Teubert v. Kessler

DAVIS, Circuit Judge. On September 14, 1921, Louis E. Teubert, Jr., recovered a judgment at law against Fred Kessler for $5,000 on account of the negligent operation by Kessler of an automobile, which struck the plaintiff while riding a motorcycle, and seriously iniured him. On December 5, 1922, Kessler filed a voluntary petition in bankruptcy and scheduled about $100 as his only assets and this judgment as his liabilities. In due time he filed a petition for his discharge in bankruptcy. The appellant filed specification of objection, wherein he set up this judgment as a bar to the discharge. The bankrupt thereupon moved to strike out this specification of objection. [ 1 ] The petition for discharge and this motion were the sole issues before the court. If the judgment was a bar to the discharge, the appellant should have prevailed on his motion; otherwise, the specification should have been stricken out. Congress has expressly declared in section 14 of the Bankruptcy Act (Comp. St. § 9598) what bars a-discharge in bankruptcy. The judgment founded on the -tort declared upon in this case does not come within the purview of that section, and so the objection was properly stricken out and the bankrupt discharged. [2] But the court went further, and held that the judgment was a provable debt and dischargeable in bankruptcy. The decree— “perpetually restrained and enjoined [the petitioner] from taking any steps in execution or any other proceedings, either at law or in equity, in the courts of the state of New Jersey or in this court, under said judgment, except to file and prove said judgment with the trustee of said bankrupt as a debt of his estate.” The right to a discharge and the effect of a discharge are wholly distinct propositions. Section Í4 of the Bankruptcy Act fixes the right to a discharge, and section 17 (Comp. St. '§ 9601) the effect of a discharge. The question before the court was the right and not the effect of the discharge. The proper time and place for the determination [474] of the effect of a discharge is when the discharge is pleaded or relied upon by the debtor as a defense to the enforcement of a particular claim. The issue upon the effect of a discharge cannot properly arise or be considered in determining the right to a discharge. The right to a discharge does not at all depend upon whether or not the judgment is released by the discharge. In re Carmichael (D. C.) 96 Fed. 594, 596; In re Tinker (D. C.) 99 Fed. 79, 80; In re Marshal Paper Company, 102 Fed. 872, 874, 43 C. C. A. 38; In re McCarty (D. C.) 111 Fed. 151. The decree should have left the petitioner free to determine the effect of his discharge in the proper tribunal. That part of the decree, therefore, which struck out the specification of objection to the discharge, and granted a discharge to the bankrupt, is affirmed, but that part which adjudicated the judgment to be dischargeable, and restrained the petitioner from further proceedings, is reversed; the petitioner to pay one-third, and the respondent to pay two-thirds, of the costs.