Burpee v. Sparhawk

Gbay, J. In Way v. Howe, post, 502, after full consideration of the able arguments made in that case and in this, it has been adjudged that a certificate of discharge granted by the district court of the United States under the bankrupt act of 1867, c. 176 could not be impeached in an action brought in the courts of this Commonwealth (upon a debt not falling within either of the [113] classes excepted in § 33, and which was provable against the estate in bankruptcy) on account of a fraudulent conveyance of property by the bankrupt, which would by § 29 invalidate the discharge ; and that the only mode of relief was by application to the district court of the United States, under § 34, to set aside and annul the discharge. Another of the cases mentioned in § 29 in which “ no discharge shall be granted, or, if granted, shall be valid,” is “ if the bankrupt has wilfully sworn falsely in his affidavit annexed to his petition, schedule or inventory, or upon any examination in the course of the proceedings in bankruptcy, in relation to any material fact concerning his estate or his debts, or to any other material fact.” It is upon this clause that the plaintiffs rely, and there can be no doubt that it covers the case of the fraudulent omission of a creditor in the schedule of debts, verified by oath, which the bankrupt is obliged by §§ 11 and 42 to file at the commencement of the proceedings in bankruptcy. The plaintiffs contend that a creditor whose debt is fraudulently omitted in the schedule, and to whom therefore no notice of the bankrupt’s application for a discharge is sent by mail under § 29, is not a party to the proceedings in bankruptcy, or barred by any decision of the United States court in the matter of the discharge. And so it has been held by the supreme court of Vermont, upon the ground that, having no notice of the proceedings, he could not be affected by them. Batchelder v. Low, 43 Verm. 662. On the other hand, it is to be observed that a creditor, whose debt is omitted from the schedule by mistake and without fraud, has no more notice of the proceedings in bankruptcy than if the omission was fraudulent, and yet an innocent omission does not affect the validity of the discharge. Burnside v. Brigham, 8 Met. 75. Re Needham, 1 Lowell, 309. Section 29 requires that, in addition to the notice by mail to all creditors mentioned in the schedule, notice shall be given by publication in the newspapers of the bankrupt’s application for a discharge, which is equivalent to the only notice to other persons interested in the estate, after the publication of which they are bound at their peril to [114] take notice of the issuing of the warrant and the proceedings under it, whether they had or had not any actual knowledge thereof. Stevens v. Mechanics' Savings Bank, 101 Mass. 109. Any creditor, whose debt is provable, whether it was proved or not, may object to the granting of the discharge, or apply to the United States court, sitting in bankruptcy, to have it set aside or annulled. U. S. St. 1867, c. 176, §§ 31, 34. Book's case, 3 McLean, 317. In re Sheppard, 1 Bankr. Reg. 115. Re Murdock, 1 Lowell, 362. The cause relied on for impeaching the discharge in this case, like that alleged in Way v. Howe, above cited, is one of those specified in § 29, and it is insisted by the defendant that the same rule must apply to the one case as to the other. And it has been so held by the court of appeals of Kentucky. Payne v. Able, 7 Bush, 344. But we are not required in this case to decide the general question of the effect of a certificate of discharge in bankruptcy against a creditor, fraudulently omitted in the schedule, and having no actual notice of the proceedings in bankruptcy; for such a creditor may waive the want of notice, and make himself a party to those proceedings ; and we are of opinion that the plaintiffs, by applying to the district court of the United States under § 34, to set aside and annul the discharge for the same cause upon which he relies in this case, have voluntarily made themselves a party to the proceedings in bankruptcy, and submitted the question of their right to impeach the validity of the discharge for this cause to the jurisdiction of that court, and cannot therefore now impeach it by any other suit or proceeding. The case falls within the same principle which has been applied to many others. For example, a citizen of another state, who proves his debt in the course of proceedings under a state insolvent law, which could not constitutionally bind him without his assent, cannot afterwards impeach the validity of the certificate of discharge granted upon those proceedings, except as allowed by that law. Clay v. Smith, 3 Pet. 411. Gilman v. Lockwood, 4 Wallace, 409. Journeay v. Gardner, 11 Cush. 355. And a creditor, whose debt is of such a class, either by reason .of its fiduciary character or otherwise, that it would not be barred by [115] any discharge in bankruptcy, still, if he elects to prove it against the estate, cannot afterwards, unless his proof is withdrawn by leave of the bankruptcy court, insist upon his exemption from the effect of the discharge. Chapman v. Forsyth, 2 How. 202, 209. Ex parte Tebbetts, 5 Law Reporter, 259. Morse v. Lowell, 7 Met. 152. Fisher v. Currier, Ib. 424. Gilbert v. Hebard, 8 Met. 129. Exceptions sustained.