IN BE DOUGLASS.
the creditor's part, and the subsequent waiver of the security, by proving the debt as an unsecured one when it was manifest that the mortgage could not be enforced, does not condone or excuse it. The statute is peremptory, and declares that such a creditor "shall not be allowed to prove for more than a moiety of his debt." The taking of such security was also an unlawful preference as against the creditors of the firm, because, in effect, it was an appropriation of so much of the separate estate of Parker to the payment of Irvine's debt, to the prejudice and wrong of the other creditors of the· firm, to whom any surplus of such estate, after payment of his individual debts, justly belonged.
(District Oourt, W. D. PennsylfJania. April 1,1882.)
ANNuL. A creditor having a provable debt may make application to have the bankrupt'sdischarge annulled. To enable him to contest the validity of the discharge, proof of the debt is not a sine qua non.
EFFECT OF DELAY.
In the ahsence of some special ground of estoppel, mere delay, if it does exceed two years, will not defeat an application to annul a discharge.
8AME-CREDITOR, WHEN EsTOPPED. .
Where specifications of opposition to a discharge were filed by certain creditors, and, after pending in court fOr a year, were withdrawn and the bankrupt discharged, another creditor, who was represented in t,he bankruptcy proceedings by the same solicitor who acted for the objecting creditors, will not be heard to assert personal ignorance before the gral;lting of the discharge of the matters contained in said specifications, nor permitted to set them up as grounds for avoiding the discharge. 4. B.um-ABSENTPROOURED BY FRAUD. If the assent of a creditor to a discharge was comlptly prol1ured. and this is assigned as a ground for annulling the same, it is no al18wer to sa,)' that the assen,t of that creditor was altogether unnecessary.
Neilllt Heywang and W. K. Jennings, for creditor. John M. Kennedy, for bankrupt. ACHESON, D. J. On February 25, 1881, Mrs. Nannie Church, a creditor of the bankrupt, presented her petition praying the court to annul the discharge which was granted totha bankrnpt on March 1879, the !petition setting forth the grounds of avoidance. The bank-
rapt has moved the court to dismiss the petition, and assigns anum. ber of reasons in support of his motion. In 80 far as these reasons touch the question of Mrs. Church's proof of debt, I think they are not well founded. Any creditor "whose debt was pJ:oved or provable against the estate in bank· ruptdy," may contest the validity of a discharge. Rev. St. § 5120. Proof of debt is not a sine qua non. Mrs. Church is a creditor of the bankrupt, confessedly. Hence it is immaterial whether or not the proof she filed in court with her present petition is regular. Nor is it fatal to her case that her original proof of debt was rejected by the register, and his action confirmed by the court, for it was so rejected solely for informality. That it was a provable debt seems clear. But it is objected that Mrs. Church has been guilty of such unreasonable delay in filing her petition that for this cause alone it should be dismissed. But the statute provides thd a creditor who desires to contest the validity of a discharge on the ground that it was fraudulently obtained, may, "at any time within two years after the date thereof," apply to the court which granted it to annul the same. Now Mrs. Church's application was made within the statutory period, and that is enough. It is not for the court to shorten the limitation fixed by the statute. In the absence of some special grounds of estoppel, mere delay, if it does not exceed two years, will not defeat ,an application to annul a discharge. Hence, the further objection that Mrs. Church's petition does not speoify the time when she acquired knowledge of the alleged fraudulent acts, is not well taken. Her petition does allege that they were not known to her before the granting of the discharge, and this is sufficient under the terms of the statute. Section But a totally different question is presented by the objectiontpat, as respects the grounds for avoiding the "one" to "seven," inclusive, it is not competent for the petitioner to allege that she had no knowledge of them prior to the granting of the discharge; and that she cannot set them up to avoid the saJne. To appreciate the force of this objection; brief recital 'the is necessary:
Upon January 25, 1878, the return-day of the order to, show cause Why the bankrupt's prayer. for his diseharge should not be granted, Roger Sherman, Esq., appeared before the register as solicitor, and in behalf of certain credit. ors of the bimkrupt, viz., Emma Leonhart, Orville B. Crareus, 'J. Smyth. Charles J. Carson, and the Second National Bank of Titusville, in opposition to the bankrupt's discharge; and on the eleventh of February, 1878, he filed, in behalf of said named creditors, written specifications of objections to
the discharge, which the court, on March 29, 1878, ordered for trial by jury at the next term. These specifications embraced, in detail, all the matters set forth in Mrs. Church's petition, exclusive of what is contai.ned in her eighth ground of avoidance, for her sixth Ktound rests upon the same matter as the fifth, and these two go together. On January 29, 1878, at an adjourned hearing of the order to show cause, Roger Sherman, Esq., as solicitor for and in behalf of Mrs. Nannie Church, appeared before the register, and presented her proof debt agai.nst the bankrupt's estate, and asked that it be allowed and computed in determining the number and amount of assets necessary to the discharge. The register's report, as to the statutory number and value of the assets, was filed in court February 23, 1878. By this report it appears that the register, in his computation, rejected Mrs. Church's proof of debt for informality. This report was confirmed by the court March 6, 1879. On the same day, the said named objecting creditors, by a writing filed in court, signed by their solicitor, Roger Sherman, Esq., withdrew their specifications of opposition, and thereupon the discharge was wanted. It further appears. that, under an order of court made at the instance of some, of the creditors, the bankrupt had been examined before the register. That examination, which was filed in court on February 23, 1878, relates to most of the transactions and matters specified in Mrs. Church's petition. Other persons bad also been examined tonching some of said transactions, and their testimony was then on the files of the court.
