Phœnix v. Stagg — 1 N.Y. Super. Ct. 635

Majority

p. 635

Daniel A. Phœnix and Samuel Whitney versus Jacob D. Stagg.

April Term, 1829.

Headnote

To an action of debt, on judgment, the defendant pleaded a discharge under the act to abolish imprisonment for debt. The plaintiffs replied, that, ©n the day appointed for the appearance of the creditors to show cause against the discharge, a certain creditor appeared to oppose the application, when the defendant, to induce said creditor to withdraw his opposition, secured to him the payment of one half of his debt; whereby the plaintiffs withdrew their opposition, and the defendant obtained his discharge. Issue was taken on the replication, and a verdict found for the plaintiffs. The defendant then moved in “ arrest of judg“ment” or for “some order directing an entry on the record, qualifying the judg“ment, so that no execution should issue against his person.” Held, that the facts stated in the replication, (though found to be true,) were not so pleaded as to avoid the discharge ; and that the judgment, although it could not be arrested, must be so modified as to prevent the execution from issuing against the defendant’s person.

A defendant cannot move for judgment non obstante veredicto.

The plaintiffs declared against the defendant in an action of debt, upon a judgment obtained against him by the plaintiffs in “ the Supreme Court of the State of New-York,” at the May-term ef said Court, in the year 1827, for the sum of eleven hundred and forty-four dollars and thirty-seven cents.

The defendant, for the purpose of protecting his person against the consequences of a recovery in this court, but without pretending to impeach the judgment on which the action was founded, pleaded, “ that the said plaintiffs ought not to have execution for the “ debt aforesaid,” “ adjudged to them, on or against the person of “him, the said defendant, because,” “ after the rendition of the “ said supposed judgment, and before the commencement of this “ suit, viz. on the 4th day of January, in the year 1828,” the defendant “ being an insolvent debtor, within the meaning of the a ct of the Legislature of the State of New-York, entitled an act to “ abolish imprisonment for debt in certain cases, did present a peti= “ tion to Richard Riker, Esq., Recorder of the city of New-York,” “ praying that his estate might be assigned for the benefit of all

p. 636

“ his creditors, and that his person might be for ever thereafter “ exempted from all arrest or imprisonment for or by reason oí “ any debt or debts due at the time of making such assignment,”. &c. The plea then averred, that such proceedings were thereupon had; that afterwards, viz. on the 25th of March, in the year 1828, the defendant was discharged by the said Recorder, as fully appeared by the record of the discharge, which was set out in the usual manner.

To this plea, the plaintiffs replied, that they “ought not to be “ barred from having execution of the debt aforesaid,” “ against “ the person of” the said defendant, because, “ on the day ap- “ pointed by the said” “ Recorder,” “ for the creditors of the “ said defendant, to show cause before him,” “ why an assign- “ ment of the said defendant’s estate should not be made for the “ benefit of all his creditors,” &c., •“ to wit, on the 25th day of “ March, 1828, at the office of the said Recorder, in the city of New- “ York, one Samuel Judd, being a creditor of the said defendant, within the true intent and meaning of said act, appeared before “ the said Recorder, to show cause why the said defendant should “ not be discharged as aforesaid, and commenced opposition to “ the said discharge, before the said Recorder. And, therefore, “ the said defendant, in order to induce the said Samuel Judd to “ withdraw his opposition to the discharge of the said defendant,” “ offered to, and did secure to be paid to the said Samuel Judd,” “ a certain part or portion of his debt or demand, to wit, the one “ half thereof. Whereupon, the said Samuel Judd, so being such “ creditor of the said defendant in consideration thereof, to wit, “ on, &e., at, &c.y aforesaid, did withdraw his opposition, and “ thereupon the said Recorder executed and delivered to the said “ defendant the said discharge in the plea mentioned, and so the “ said plaintiffs say, the said discharge was fraudulently-obtained, “ and is void,” -&c.

