grounds as are alleged in said
bill."
"IV. That the said complainants have not, by the said bill,
alleged any cause sufficient in law to authorize this Court to set
aside the decree of discharge in bankruptcy in favor of this
defendant, rendered by the district court of the United States, as
set forth in said bill."
"V. That the said complainants, by the allegations of said bill,
show that the claims held by them, if they ever were due to them by
this defendant, have become discharged by lapse of time, and barred
by the statute of prescription and limitation."
"VI. That the said complainants, by the allegations of said
bill, show such laches as by the principles and rules of equity
deprives them of any right to claim relief or remedy in this
Court."
"VII. That the said complainants have not, by the showing
contained in their said bill, made out a case entitling them to
relief either at law or in equity."
"Wherefore this respondent demands the judgment of this
Honorable Court, whether he shall be compelled to make any other or
further answer to the said bill, or any of the matters and things
therein contained, and prays to be hence dismissed with his
reasonable costs in this behalf sustained."
"[Signed] BENJAMIN, BRADFORD & FINNEY,
Solicitors"
"I certify that, in my opinion, the foregoing demurrer is well
founded in point of law."
"[Signed] J. T. BENJAMIN,
of Counsel"
"Henry S. Buckner, being duly sworn, deposes that the foregoing
demurrer is not interposed for delay."
"[Signed] HENRY S. BUCKNER"
"Sworn to and subscribed before me this 1st of October,
1855"
"[Signed] J. W. GURLEY,
Commissioner"
The stating part of the bill of the complainants, their prayer
for relief, and the demurrer of the defendant suggest that our
first point of inquiry in this case should be into the power of the
circuit courts of the United States to entertain an original bill
to annul or vacate a decree discharging a bankrupt, either in whole
or in part, for any of those frauds upon the act of the 1st August,
1841, which would prevent the bankrupt from receiving a discharge.
No such jurisdiction is given by the act to the circuit courts. The
jurisdiction of these courts
Page 61 U. S. 117
under the act exists in three cases:
First, when a question has been adjourned into a circuit by the
district court, under the 6th section of the act.
Second, by appeal, as that is given, under the 4th section, to
the bankrupt, when a majority of his creditors in number and value,
who shall have proved their debts, shall file their written dissent
from his discharge.
Third, the jurisdiction given to the circuit courts by the 8th
section, in suits by an assignee of the bankrupt, against any
person claiming an adverse interest, or by such person against the
assignee for property, or rights of property, transferable to or
vested in the assignee under the act. If we cannot find such a
jurisdiction in the circuit courts in the Act of 1 August, 1841, it
is in vain to look for it elsewhere, for the purposes for which
this bill has been brought.
The inquiry then must be if the circuit court has jurisdiction
to annul the decree of the discharge given to the bankrupt by the
district court, for frauds upon that act, which would have
prevented him from receiving a discharge and certificate. In other
words, has not the district court of the United States, in which
the bankrupt's discharge was given, and that court only, the power
to inquire into frauds upon the act discovered after the bankrupt
has received his discharge, with a view to annul it, and to give to
his creditors who have proved their debts the benefit of the
property he may have concealed, or the preferences he may have
given, or transfers of property he may have made in contemplation
of bankruptcy. It seems to us that the jurisdiction given by the
6th section of the bankrupt act to the district court is plenary
and exclusive for such a purpose. The words of the 6th section
are:
"That the district court in every district shall have
jurisdiction in all matters and proceedings in bankruptcy arising
under this act and any other act which may hereafter be passed on
the subject of bankruptcy, the said jurisdiction to be exercised
summarily in the nature of summary proceedings or equity, and for
this purpose the said district court shall be deemed always open.
And the district judge may adjourn any point or question arising in
any case of bankruptcy into the circuit court for the district, in
his discretion, to be there heard and determined, and for this
purpose the circuit court of such district shall be deemed always
open. The jurisdiction hereby conferred on the district court shall
extend to all cases and controversies in bankruptcy arising between
the bankrupt and any creditor or creditors who shall claim any debt
or demand under the bankruptcy, to all cases and controversies
between such creditor or creditors and the assignee of the estate,
whether in office or removed, to all cases and controversies
between such
Page 61 U. S. 118
assignee and the bankrupt, and to all acts, matters, and things,
to be done under and in virtue of the bankruptcy, until the final
distribution and settlement of the estate of the bankrupt, and the
close of the proceedings in bankruptcy. And the said courts shall
have full authority and jurisdiction to compel obedience to all
orders and decrees passed by them in bankruptcy, by process of
contempt, and other
remedial process, to the same extent
the circuit courts may here do in a suit pending therein in equity.
