Davis' Executors v. Cathey , 1 Stew. 402 ( 1828 )

JUDGE WHITE

delivered the opinion of the Court.

Whethek we apply this demurrer to the plea or carry it back to the declaration, it is obvious that the point presented for our consideration is' simply this, whether the fraudulent act of the debtor in not rendering a true schedule of his property to the Judge, before whom he took the oath of insolvency, and obtained a discharge under the provisions of the act of 1821, ^a can subject his security to suit upon the bond, when the latter had no ■agency in the fraud? On the part of the plaintiff, it is urged that the security binds himself in such a case, not merely for the formal appearance and rendering of a schedule by the debtor, but for the honesty of his principle in the transaction; and consequently, if the debtor by fraud obtains a discharge, the security is, notwithstanding such discharge, liable upon his bond. On the contrary, it is contended that the discharge being the act of a Court of competent jurisdiction, it remains, while unre=-versed, valid so as to acquit the security from liability on the bond, unless he colluded with the debtor in pro-' curing the fraudulent discharge. In support of this last position, the case of Sims and Wire against Slacum ° has been relied on. That case was this: Sims as principal, and Wire as security, were bound to Slacum in a prison bound bond, taken under the laws of Virginia; the condition of which was, that Sims, the debtor, should keep within certain limits until discharged by due course of law. Sims was discharged by the proper authority, and went at large. A suit was instituted on this bond, and upon the defendants pleading this discharge, the plaintiff in the inferior court offered evidence tending to prove that it was obtained by several acts of fraud .on tbe part of the debtor. That Court upon this evidence chatg-ed tbe jury in effect, that those fraudulent acts on the part of the debtor would invalidate the discharge and render it unavailing as a defence to the suit.. A judgement was accordingly rendered for the plaintiff, and the case presenting this aspect taken to the Supreme Court of the United States. It was there determined that such a discharge, though obtained by fraud, ivas a discharge indue couise of law, and absolved the security from liability on the bond, unless he colluded with the debtor in the fraud; that an act, which was the result of a judgement of a Court of competent jurisdiction, was valid, though obtained by fraud, as to the rights of third persons who had not co-operated in the fraud. All this is admitted, but it is urged that the present case is so evidently dissimilar to that in Cranch, that the principles of the one do not apply to the other.

Upon examination of the Digest, it will be found that our statutes, previous to the one under which this bond-was taken, resemble in every material respect the law of Virginia, upon the construction of which the decision just, cited was rendered. Here, as in Virginia, the prison rules were allowed to unfortunate debtors, upon giving bond to keep within the same until discharged by due course of law. And the latter part of the thirteenth section of the act of 1807, provides expressly that such prisoners shall be entitled to the benefits of that act. These benefits are, as appears from the preceding part of the same section, the privilege of obtaining a discharge by rendering in upon oath a schedule of all their property for the benefit of their creditors. Then, accord-in® to the case cited, if a prisoner wore bv fraud to con-cení a portion o! his property, ac-d yet offs ct his u’charge by a false schedule and 01th, this discharge would, bevun-l all doubt, be a bar to an ration on the >■risc-', bound bond against bis sveut: y_ unless the b.t.ev hid an agency in procuring it; because it would fea b?.vhr though fyudideritiv obtained, in due course <■' lav; it onlv remains to see whether the set of 1321 and diis bond taken under it, are 'reed from the operation of 'be principles which rontu-1 die con, traedor of our piwi us statutes, made for the her* fit of insolvent debí rs. s» u of which the last act is mtusly amendatory. To this er.d, it will be proper to advert to some other m bicyh s than those already"mentioned, settled iu. the from (.u n 'h. There it was laid down that, in construing bos, ds dw.i by virtue of statutes made for the benefit of in-oL ecu iVorc rs, we rmiStva.ver lose Might of Te intention or ire a-1- tin en-selvas. Fuithermoie it was held, that the intention '/ ¡11 these statutes is not to increase the secvrities o> etib.rpc ,ie rights of the creditor, hut to promote the henefit of the debtor, by indulging him in the enjowneut of his y as Lr as compatible with the |.ro ious cla.m;. •■{ lbs editor. The principle applies with all its-meaning ..t; the act of lP.'-’l ; inasmuch as that act contemplates and :>1-lows the entire freedom from attest uf iht delito.' If he will give a bond with seeuiiti, to appear at a ti, o r. d place specified, and sunendet upon oath, :;s tcor',:--' by the then existing laws, a schedule of his pi opt r y tor d-e ■ benefit of his creditors, I "his law then, tested b this principle, will be seen 10 mean nothing rnoe tK.i, hose which it professes to amend, except a furTe5’ exemption of the debí or from imprisonment, it creates no re tv security for the creditor. The other statutes permitted the creditor to confine the body of his debtor wit.iin ihe bounds, upon security, till he should discharge hinr eli by a surrender of all his property upon oath. This allows the same, unless he will give bond and secuiiiy to smlen-der in like manner, in both cases the law expects a -"me and honest schedule, and to effect this, the solemn obligations of an oath arc required. But it is grafted that if a debtor within prison rules obtains his discharge by a false schedule, or other fraudulent means, his security is not liable to the creditor. Why then should Ik i o*\ in a case like the present, be exempted ? The discharge is as much the act of a competent authority in the one case as in the other, and therefore should operate alike to his benefit in each cáse, if he has not joined in the fraud,

This view of the subject is strengthened by the fact that the statute requires notice to be given to the creditors of the time and place of procuring the discharge. Such a provision in effect makes them parties to the question of discharge, and has no meaning unless it is intended to arm them with the privilege of examining and questioning the correctness of the schedule. It is also more rational to confide this matter to the creditors than the security, because they are presumed to know more about the property of their debtor with whom they have debts and made contracts, and to be more interested in an honest surrender of it, than the security can be. A different doctrine too would result in this, that the smallest degree of dishonesty on the part of a debtor in rendering his schedule, would subject an innocent security to the payment of the whole debt. Such liability once established and known, would prevent all but the most incautious from subjecting themselves to it; and the inevitable .consequence would be, that this law, intended to favor and enlarge human liberty, and not to give new securities to creditors, would be mainly if not entirely defeated in its benevolent purposes. I am then of opinion, that a discharge of the debtor under the provisions of the act of 1821, though fraudulently obtained by him, but without the collusion of his security, exempts the latter from liability upon his bond, and may therefore be pleaded in bar to such an action as the present. And in this opinion the Court are unanimous.

Judges Crenshaw and Perry not sitting.

Judgement affirmed.

a 0r,nws AU.320.