In re H. Hurst — 7 Wend. 239

Majority

p. 239

In the matter H. Hurst, an insolvent debtor.

Headnote

An insolvent’s discharge will be set aside os fraudulent in law, where the insolvent, in contemplation of obtaining a discharge confesses a judgment, on which his property is sold, although it be confessed to a trustee for the benefit of all his creditors without preference; the judgment and sale under it being considered an assignment in fraud of the statute.

Certiorari in case of insolvency. Hurst presented his petition in May, 1830, to a commissioner, to be discharged as an insolvent debtor from the payment of his debts. On the day appointed for his creditors to shew cause, viz, in August, 1830, one of them appeared and objected to his discharge, on the ground that in the account of creditors exhibited, the consideration of the debts stated to be owing to several of them was not set forth. The commissioner, on proof that the omission was by mistake, permitted the account to be amended. The debtor was then sworn, at the request of the creditor, and examined, and it appeared that on the same day of presenting his petition, he confessed a judgment in favor of his mother, a woman 80 years old, which was forthwith entered up, an execution issued, and all his property, except some articles exempt by law, sold and nearly the whole of it bought in by his mother, and that it continues in his possession as before the sale. The property sold for about $200. The mother of the debtor

p. 240

is his principal creditor. The judgment was confessed with a vjeW) and preparatory to his application for a discharge as an insolvent debtor, and was confessed to his mother, as a trustee jfor all his creditors, without preference to any, and so expressed in the judgment. The commissioner granted a discharge, and the creditor sued out a certiorari.

J. L’Amourieux, for creditor.

J. V. N. Yates, for insolvent.

By the Court,

The discharge of the insolvent is sought to be set aside, on the ground that the confe ssion of the judgment was a jfraud upon the law, and on the' further ground that the proceedings should have been dismissed, because the consideration of the debts of some of the creditors was not specified in the original inventory.

It seems to be an answer to the latter objection, that the proceedings were amended, and the consideration inserted in the account before any investigation took place. Had the discharge been granted upon the defective proceedings, it would have been void, according to the act of 1817, Laws of 1817, p. 46, § 11; 3 Wendell, 344; this defect is not enumerated in the revised statutes, 2 R. S. 23, § 35, as one of the causes which shall avoid a discharge after it has been granted. The discharge, therefore, is valid, unless it be avoided for fraud, or unless the proceedings shall be set aside on the first mentioned objection.

On that point it seems to me that the mode of proceeding adopted in this case is against the policy of the statute, and if not prohibited in terms, is so by necessary implication. Such a proceeding is totally untiecessary, and cannot be intended to benefit the creditors generally. The confession of the judgment and the sale under the execution amount to an assignment, and according to the testimony, is an assignment to the principal creditor, for the benefit of the creditors at large. The insolvent thus appoints the assignee, when, by the statute, the assignee should be appointed by the creditors. The assignee appointed by the insolvent takes no oath; if appointed under

p. 241

the statute, he does. The former is accountable only in a court of chancery; the latter may be required summarily to account. The former controls only the property which is liable to execution: the latter receives the whole, and is clothed with powers by the statute to recover all debts and things in action, in like manner as the insolvent before his insolvency ; by the statute, certain debts have preference, 2 R. S. 46, § 32, which preferance is avoided by the mode adopted in this case. By the statute, too, the trustees are subject to the order of the supreme court, but not in the present mode. On the whole, it seems to meto be an effort on the part of the debtor-to make a different disposition of his property from that which the law makes in cases of insolvency, and therefore in fraud of the law.

I am of opinion that the commissioner erred, and that his proceedings should be reversed.