And it shall be the duty of the district court, in each district,
from time to time, to prescribe suitable rules and regulations, and
forms of proceedings, in all matters of bankruptcy; which rules and
regulations and forms shall be subject to be altered, added to,
revised, or annulled, by the circuit court of the same district,
and other rules and regulations and forms be substituted
therefor."
Our reflections upon this section as a whole, and particularly
upon that clause or sentence of it which extends the jurisdiction
of the court to all controversies between the bankrupt and a
creditor,
who shall claim any debt or demand under the
bankruptcy -- to all cases between creditors and the assignee
of the estate, whether the latter continues in office or has been
removed, and to all controversies between the assignee and the
bankrupt -- have brought us to the conclusion that it was meant to
give jurisdiction to the district court, either at the suit of the
assignee or of the creditor, just in such a controversy as the
complainants have made by their bill, with the power in the court,
in a suit of either the assignee or the creditor, or both combined,
to inquire into the fraudulent preferences alleged to have been
given by the bankrupt in contemplation of bankruptcy, and when they
shall have been satisfactorily proved, to revoke the decree of
discharge which had been given to him, to prevent it thereafter
from being pleaded as a bar to any suit which may be brought
against him, for any demand which was provable under the act. Or
the assignee alone may sue the bankrupt and his accomplices in the
district court, for any preferences he may have given to creditors
in contemplation of bankruptcy, to recover the amount of such
preferences, as a part of the bankrupt's estate for distribution
among his creditors who have proved their debts under the act, and
with the additional object of revoking the bankrupt's discharge by
a decree of the court. In either suit for the latter purpose, the
assignees and the creditors who have proved their debts under the
act, may be the parties on the one side, and the bankrupt and those
who conspired with him to commit the fraud upon the act, should be
made parties on the other. If it be intended only to recover the
amounts of fraudulent
Page 61 U. S. 119
preferences, as a part of the bankrupt's estate, the assignee
may sue the bankrupt and those who have received them, or the
latter alone, giving to the bankrupt prior reasonable notice,
specifying in writing the fraud or concealment which it is the
object of the suit to investigate, so that he may be present at the
trial to defend himself, or to petition the court to be made a
party defendant to the suit, for the same purpose. And in such a
case, the jurisdiction of the district court should be exercised
summarily, in the nature of summary proceedings in equity, such
being the direction in the sixth section of the act, for all
proceedings in bankruptcy under it.
These conclusions are verified into unquestionable certainty, by
considering in connection other parts of the bankrupt, bill.
By the third section of it, the property of the bankrupt, of
every kind whatever, from the time of his discharge, by mere
operation of law, is deemed to be divested out of him, and becomes
vested by force of the decree in the assignee who may be appointed
for the benefit of such of the bankrupt's creditors who have come
in and proved their debts, for the purpose of becoming distributees
equally of the bankrupt's estate, to the exclusion of all creditors
who have not done so. Then, by the second section, the amount of
preferences which may have been given in contemplation of
bankruptcy, are declared to be a part of the bankrupt's estate. It
is the duty of the assignee to sue for them, and the bankrupt who
has made them, when they have been proved, cannot be allowed a
discharge under the provisions of the act. And that this
disability to receive a discharge was meant to apply prospectively
to preferences which might be given, and retroactively to such as
had been given in contemplation of bankruptcy, or to such
preferences, whether given before the decree of discharge or after
it, is manifest from the whole language of the fourth section,
particularly that part which makes a
bona fide surrender
by the bankrupt of all his property and rights of property, for the
benefit of his creditors, one of the prerequisites of his being
discharged from all of his debts, and declares, that if the
bankrupt shall be guilty of any fraud or willful concealment of his
property or rights of property, or shall have preferred any of his
creditors, contrary to the provisions of the act, or, if he admits
a false and fictitious debt against his estate, that he shall not
be entitled to such discharge or certificate. Further, the 5th
section declares, that no creditor or other person, coming in and
proving his debt or other claim, shall be allowed to maintain any
suit at law or in equity
therefor, but shall be deemed
thereby to have waived all right of action and suit
against such bankrupt, which, while it excludes such a creditor
from bringing a suit at law or in
Page 61 U. S. 120
equity in any other court for his original debt, which had been
proved against the bankrupt, cannot be construed to mean that he
could not resort to the district court, which had been deceived
into granting the discharge, for the purpose of investigating the
frauds which may have been committed by the bankrupt before a
discharge had been granted to him, but not discovered until
afterwards, and for the further purpose of obtaining from the
district court an annulment of the discharge which had been
obtained from it by perjury and fraud. In this we do not differ
from the counsel of the complainants, for much of his argument was
intended to show that the creditors of a bankrupt are not without a
remedy for frauds committed by him, but not discovered until after
he had received his certificate of discharge. That was the case of
Haxton v. Corse, 2 Bar.Ch. 507, decided by Chancellor
Walworth. The chancellor's language is that he could not
conclude,
"notwithstanding the general language contained in the fifth
section of the act, that the creditors who come in and prove their
debts shall not be allowed to maintain any suit at law or in equity
therefor, and that the lawmakers did not intend that the proving of
debts by creditors should be an absolute abandonment of all claim
against the future acquisitions of their debtor, if his discharge
was refused, or if it was void for any of the frauds specified in
the act."
