McDonald v. Ingraham

Handy, J., delivered the opinion of the court. This was a bill filed in the Superior Court of - Chancery, by the defendants in error, as assignees of the Grand Gulf Bank, a dis [394] solved corporation, to enforce a judgment at law, previously rendered in favor of that bank against the plaintiffs in error, on the 9th of November, 1842. The defendants below, first pleaded their discharges severally in bankruptcy; which pleas being overruled, they then set up their several certificates of discharge in bankruptcy, by way of answer, exhibiting the certificates, by which it appears that the defendant, M‘Donald, filed his petition in bankruptcy on the 31st of August, 1842, and the defendant, Curtis, filed his petition on the 6th of October, 1842; that they were both declared bankrupts by decree, rendered on the 8th of November, 1842; and that they both obtained their certificates of final discharge in February, 1843. It is conceded that the debt, on which the judgment at law was rendered, was in existence at the time the parties filed their petitions in bankruptcy; and from the allegation in the answer, that they were discharged by the certificates of final discharge — the case being heard on bill and answers — it must be taken that the debt, in the form in which it stood before judgment, was provable in bankruptcy. The question then, is, whether the certificate of final discharge of the bankrupts, operated as a discharge of the judgment which was rendered against them after the filing of their petition, but before the date of their final discharge as bankrupts. It is conceded by the counsel for the defendants in error, that if the judgment at law could be regarded as the same debt exist-isting against the bankrupts when they filed their petition for the benefit of the bankrupt act, the debt would be extinguished by the final discharge. But it is said, that by the judgment the old debt was merged, and a new debt thereby created, which had no existence when the proceedings in bankruptcy were instituted, and which, therefore, not being provable, was not affected by the discharge in bankruptcy. We do not think that this position is well founded. It is certainly true, that the bankrupts were discharged from the debt in the form in which it stood at the time when they filed their petitions in bankruptcy, and that if the final discharge had been granted before the suit at law came on for trial, the discharge [395] would bare been a complete bar to the recovery. But the discharge had not then been granted, and it was therefore beyond the power of the parties to avail themselves of it as a defence. And this is a sufficient answer to the objection, that the parties having failed to avail themselves of the defence to the suit at law, cannot now be permitted to set it up in equity. Can it be said, then, that the judgment became a new debt, wholly disconnected with the original debt, so that it would not be affected in any manner by any consideration connected with the original debt ? We think not. A debt is said to be merged, when its original form is changed into a form importing higher dignity; as a parol contract converted into a bond, or a bond or other contract converted into a judgment. But the essential difference between such contract in its original form and its new form, consists in two particulars; the first having reference to the legal effect of the new contract in point of evidence, as a bond importing of itself to be on sufficient consideration, or a judgment being primd facie a conclusion of any defence which could have been made to the action in which it was rendered; and the second having reference to its operative force, as a judgment being capable of enforcement by execution. But the form into which the debt may be changed, cannot change its substantial nature, and impart to it legal efficacy, when it had not sufficient ground to support it in its original form. The process of impeaching it, may be rendered more difficult by the new form and higher dignity which it has assumed. It may be more difficult to show a want of consideration of a bond than of a debt by simple contract; and it may be much more difficult to show that a judgment has no legal foundation to support it, than to establish such defence pending the action. Yet it could scarcely be said, that such a judgment cannot be vacated, especially in a court of equity; and the question in such cases always is, whether a sufficient excuse is shown for not making the defence at law. Hence, though the old debt be merged in the new one, it does not create a new contract severed and absolved from.its original consideration; but in equity it must stand upon its original consideration, and when that fails it may be impeached, whatever may be its new form, if the party [396] aggrieved can show sufficient reasons for not interposing Ms de-fence at an earlier stage of the transaction. It is not denied that tbe debt on which the judgment in this case was founded, was discharged by the certificates in bankruptcy; and it is therefore clear that the judgment has no legal or equitable consideration to support it, and should not be enforced in a court of equity. The plaintiffs in error were unable to avail themselves of their discharges before judgment, because they were not then granted; and their failure to do so, cannot conclude their right to set up their discharges as a defence to this bill, which is the first opportunity they have had to make the defence. The conclusion to which we have come, is sustained by the well-considered case of Ciarle v. Rowling, 3 Comst. 216. The decree is reversed, and the bill dismissed, as to the plaintiffs in error.