Crouse v. Whittlesey — 40 N.Y. St. Rep. 133

Majority

p. 133

Daniel Crouse et al., Resp’ts, v. Walter Whittlesey, App’lt.

(Supreme Court, General Term, Fourth Department,

Filed October 3, 1891.)

Headnote

Bankruptcy—Discharge of judgment—Code Civ. Pro., § 1268.

Where the validity of a discharge in bankruptcy is questioned in a proceeding under § 1268 of the Code to discharge a judgment, such question may be settled and determined by the court in such proceeding. The proper practice in such case is to" order a reference to take and report the evidence of the parties with the opinion of the referee.

Appeal from an order made at Onongaga special term, denying a motion made pursuant to § 1268, Code Civil Procedure, to procure a judgment to be discharged of record, on the ground that the debtor had been discharged in bankruptcy from the payment of the judgment

A discharge in bankruptcy had been granted, which, if valid, was sufficient to discharge the judgment, and entitle the judgment debtor to the relief asked for in the court below. The judgment creditors, however, claimed the discharge was invalid; that there was want of jurisdiction in the court, and other things connected with the proceedings practically amounting to fraud in procuring the discharge.

The court below, upon the affidavits and papers presented, decided the discharge was invalid, and denied the motion.

C. D. Adams, for app’lt; G. W. Adams, for resp’ts.

It is provided by § 5119, U. S. R. S., that “the certificate (of discharge) shall be conclusive evidence in favor of such bankrupt of the fad and regularity of such discharge.”

And then provision is made by | 5120 for contesting the validity of the discharge for fraud, within two years, by reason.of any of the acts specified in § 5110 as grounds for refusing or invalidating the discharge.

It has been held in this state that the remedy given by § 5120 is exclusive in the district court only where the invalidity of the discharge is based on one or more of the grounds of fraud specified in § 5110, and a discharge may be attacked in a state court for fraud based upon any other ground, and also for want of jurisdiction in the court granting it Poillon v. Lawrence et al., 77 N. Y., 207 .

The attack was, in that case, made in an action, but I can perceive no reason why it may not be done as well on a motion under this section of the Code of Procedure. Such attack was made and resulted in the defeat of such a motion, in superior court, New York city, special term. Seaman v. McReynolds, 65 How. Pr., 521 .

The question of power to settle the question of the validity of the discharge on motion, however, does not seem to have been considered. There are some cases holding the validity of discharges should not be tried upon motions. Bangs v. Strong, 1 Denio, 619 ; Robens v. Sweet, 48 Hun, 436 ; 16 N. Y. State Rep., 334, and the cases therein cited and referred to. Hone of these cases were motions under this section of the Code of Civil Procedure. They were motions to set aside executions or supplemental proceedings based upon judgments alleged to have been discharged; and it was held the motions should be practically held to await the determination of the validity of the discharge in actions to be brought upon the judgments.

While the principle involved in those cases is very similar to the one here involved, yet this motion, unlike those referred to, is expressly provided for by the legislature, and the intention would seem to be obvious to provide by this section for a full and complete determination of all matters' involved in the relief sought for. The power to attack these discharges exists in the state courts, and when, therefore, the validity of a discharge is questioned in a proceeding under this statute, I see no reason why the cou'rt may not in the same proceeding settle the question as to the validity of the discharge which stands in the way of granting the relief sought. It would be a great hardship to the parties to be driven to an action, with its attendant expense and delays, to procure a determination of this question. There is really no necessity for it, and no reason why the question cannot as well be settled in the proceeding under the section of the Code itself.

The court should • be careful to provide for a full, fair opportunity to litigate the question, and the better practice is to order a reference to take and report the evidence of the parties, with the opinion of the referee. In this case new papers are presented in this court, which at least create a doubt as to whether a correct conclusion was reached by the court below as to the facts.

p. 135

I think a proper disposition -of this appeal is to reverse the order appealed from, and direct the entry of an order of reference to take proofs of both parties as to the validity of the discharge, and report the same, with the opinion of the referee, the motion to be further heard at special term, upon the coming in of such a report. And no costs or disbursements of the appeal should be allowed.

Merwin, J., concurs.

I think the order should be reversed. Inasmuch as all the record evidence was not before the special term which the debtor has in regard to the discharge, and he did not have an opportunity to meet and explain or contradict the affidavits read by the plaintiffs, it is reasonable that upon a reference the facts should be ascertained before final action is had upon the motion. I agree with Justice Williams in ordering a reference to take proofs, and when they are taken by the referee and he has expressed his opinion thereon, the motion should be further heard by the special term, when it can be determined whether the motion should prevail.

I suggest a reversal of the order, without costs to either party of the appeal, and a reference to take proofs and report with his opinion to a special term, when the motion should be heard upon eight days notice.