In re Marshall Paper Co.

• Decision Date: 07 June 1900
• Docket Number: 299,301.
• Citation: 102 F. 872
• Parties: In re MARSHALL PAPER CO. v. TRAIN. MARSHALL PAPER CO.
• Court: U.S. Court of Appeals — First Circuit

102 F. 872

In re MARSHALL PAPER CO.

MARSHALL PAPER CO. v. TRAIN.

Nos. 299, 301.

United States Court of Appeals, First Circuit.

June 7, 1900

M. F Dickinson, Jr., and Hollis R. Bailey, for appellant.

George R. Nutter and Edward F. McClennen, for appellee.

Before COLT and PUTNAM, Circuit Judges, and WEBB, District Judge.

COLT Circuit Judge.

This appeal and petition relate to two orders or decrees entered by the district court in the matter of the Marshall Paper Company, bankrupt. 95 F. 419. The question raised by the appeal is whether the order of the district court refusing to grant the petitioner a discharge was proper.

The district court based its decision on two grounds: First, it doubted, at least in some cases, whether a corporation was entitled under the act to a discharge; second, it held that the court could refuse a discharge for causes other than those mentioned in section 14 of the act, and it declined to grant a discharge in the present case by reason of the injurious effect it might have upon the creditors' right to enforce the secondary liability of the directors of the corporation under the Massachusetts statute.

We think a corporation is entitled to a discharge under the bankrupt act of 1898. The provisions of the act, supplemented by its legislative history, forbid, in our opinion, any other conclusion. By section 1, par. 19, it is declared that 'persons' shall include corporations, except where otherwise specified; by section 14a, that any person may file an application for a discharge; and by section 4b, that any corporation may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this act. As any person may file an application for a discharge, and as a corporation is a 'person,' within the meaning of the act, and entitled to the benefits of the act, it follows that a corporation is entitled to a discharge under the act.

The bankrupt act of 1867 expressly excepted corporations from the right to a discharge. Rev. St. Sec. 5122. This exception was retained in the earlier drafts of the present act, but it was stricken out before the act became a law. To quote from Judge Lowell's opinion in the district court:

'Some earlier drafts of section 14 of the present act-- drafts which in other respects resemble almost literally the section as passed-- began with the words, 'Any person not a corporation.' See S. 1694, 52d Cong., 1st Sess Sec. 50; H.R. 9348, 52d Cong., 1st Sess., Sec. 13; S. 1035, 55th Cong., 2d Sess., Sec. 13, of the substitute. See, also, the similar change made in drafting section 17 of the act.' 95 F. 421.

Where a former act contains an express exception, and the first drafts of a later act relating to the same subject contain the same exception, and this exception is omitted from the act as finally enacted, and other provisions in the act are made to conform with this change, we cannot but conclude that congress intended to make the change, and the courts should not seek to render it nugatory by a forced construction.

The bankrupt, under section 14, is entitled to a discharge as a matter of right, provided he has not committed any of the offenses therein enumerated. Section 14b reads as follows:

'The judge shall hear the application for a discharge, and such proofs and pleas as may be made in opposition thereto by parties in interest, at such time as will give parties in interest a reasonable opportunity to be fully heard, and investigate the merits of the application and discharge the applicant unless he has (1) committed an offense punishable by imprisonment as herein provided; or (2) with fraudulent intent to conceal his true financial condition and in contemplation of bankruptcy, destroyed, concealed, or failed to keep books of account or records from which his true condition might be ascertained.' By this provision, the judge shall hear the application and discharge the applicant unless he is found guilty of some one of the prescribed offenses. The court is not authorized to deny the application for discharge upon a ground not set forth in this section. In re Black (D.C.) 97 F. 493. A refusal to grant a discharge cannot be said to rest in the discretion of the judge. The words, 'investigate the merits of the application,' must be taken in connection with the context. To construe these words as if they stood alone and disconnected from what follows would be to leave the whole question of discharge in the discretion of the court. Looking at the entire section, we do not think these words will bear such a construction, however desirable it may seem to the court in a particular case to so interpret them. It seems to us that congress in this section clearly specifies the only causes for which a discharge can be denied, and leaves to the court the sole duty of deciding, after due hearing, whether such cause exists.

When the bankrupt files his petition for a discharge, the only facts pleadable in opposition thereto are those which show that, under the provisions of section 14, he is not entitled to a discharge. In other words, it must be shown that he has committed some one of the offenses described; otherwise, the judge 'shall' discharge the applicant.

The right to a discharge, and the effect of a discharge, are wholly distinct propositions. The proper time and place for the determination of the effect of a discharge is when the same is pleaded or relied upon by the debtor as a defense to the enforcement of a particular...