The defendant rejoined, taking issue upon the replication, and denying that Judd ever did show cause why the defendant should not be discharged, and denying that he ever made opposition to such discharge before the Recorder; “ without this, that the said “ defendant, in order to induce the said Samuel Judd to with

p. 637

“draw his opposition to the discharge of the said defendant,” “ offered to, and did secure to be paid to the said Samuel Judd,” “ any part or portion of his debt or demand,” &c., with a conclusion to the country.

Upon this issue, a verdict was found by the jury in favour of the plaintiffs, and the defendant now moved “in arrest ofjudg- “ ment, or for some order of the court, directing an entry on the “ record, qualifying the judgment to be entered for the plaintiffs, “ so that no execution should issue thereon against his person.”

Mr. Elias H. Ely, for the defendant,

and in support of the motion, contended, that the judgment might be arrested, or at least modified, under the pleadings, because the issue joined, although found in favour of the plaintiffs, did not impair the discharge. The defendant, he said, would, of course, be entitled to the benefit of the plea, which asks merely for a personal privilege, unless there was something in the replication which avoided or destroyed its effect. The plea sets forth the discharge in h<zc verba, and if the defendant is to be deprived of the benefit of his plea, it must be for some cause set foi th in the replication.

In the first place, the discharge itself cannot be impeached: it is a record, and imports absolute verity : it concludes all parties and privies, and creditors are of course parties. Even if there was fraud as to the manner of procuring the discharge, that would not avail against the discharge, except for the causes set forth in the statute. Fraud, in the consideration of a deed cannot be inquired into at law, and nothing comes up before such a tribunal but questions relative to the sealing. [1 Johns. R. 300. 2 J. R. 177. 13 Ib. 430. 5 Cow. R. 506, 510. 8 Ib. 177. 290.] In the case cited from the 13th of Johnson’s Reports, it was expressly decided, that all creditors who did not appear and oppose the discharge, assented to it; and here these plaintiffs having neglected to appear when notified to do so, if they had cause, have assented to the discharge.

II. It is admitted, that the plea may be avoided by a replication, setting forth any of the facts stated in the statute, which de

p. 638

stray the discharge. There acts are all set forth in the 5th section the act, [5 Vol R. L.p. 117. Sess. 42, ch. 101.] and the discharge cannot be avoided by any thing except the causes set forth in that section. These are, 1. perjury ; 2. a concealment oi property, and, 3. the receiving a debt after the discharge.

Now the cause set forth in the replication, is not one of those enumerated: it states, that the defendant offered to secure, and did’secure, to one Samuel Judd the payment of one half of his debt, if he would withdraw all opposition to the defendant’s discharge. JVon constat, that the one half of Judd’s debt was paid by any part of the defendant’s effects., It is not asserted that the fund assigned for the benefit of all the creditors, was made less by the payment made to Judd. • Neither does it appear, that the creditors have suffered in any way by the acts of the defendant, set forth in the replication.

For these reasons, Mr. Ely contended, that the judgment ought to be arrested or modified, so as to give the defendant the benefit of his plea, because there was nothing set up in the replication which could, in law, deprive him of the protection afforded by his discharge.

Mr. D. B. Tallmadge, for the plaintiffs, contra, contended,

I. That there were facts enough averred in - the replication to avoid the discharge. No matter whether the fraud alleged be that specified in the act or not, so long as it is one against the law or the policy of the law. It has been decided repeatedly, that frauds not set forth in the act are sufficient to avoid any securities taken by a creditor for withdrawing his opposition. [2 J. R. 386. 4 Ib. 410, and note to 2d Ed. 12 J. R. 306. 3 Caines’ R. 213. 9 J. R. 295.]

