Alcott v. Avery

Appeal from an order of the vice chancellor of the eighth circuit. Subsequently to the entry and docketing of the decree for the deficiency in this case, Avery, one of the defendants, applied for and in March 1843 obtained a discharge under the bankrupt act. In November 1845 the complainants, without any previous application to the court for leave to take out execution against Avery or his property, issued aji.fa. against the real and personal estate of both defendants generally; including the real estate of which they were seized when the decree was docketed, in January 1840, or at any time since. Under that execution the sheriff levied upon the personal property of the defendant Avery which he had acquired subsequent to his discharge. Avery thereupon applied to have the execution set aside as against him, and for a perpetual stay of proceedings against him upon the decree, &c. In opposition to this motion the complainants produced affidavits tending to show that Avery’s discharge was procured by a fraudulent concealment of his property. The vice chancellor directed a reference to a master to take proof of the facts and circumstances stated in the affidavits ; reserving the decision of the questions involved in Avery’s application until the coming in of the master’s report.

The chancellor decided that where a suit is commenced against a bankrupt subsequent to his discharge, it is his duty *° set '*■ UP as a ^°^Rnco 60 as *° g¡ve the adverse party an opportunity to impeach it for fraud, if he wishes to do so. And that he must also set up the discharge in a suit pending against him at the time it is obtained, as a bar to the further continuance of the suit to obtain satisfaction of the debt of him personally, or out of his future acquisitions; provided the situation of the suit is such as to enable him to set up such defence.

That in cases of that kind the court will not relieve the bankrupt on motion vvhere he has lost the benefit of the discharge by his own neglect. But that where a judgment or decree obtained subsequent to the discharge would be binding on the defendant and his property, although he has had no

Irregular tob-sue execution on a decree 3 bank’

va lidity of defendant’s de-charge as a bankruf)t-

That it is irregular to issue an execution upon a judgment ° . * or decree which is prima facie no longer m existence as a subsisting debt against the defendant or his property, without a previous application to the court and upon due notice to the discharged bankrupt.

That the appropriate remedy of a complainant, in a suit in this court, where he wishes to contest the validity of the de- , _ tii , . fendant s discharge under the bankrupt act, and to obtain satisfaction of his decree out of his subsequently acquired property is to file a supplemental bill stating the obtaining of the decree, the alleged or pretended discharge of the defendant, and the fraud which renders it invalid; and praying that the •decree may be carried into full effect against the defendant and his property notwithstanding his alleged discharge. And that if the complainant wishes to protect and preserve his lien upon the defendant’s subsequently acquired real estate against those who might become bona fide purchasers thereof without notice of the alleged invalidity of the defendant’s discharge, he may file a notice of the pendency of such supplemental suit, in the county clerk’s office, as required by the statute.

And it seems that in a proper case this court might also air low the complainant to proceed by petition, for leave to take out execution upon the decree ; setting out in such petition, the fraud which renders the alleged discharge invalid, and giving due notice to the defendant of the time and place of presenting such petition, and serving a copy thereof upon him ; as, upon such a petition, if the alleged fraud was denied, the court could award an issue, or refer it to a master, to ascertain whether the fraud charged had been committed.

Order appealed from reversed, and execution set aside as to appellant; but without prejudice to the right of the complainants to contest the validity of the alleged discharge of the defendant as they may be advised. With leave to complainants, also, to file a supplemental bill to carry the original decree into effect notwithstanding the discharge ; or to apply to the vice chancellor, by petition, for leave to take out an execution against the appellant on such decree.