In view of these facts, can Mrs. Church reopen the controversy tonching the transactions to which the said specifications of objection to the bankrupt's discharge related ?ls it allowable to her to assert that she was personally ignorant before the discharge was granted of the said matters? These questions, it seems to me, must be answered negatively. Mrs. Church was not only a party to the bankruptcy proceedings in the general sense in which all notified creditors of a bankrupt may be said to be parties, but she actively participated therein. Pending the application for the bankrupt's discharge she appeared by connsel before the register and presented her proof of debt, and songht to have it anowed and computed against the bankrupt. A few days thereafter the said specifications of objection were prepared and filed by her own solicitor, Mr. Sherman, in the names, it is true, of other creditors. That Mr. Sherman was actirig as· Mrs. Church's solicitor in these bankruptcy proceedings down until the time of the discharge, is indisputable. His kriowledge; therefore,nnderall the circumstances, niust be his client, Mrs. Church. Barnes v. McClinton, 3 Pen. & Watts;. 67 ; The Dist'illed Spirits Case, 11 Wall. 356. Upon such a state of facts as we have here, it would be very oppressive upon a bankrupt to' permit a creditor in the situation of Mrs. Church to go back of the order of discharge. to litigate afresh
questions which had been fully raised upon the record and disposed. of. I am of opinion that it cannot be done. But the eighth ground for annulling the disoharge set forth in the petition is new, the allegation being that the bankrupt influenced the above-named objecting creditors to cease their opposition to his discharge, and procured their assent thereto, by paying them a money consideration. As to the truth of this charge I think Mrs. Church is entitled to be heard. It has been already shown that her application was not too late, and that her want of prior knowledge as respects this particular matter is sufficiently averred. It has indeed been urged that the assent of said creditors was not necessary to secure the discharge, the record showing that the bankrupt had the statutory quorum of assents without the opposing creditors. But this is not a satisfactory answer. In Re Palmer, 14 N. B. R. 437, it was held by Chief Justice Waite that a discharge must be refused where the assent of a creditor was procured by a pecuniary consideration, although his assent was altogether unnecessary. Moreover, the substance of the charge here made is that the withdrawal of the specifications of objection was corruptly procured. The petition in this regard brings the case clearly within the eighth division of section 5110 and of section 5120, Rev. St. And now, April!, 1882, the grounds of avoidance set forth in the petition of Mrs. Nannie Church, numbered from 1 to 7 inclusive, are overruled, and as to them the motion to dismiss is allowed; but as to the residue of the petition the motion is denied.
& SON, Bankrupts.
April 18, 1882.)
(DlItn'ia OO'Urt, W. D. P6nn8ylfJania.
BANKRUPTcy-PARTNERSHIP WITH INll'ANT SON-FIRM PROPERTY.
A father formed a mercantile copartnership with an infant son, in his twentieth year, the father contributing his stock of merchandise, and some book accounts, and the son his time and services, each to. have a haif interest. Thenceforth the business was conducted in the name of and by the firm openly and notoriously, and with the knowledge oftha father's individual creditors,for more than a year, during which time the old stock was disposed of, and a new stock" bought by the firm very largely on credit. One of the old individual creditors of the father then levied. upon the new stock, whereupon the partners, upon their joint petition, (which did not disclose the son's infancy,) were adjudged bankrnpts. The transaction between father and son was free from actual fraud, uut the register in Lankruptcy found it was constructively fraudulent as