We admit the principle that creditors so circumstanced have a
remedy, but not that they may use it in any suit at law or in
equity in the circuit court. The bankrupt law has given to the
district court a plenary and exclusive jurisdiction in all matters
and proceedings in bankruptcy. We say plenary and exclusive
jurisdiction in the district court. This Court has said so in
Shawhan v.
Wherritt, 7 How. 643. Besides, on the authority of
the same case, we say, as all the proceedings in all cases in
bankruptcy are made matters of record by the thirteenth section,
that a party to one of them cannot be permitted to impeach
it collaterally in another suit in another court, brought by him
there to recover from the bankrupt his original debt, whilst he
continues to occupy his relation to the assignee and the bankrupt,
under the discharge of the latter, as one of the creditor
distributees of his estate. The district court has by the act
plenary and exclusive jurisdiction of the matter, and no other
court can annul the decree of the bankrupt's discharge, either
partially, for the benefit of a particular creditor, or wholly, to
deprive the bankrupt of its operation.
This we say, with direct reference to the parties in this suit,
who were parties to the decree of the bankrupt's discharge, who
proved their debts, and who have taken a dividend from
Page 61 U. S. 121
his estate. We do not mean to say anything of the circuit
court's jurisdiction in a
suit brought by a creditor who had
not come in and proved his debt, and who is not a party to the
decree in bankruptcy. These are points which will no doubt be
well considered by counsel before a suit shall be brought, directly
in connection with the power given to such a creditor to impeach
the discharge, when the bankrupt shall plead it in bar of a suit.
But the manner of bringing such a suit by such a creditor, how,
when, or in what court it should be brought we shall not decide
until such a case shall be brought regularly here for
adjudication.
We will now consider another point in the case, necessarily
arising from the frame of the bill, which was argued by the counsel
for the complainants, with some earnestness. It is whether the
circuit court had jurisdiction of
the subject matter of the
bill, on account of the frauds alleged against the
defendant.
The complainants in their bill state minutely the original
indebtment of the bankrupt to them, particularize the fraudulent
preferences he had given to other creditors in contemplation of
bankruptcy, admit that they were parties to the bankrupt's
discharge, and had taken a dividend. and then they ask for the
intervention of the circuit court in equity, to set aside the
bankrupt's discharge as to them,
because it had jurisdiction in
cases of fraud, and that it would adjudge that the defendants
shall pay to them their original debt, with interest, on account of
their ignorance of the frauds of which they complain, until within
two years before they brought their bill. And for the same cause
they say that they had not brought their action at law upon their
original cause of the defendant's indebtment.
The bill of the complainants, then, is a suit to recover from
the defendant the debt which they had proved in bankruptcy. It has
generally been thought, and has been frequently decided judicially,
that the fifth section of the bankrupt act was a bar to a suit
where a party proves his claim and takes a dividend. In England,
though such suits were attempted in the earlier administration of
her bankrupt laws, such an action would not be thought of now for a
moment. The words of our statute are
"and no creditor or other person, coming in and proving his debt
or other claim, shall be allowed to maintain any suit at law or in
equity
therefor, but shall be deemed
thereby to
have waived all right of action and suit against such bankrupt, and
all proceedings already commenced, and all unsatisfied a judgments
already obtained thereon, shall be deemed to be surrendered
thereby."