II. But the fraud contained in the replication is specified in the 5th section of the act. It is concealment of part of the debtor’s effects. The insolvent “secured to one Judd a part of his debt, to wit, one “ half.” The fair intendment of this allegation is, that the insolvent secured it out of his effects, not contained m his inventory. This

p. 639

is a concealment within the meaning of the act, and it, need not he averred in terms. It is sufficient, if facts enough are set forth from which fraud may be inferred; for on a motion in arrest of judgment, every intendment is against the party moving and in favour of the pleading attacked. Whatever by possibility might have been proved under the issue, will be intended to have been proved. [2 Tidd’s Prac. 826. Steph. on Plea. 166.] Therefore, as under that issue, we might have proved that the insolvent bought off Judd’s opposition, by giving to him a note due and owing to the insolvent, it will be intended that we did, in fact, prove it; and such proof would be conclusive evidence of concealment within the letter of the 5th section. This mode of securing Judd’s debt, is the probable one, and the court will infer that it was adopted.

Fraud may be inferred from the facts stated in the replication, which is concluded by a direct averment that the discharge is void by reason of fraud. The jury have found all the facts to be as stated in the replication, and the conclusion also: that conclusion is fraud.

But, it is said, that if Judd was bought off, the fund was left entire, and the creditors thereby benefitted. In reply, we say, that if Judd had not been bought off, the defendant would not have been discharged, and the plaintiffs would have been left in possession of all the remedies against their debtor known to the law.

III. The insolvent was guilty offalse swearing, within the meaning of the 5th sec. of the act. The act provides, that an insolvent shall not settle with any of his creditors with a view to obtain the benefit of the act, and the party is required to swear, that he has not so settled. Is the act complied with, if the oath be true when taken, but becomes false immediately afterwards'l The spirit of the act extends to proceedings as well subsequent to the oath as precedent thereto, and to settle, with a creditor, after the oath has been taken, is a violation of the spirit of the act.

The act 5 Geo. 2, c. 30, sec. 10, requires the bankrupt to make and present to the Chancellor an affidavit, stating “ that the “ certificate and consent of the creditors thereunto were obtained

p. 640

“ fairly and without fraud.” In the case of Itodson v. Galze,[Doug. 228,] notes had been given by a confidential friend of the bankrupt without his knowledge to two of his creditors, whereby they were induced to sign the certificate. The bankrupt'made the affidavit required by the statute, and was afterwards informed of the acts of his friend; subsequently to this he presented his affidavit to the Chancellor. Upon these facts, Willes, J. observed, that it was “ a fraud in the bankrupt to present his affidavit “ to be read at the time when the certificate was allowed; for “ though it might be true when sworn to, it certainly was not “ true then, and therefore the certificate was void.” Buller, J. observed, “ that the certificate would not have existed, but for “means which the legislature had reprobated.”

IV. But if the fraud set forth in the replication be not sufficient to avoid the discharge, the defendant cannot take advantage of it, by a motion in arrest of judgment. The plaintiffs are entitled to judgment, first, by nil dicit, and secondly, because the plea does not go to the cause of action, but merely to qualify the judgment. As to the cause of action the defendant says nothing. [Doug. 393, 1 Cow. R. 207.] Judgments cannot be arrested, according to our statute, for mere defects in form, and since the act no case can be found where a judgment has been arrested, except for defects in the declaration: none for defects in any subsequent pleading. If the defendant objected to the replication, he should have demurred, and that was the only course by which his objection, if well taken, could be sustained by the court.

Mr. J. Anthon for the defendant, in reply.

The plaintiffs might have judgment by nil dicit, if they, had given the defendant the benefit of his plea. They were not bound to join issue, but might have had judgment without the least delay. If, however, they seek to take from the defendant the privilege given to him by his discharge, they must state some valid reason upon the record, why the discharge is void. The court will not, ex industria, seek for causes to establish fraud, but will rather call upon the party who asserts its existence, to state it in

p. 641

such clear and direct terms in his pleading, that the defendant may meet and rebut it if he can at his trial. If the defendant has been guilty of false-swearing his discharge is not only void, but he may be liable to the laws in another manner.

