Fell v. Cook , 44 Iowa 485 ( 1876 )

Rothrock, J.

I. The notes upon which suit is brought are dated October 23, 1869.

1. promissory eration:°d!s-" ■ kanifruptoy. The defendants exhibited and introduced in evidence orders of discharge in bankruptcy issued from the District Court of the United States for the Southern District of Ohio, dated March 31, 1869. 'It appears from the evidence that the notes in question were given for a pre-existing debt contracted in 1867, which was scheduled and proved in the bankruptcy proceedings.

It further appears from the evidence that plaintiffs reside in the city of Philadelphia, and at the time of the bankruptcy proceedings'tlie defendants also resided at that place, and after defendants obtained their discharge in bankruptcy the plaintiffs instituted a proceeding in said bankruptcy court to set aside said discharge and adjudication on the ground that the District Court for the Southern District of Ohio had no jurisdiction, and that said discharges were void bj*- reason of being obtained by imposing on said court jurisdiction which it did not possess. Pending this proceeding and after some testimony had been taken in the form of depositions, these notes were executed in consideration that said proceedings should be dismissed and no further effort be made to set aside the discharges in bankruptcy. The defendants supposed that these notes were valid' and have since paid another note of $318, given to plaintiffs at the same time and under the same circumstances as the notes in suit, and they wrote frequent letters promising to pay the latter. A short time before the commencement of the suit, defendants were advised that said notes were invalid and not binding on them, since which time they have resisted payment. The evidence shows no duress in its legal sense. It. merely shows that plaintiffs instituted the proceedings to revoke the discharges in bankruptcy and represented to defendants that they could make them trouble, and as an inducement to the defendants to give these notes, plaintiffs abandoned all efforts to impeach the adjudication in bankruptcy.

The evidence establishes the above facts clearly and without conflict, and the question to be determined is, are the notes void?

Section 5131, Rev. Statutes, U. S., provides, that “ Any contract, covenant, or security, made or given by a bankrupt or other person with, or in trust for any creditor, for securing the payment of any money as a consideration for or with intent to induce the creditor to forbear the opposing the application for discharge of the bankrupt shall be void.”

If these notes had been given before the date of the discharge in bankruptcy as an inducement to withhold opposition to the discharge, they would unquestionably be void under the provisions of the statute just cited. Such a promise is a fraud upon the other creditors of the bankrupt, and is contrary to public policy.

It is contended, however, that these notes are not within the statute as they were made after the defendants procured their discharge in bankruptcy.

Section 5120 of the Revised Statutes of the United States, provides that “Any creditor of a bankrupt, whose debt was proved or provable against the estate in bankruptcy, who desires to contest the validity of the discharge on the ground that it was fraudulently obtained, may at any time within two years after date thereof apply to the court which granted it to annul the same.”

Any fraud on the part of the bankrupt which would have prevented a discharge in the first instance is available in this supplemental proceeding, and will annul the discharge, provided it be shown that the complaining creditor had no knowledge of the fraud until after the granting of the discharge.

Eor two years, then, succeeding the discharge, it is merely provisional as to creditors who may be able to show fraud. Its effect as to them is the same as if they were seeking to defeat a discharge in the first instance, and if after instituting proceedings to annul, the bankrupts are induced by a withdrawal of the same, to make a contract by giving notes, they' are as invalid as if made before discharge.

2. —:-; Slll)S6C[U61lt promise. II. It is urged by counsel for plaintiffs that the defendants should be held liable by reason of the subsequent promises to pay the notes. We very much question whether x •/ v x a promise made to pay an obligation which the law declares to be void as against public policy can be binding, but it is a sufficient answer to the claim made to say that this suit is founded upon the notes, and not upon a cause of action arising by reason of a new promise.

Reversed.