How, then, can it be that a creditor, coming in and proving his
debt and receiving a dividend, can be
Page 61 U. S. 122
allowed to sue the bankrupt for it afterwards, either at law or
in equity, when it is declared, in positive and unmistakable words,
that if the creditor, before proving his debt, had commenced an
action for it, or had obtained a judgment for it, he shall be
deemed to have surrendered it, and to have waived all right of
action and suit, either in law or in equity, against such bankrupt,
for the debt which he has proved? It cannot be done, and the
disability of such a creditor to sue the bankrupt is in perfect
harmony with every other part of the statute of the 19th August,
1841, and with all the rights of creditors which are meant to be
secured by it.
Moreover, the exclusion of such a creditor to sue the bankrupt,
is sustained by all of the decisions in the courts of England upon
the statutes of bankruptcy.
Lord Hardwicke said, in
ex parte Groome, 1 Atk. 119 --
when such a right was claimed by a creditor upon a similar
provision in the statute of George II, chap. 30, sec. 7, by no
means so expressive as that just cited from the act of the 19th
August, 1841 --
"I think that the privilege of creditors to come in, and of
bankrupts to be discharged from debts, is coextensive and
commensurate, and very equitable, for it would otherwise make an
irregularity among the creditors, for a creditor whose debt was due
before the taking out of the commission shall, perhaps, have more
than five shillings in the pound, and the creditor whose debt was
not due till a second distribution shall come in and have as much
as the other creditor, and likewise have a remedy open to him for
the rest against the bankrupt."
Therefore a creditor shall not prove his debt, receive a
dividend, and proceed afterwards in an action at law against the
bankrupt. In such cases in England, the creditor is put to his
election whether he will come in and prove his debt or pursue his
remedy at law. With us he has the same privilege. In
Ex Parte
Goodwin, 1 Atk. 152, Lord Hardwicke said:
"This Court will not suffer a
petitioning creditor to
arrest a bankrupt, and for this reason -- because a commission of
bankruptcy is considered both as an action and an execution in the
first instance; and after the petitioning creditor had laid hold of
all of the bankrupt's effects, it would be a great absurdity for
the same person to be permitted to arrest him likewise."
In regard to the creditor having made an election, his Lordship
ruled, in
Ex Parte Ward, 1 Atk. 153, that a
petitioning creditor determines his election by taking out
a commission, and cannot sue the bankrupt at law, though for a debt
distinct from what he proved.
In
Ex Parte Ward, 1 Atk. 153, it was also ruled that a
petitioning creditor's right of election does not exist after the
bankrupt has received his certificate, and when the creditor
has
Page 61 U. S. 123
already proceeded at law, he is not at liberty to come in and
prove his debt under the commission, without relinquishing his
proceedings at law, unless by order of the great seal, for the
purpose of giving his assent or dissent to the certificate. In
Capon's Case, 1 Atk. 219, Lord Hardwicke declared,
"It was by no means to be done that a creditor was to receive a
proportionable benefit under the commission, and still pursue the
bankrupt's person at law,"
and he would not permit the creditor, in that case, who had
proceeded at law after he had received two dividends, to assent to
or dissent from the bankrupt's certificate, until he had refunded
the dividends he had taken under the commission. In
Lindsay's
Case, 1 Atk. 220, he petitioned to be discharged from a
commitment at the suit of his creditor, Henkle, who had proved his
debt. The Lord Chancellor said the creditor must either waive his
proof under the commission, or make his election to proceed under
it; but, notwithstanding, if he elects to proceed at law, he may
still assent or dissent to the certificate.
In
Dorvillier's Case, his creditor had proved a debt
for �800 under the commission, and being the majority in value of
all the creditors, had chosen himself assignee, as he had the right
to do under the statute. He brought an action at law for the debt
which he had proved against the bankrupt. The bankrupt petitioned
that his creditor should make his election to proceed under the
commission or to proceed at law. The Lord Chancellor doubted
whether, by choosing himself assignee, was not making an election;
but upon the creditor's having elected to proceed at law, he
discharged him as a creditor under the commission, but still
allowed him to assent or dissent to the bankrupt's certificate.
In
Aylott v. Harford & Richards, Bail of Lowe, 2
Blackstone 1317, the creditor had proved his debt under the
commission, and had voted in the choice for assignees, and had
subsequently made an agreement with the bankrupt that he should
keep open his hotel for business. The bankrupt absconded. The
creditor brought an action against the bail of the bankrupt,
contending that, as Lowe had absconded, he had forfeited the
protection of his commission, and that the bail was to follow the
fate of his principal. De Grey C.J., refused to fix the bail, and
said there are some instances in which the court of chancery
permits a creditor to do certain acts, such as proving his debt and
voting for assignees, without binding him to come under the
commission and renounce his legal remedy. But the plaintiff has
gone much further, especially by the transaction of the 25th of
August. He has made his election, has acquiesced under the
commission, and he shall
Page 61 U. S. 124
not, on a subsequent unforeseen event, at the distance of twelve
months, desert the commission, and come on the bail by surprise.