Will not the court then, say, that every intendment ofmere technical pleading is against fraud, and will they not rather compel the plaintiffs to aver with strictness all the facts upon which they rely to establish the fraud 1 The general conclusion that “so the discharge was frudulently obtained and is void,” will avail nothing, unless the plaintiffs point out how it was fraudulent and void. This they have not done, and they are confined to their specific allegations. These, upon examination, turn out to be entirely inoffensive, if true, for there is no moral turpitude in paying or satisfying a debt w hich is justly due. The discharge, then, cannot be considered as void unless the defendant has done something which the act has forbidden him to do, and to ascertain that fac t we must examine the act itself.

All the cases cited by the plaintifis, are such as have arisen under the “two-third act” where the proceedings differ materially from those which merely exempt the pérson from arrest. In the one case all remedy for the debt is taken away ; in the other the person only is exempted from execution. Under the act relating to non-imprisonment, it is no injury to one creditor that another has been bought off, unless it can be shown that his dividends have been thereby diminished. In this case, there is no averment that any part of the defendant’s property was taken to satisfy the opposing creditor, and the court will not infer it, becapse such might possibly, or even probably, have been the case. If tpe plaintiffs rely upon the fact, let them state it, that the defendant may have an opportunity of denying it.

II. But has there been a concealment here in any shape, either within the meaning of the act, or in fact 1 Before Judd appeared to oppose, the defendant had made out a complete inventory of his property, which was surrendered to the assignee according to the inventory. How then could any part of this specified property be substracted, for the purpose of satisfying Judd’s debt 1

p. 642

The whole case is narrowed down to the single enquiry, whether the defendant lias violated the statute. Upon this point the discharge speaks for itself, and is conclusive. It states, that the defendant had “ conformed in all respects to the matters. and “ things required of him, according to the true intent and meaning “ of the act.” How can this be gaínsayed ? The jury have found nothing more than this, that one Judd was paid or secured the one half of his debt 1 Does that deprive the defendant of the protection afforded by his discharge 1 If the oath was false the assignment was void, but the oath, the plaintiffs admit, was true when it was administered. If so, how can the statute operate retrospectively, even if the defendant did satisfy Judd after the oath was taken 1 The fifth section is an entire new enactment ; it is not to be found in the two-third act, and the legislature intended to point out every thing which could avoid the discharge. This they have done, and (he replication has set. forth none of them. The issue joined is, therefore, immaterial, and the judgment may he arrested.

There is a distinction between an informal and an immaterial issue. [2 Saund. 319 a. 1. Ib. 227. 2 Arch. Prac. 239.] For the former defect, a motion in arrest cannot be sustained, but for the latter, it may.

in delivering his opinion, remarked, that the question in this case was, whether the facts stated in the replication were sufficient to avoid the defendant’s discharge ; for the court would infer, that all the facts upon which issue,was taken, had been found by the jury.

The replication alleges, that in consequence of a compromise made by the defendant with one of his creditors, that creditor was induced to withdraw the opposition to the defendant’s discharge, which he otherwise would have made. Suppose the fact to be so : does it follow as a necessary or inevitable consequence, that the compromise.wasfraudulent ? Suppose the defendant was attended to the Recorder’s office by some friend, and that friend being informed of the creditor’s intended opposition, had himself advanced the money to effect the compromise: would the other creditors of the defendant have been prejudiced, by such a course

p. 643

of proceeding 1 The entire fund, assigned by the debtor, would still have gone to his assignee, and it would, in that case, have been divided among a smaller number of creditors. By this means, the creditors would have been benefitted, and could not, with any reason, complain of the defendant’s acts in this particular. The court will not infer, that the acts done were fraudulent, because the replication, in its conclusion, asserts, that the discharge was fraudulent; but they will look at the facts stated, and ascertain from them whether the law has been violated.