White ex Parte, 2 Ves. 9; 2 Bro.C.C. 114.
These citations, then, show how the comprehensive equity of Lord
Hardwicke, upon an indefinite statute of George II, anticipated the
more perfect legislation of 49 George III, c. 121, s. 14, and that
of 6 George IV, c. 16, s. 59, upon the same subject.
The first provides,
"That after the 29th June, 1809, it shall not be lawful for any
creditor, who has or shall have brought any action or instituted
any suit against any bankrupt in respect of any demand which arose
prior to the bankruptcy, or which might have been proved as a debt
under the commission, to prove a debt under such commission for any
purpose whatever, or to have the claim of debt entered upon the
proceedings under such commission, without relinquishing such
action, a suit, and all benefit from the same, and that the proving
or claiming a debt under a commission by any creditor shall be
deemed an election by such creditor to take the benefit of such
commission with respect to the debt so proved or claimed by
him."
The statute of George IV is
"That no creditor who has brought an action or instituted a suit
for a demand arising prior to the bankruptcy, or which might have
been proved, shall prove a debt or enter a claim for it, without
relinquishing such action or suit, and all benefit from the same,
the proving a debt or entering a claim to be deemed an
election."
Our statute is as comprehensive as either of those, and was
taken from them, though not expressed in the same words. Indeed,
the three are an embodiment of the decisions of the courts which
were made from Lord Hardwicke's time in the administration of the
bankrupt law, and the construction of the English statutes in their
courts since has been in conformity with the earlier decisions.
In
Adames v. Bridge, 8 Bingh. 314, in an action of debt
upon a bond, in which a rule
nisi had been obtained to
stay proceedings commenced in 1831, it appeared by an affidavit
that the defendant had been a bankrupt in 1816, and that the
plaintiff had elected to prove under the commission sued out at
that time. Tindall, C.J., ruled that plaintiff, having proved under
a commission of bankruptcy in 1818, was estopped to sue for the
same debt after the passing of 6 George IV, c. 16, though that
repeals 49 George III, c. 121, and makes proof of a debt an
election not to sue. The Chief justice added, the fallacy in the
argument is in considering the election to prove as an incomplete
act. It was a complete act to effect a discontinuance, and after
such a lapse of time, the rule must be discharged
Page 61 U. S. 125
with costs. In some of its features, that case is not unlike
that which we have been considering.
Joseph ex Parte, 18 Ves. 340, establishes the same
principle; also
Dickson, 1 Rose 98;
Boslock's
Case, 1 Dea. & Chit., the same. A like interpretation has
been given to the fifth section of the Act of 19 August, 1841, by
Chief Justice Tenney, in 31 Maine 192, in the case of
Humphrey
and Small, and by Mr. Justice Hardy, in the case of
Buckner & Stanton v. Calcote, in 28 Miss. 390. Both
are able constructions of the statute of the 19th August, 1841,
from the statute itself, and they command our entire assent.
Our conclusions in this case are that the circuit courts of the
United States has not jurisdiction to annul or vacate the discharge
and certificate in bankruptcy obtained in the district court upon
imputations of fraud done in contemplation of bankruptcy by the
bankrupt, or to give relief, either at law or in equity, in a suit
brought by a creditor who had proved his debt under the commission,
who had assented to the bankrupt's discharge and certificate, and
who has taken a dividend out of the bankrupt's estate. These
conclusions relieve the case of all difficulty, and make it
unnecessary for us to discuss any of the other points which were
made by counsel on either side in the argument.
We add a word more. It was frequently urged in the argument, by
the counsel for the complainants, that the demurrer of the
defendant was a confession of the frauds alleged in the bill, and
that therefore the circuit court had jurisdiction to give
relief.
Our view of that demurrer is different. It is only a confession
of all facts
well pleaded, but in this bill none were so;
the power of the court to give relief, and of the complainants to
bring a suit, either at law or in equity, for the original debt
which they had proved in bankruptcy, having been mistaken.
The dismission of the bill by the court below is
Affirmed.
MR. JUSTICE NELSON concurs in the result of the opinion of the
Court in this case.