In order to impeach the discharge, the court must infer, that the defendant subtracted a part of the funds, which would otherwise have gone to the creditors in general, and gave it to a particular creditor, for the purpose of inducing him to withdraw his contemplated opposition. This is not averred in the pleadings, and will not be intended, where such intendment must cast upon the defendant the perpetration of a fraud, and break up so solemn an instrument as a discharge, under the seal of a competent officer.

There is another reason why the allegations in the replication are not entitled to the particular favour of the court. When the defendant presented his petition to the Recorder, notice was directed to be given to all the creditors, to appear and show cause, if any they had, why the prayer of the petition should not be granted. That notice must have been given to the plaintiffs, among others, because the discharge itself avers, that satisfactory evidence was furnished to the Recorder, that all the requirements of the act had been complied with. If the plaintiffs intended to oppose the defendant’s discharge, why did they not appear at the proper time and place, and show cause ? By not appearing, they acquiesced in the discharge, and are concluded by it. The discharge is by the act itself, made conclusive evidence as to the facts which are asserted in it, and from that, nothing appears to shew the compromise, or impeach the discharge. It is, then, sufficient to afford the defendant all the protection which is sought in his plea, and must be made available for that object.

The next question is, can the judgment be arrested 1 According to strict technical principles, I think it cannot; but it may be

p. 644

modified, in such way as to meet the exigency of the case. Where the law affords to an insolvent debtor a privilege, which is to protect his person, the court may always point out the means by which it may be made available. The only part of the judgment complained of, is that which relates to imprisonment, and that must be modified by a special entry, which shall protect the debt- or’s body. The plaintiffs will thus have their judgment, and the defendant, the protection asked for in his plea.

This is an action of debt on judgment. The defendant, to protect his person against execution, interposes a plea of a discharge, obtained under the act entitled, “ An act to abolish imprisonment for debt in certain cases.” The plaintiffs reply in substance, that on the day appointed for the appearance of the creditors to shew cause, against the discharge, one Judd, a creditor of the defendant, appeared to oppose, and commenced his opposition to the said discharge, and that the defendant, “ in order “ to induce the said Judd to withdraw his opposition, offered to, “ and did secure to be paid to him, the one half of his debt;” and he thereupon withdrew his opposition, and the defendant obtained his discharge. Issue was taken on this replication, and a verdict was found for the plaintiffs. The defendant now moves in arrest of judgment, or for some order of the court, directing an entry on the record, qualifying the judgment to be entered for the plaintiffs, so that no execution shall issue thereon against his person.

By the act, under which this discharge was obtained, [sess. 42. c/t. 101, s. 2.] it is enacted, that the insolvent, on presenting his petition, shall make oath, among other things, that he has not settled with any of his creditors with a view to obtain (he benefit of the act. Public notice is then directed to be given to the creditors of the insolvent, to show cause against his discharge, on a day to be appointed, and if no causé be shown, and the officer to whom the petition is presented, “ shall be satisfied that the in sol- “ vent hath in all things conformed to the provisions of the act,” he shall direct an assignment to be made of the insolvent’s estate. The 3d section directs the discharge to be granted, upon proof of such assignment; and declares, that the discharge so granted, “shall be conclusive evidence in. all courts within this state, of

p. 645

“ the facts therein contained.” By the 5lh section, it is enacted, that the discharge shall be void, for several causes particularly specified therein, among which, are the commission of any perjury by the insolvent, and the concealment of any of his estate or effects.

It is contended, on the part of the defendant, that the discharge cannot be impeached or avoided for any cause, other than those particularly enumerated in the 5th section of the act. This position appears to be fully supported by the case of Lester v. Thompson, [1 J. R. 300.] In that case, the discharge relied on, was obtained under the general insolvent act, which requires the assent of a portion of the creditors of the insolvent to the granting of his discharge. The 13 th section of that act [1 R. L. 466.] enumerates the causes which shall render a discharge void, and its provisions are similar to those of the 5th section of the act now under consideration, as far as the nature of the proceedings under the respective acts Will admit. In Lester v. Thompson, the fraud alleged against the discharge, was one not enumerated in the act, as it then stood. The plaintiff there contended, that any fraud on the part of the insolvent, in obtaining the discharge, would vitiate it. But the court said, that its validity could not be contested on any ground, other than those expressly reserved in the act itself. This seems to be fully in point in the present case.

It has frequently been decided, as suggested by the plaintiffs’ counsel, that notes or securities given to a creditor by the insolvent or others, as a consideration for withdrawing his opposition to the discharge, are void, as being against the policy of the law. That principle cannot, however, be applied to the present case. The validity of the discharge itself, rests upon the express provision of the statute, A note, madé under the circumstances above mentioned, is held to be void by the principles of the common law.

,The plaintiffs further contend, that the facts set forth in the replication, show, that the insolvent was guilty of false-swearing, within the spirit and meaning of'the 5th section of the act. The oath taken, by the insolvent, at the time of presenting his pet.i

p. 646

tion, was, that he had not settled with any of his creditors, with a view to obtain the benefit of the act. The facts set forth in the replication, certainly show a settlement with Judd, within the fair import of that clause of the oath. But we are not at liberty to refer the party’s oath to a period different from that fixed by the statute. It was strictly true, for aught that appears at the time it was made, and acted on by the Recorder, and it would be over-leaping the plain terms of the statute, to refer it to a subsequent period, with a'view to falsify it. In this respect, the case differs from Robson v. Calze, [Doug. 228,] cited by the plaintiffs’ counsel. There, the affidavit of the party was true, as he supposed, when it was sworn to, but known by him to be talse when laid before the Lord Chancellor, for the allowance of the bankrupt’s certificate.

It is again contended by the plaintiffs’ counsel, that the facts set forth in the replication, amount to an averment, that the insolvent had concealed a part of his effects. The allegation is, that he had secured to be paid to Judd a portion of his debt, and it is said, that we must intend that such security was given by an appropriation of the insolvent’s own estate. Such intendment, I apprehend, cannot fairly be made. The security given to Judd, may have been by the intervention of some friend, and this will be presumed to have been the case, where a contrary intendment will charge the party with fraud.

On the whole, I am of opinion, that upon this record, the defendant is entitled to the protection of his discharge, notwithstanding the finding of the issue against him. The plaintiffs’ judgment for the debt, must be so modified, as that no execution can issue against the defendant’s person, and a special entry must be made on the record to that effect.

The defendant’s counsel, in the first instance, moved for judgment “non obstante veredicto, or for such other rule, or order, as the “ court might grant.” They then contended, that the facts stated in the replication were all immaterial, and that, therefore, the de

p. 647

fendant might have judgment to the extent of his plea, and cited Whittemore v. Adams, [2 Cowen’s R. 626.]

Mr. Tallmadge, contra, contended, that the defendant could in no case, move for judgment, non obstante veredicto. It is the privilege of the plaintiffs to make this motion, while the defendant, on his part, is allowed to meet corresponding defects by a motion in arrest. In all cases where this motion prevails, a repleader may be awarded, and it is only made in cases of issues palpably immaterial.

The Court ruled, that the defendant could not move for judgment, non obstante veredicto,^[1] in a case where it was clear that the plaintiffs were entitled to it. His object was, not to enter up a judgment in his own favour, but to cause that of the plaintiffs to be modified to the extent of his plea, which claimed nothing more than a personal privilege. They therefore refused that motion, and permitted the defendant to seek for relief in some other form. The defendant, therefore, subsequently made the motion report-in the case above.

[E. Curtis, Att’y for the plffs. E.

* Vide Smith v. Smith, 4 Wend. R. 468.