The Commercial Bank of Manchester, Complainant and Appellant v. Henry Buckner

• Decision Date: 01 December 1857
• Citation: 15 L.Ed. 862,61 U.S. 108,20 How. 108
• Parties: THE COMMERCIAL BANK OF MANCHESTER, COMPLAINANT AND APPELLANT, v. HENRY S. BUCKNER
• Court: U.S. Supreme Court

61 U.S. 108

20 How. 108

15 L.Ed. 862

THE COMMERCIAL BANK OF MANCHESTER, COMPLAINANT AND APPELLANT, v. HENRY S. BUCKNER.

December Term, 1857

THIS was an appeal from the Circuit Court of the United States for the eastern district of Louisiana.

It was a bill filed by the bank upon the equity side of the Circuit Court, against Buckner, under the circumstances fully detailed in the opinion of the court.

It was argued by Mr. Day for the appellant, and by Mr. Benjamin and Mr. Bayard for the appellee.

Mr. Day filed an elaborate printed argument, consisting of more than one hundred pages. Of the several points of the case included in this argument, it is necessary to omit the discussion of the following propositions, viz:

1. Are the charges of fraud sufficient to invalidate the discharge in bankruptcy?

2. The equity side of the court has jurisdiction over the case, upon the ground of its general jurisdiction over frauds.

3. Whether the case made by the bill is of such a nature and character as to give equity jurisdiction.

4. Nor does the fact that the fraud from which relief was sought, is fraud in obtaining a judgment in discharge in bankruptcy, at all militate or vest the chancellor of jurisdiction.

Mr. Day then sustained the right of the Circuit Court to interpose in this case, upon the ground that the discharge in bankruptcy should be treated as a nullity.

True, a court of equity does not presume to direct or control a court of law; but, it considers all the equities between the parties, and acts upon the persons of the party seeking against good conscience to avail himself of an advantage which, under all the equitable circumstances of the case, it is against conscience for him so to do, and restrains or deprives him of such advantage. (20 Conn. R., 556; 2 St. Eq., secs. 875, 194; 1 Atk., 630; 1 Sch. and Lef., 205-'6; 2 P. Wm., 424; 2 Ves. jun., 135; 3 P. W., 395.)

And so, even at law, (notwithstanding the general rule that no court, except an appellate one, has authority or power to set aside the judgment of another court of competent jurisdiction, for error or irregularity,) where the main object, as in this case, is not to annul the judgment of another court, but simply to avoid the effect of such judgment when it is set up as a bar, by replying that it was obtained by fraud, the party has a right to show, in any court, that the judgment was obtained by fraud and imposition, and thus indirectly to treat it as a nullity. (2 La. R., 139-'40; 11 ib., 521; 25 Vt. R., 339; 2 Kernan's R., 165, and auth. cited; 3 Cranch's R., 300, 307-'8, 310-' 11; 3 Foster's N. H. R., 535; 3 Sum., 604; Shedden v. Patrick, 28 Eng. L. and Eq. R., 56, and the numerous cases cited by counsel on page 60; 72 Eng. C. L., 513; 15 J. R., 121; 6 Pet., 729-'30; Don v. Lipman, 5 Clark and Finn. R., 1, 20, 21; St. Conf. L., sec. 603.)

For if such be not the law, then a party would be allowed to profit by his own fraud, 'a position altogether inadmissible.' (Per Thompson, C. J., in Borden v. Fitch, 15 J. R., 121.)

But, be this as it may on general principles, yet, according to the express provisions of the bankrupt act, it is competent for any court to treat the discharge and certificate, when interposed as a barrier to prevent a recovery on a pre-existing demand, as null and void, whenever the fraud is shown. (5 U. S. Stat., 443-'4; 8 Ired. N. C. R., 142; Mabry et al. v. Herndon, 8 Alab. R., 848, 864; 11 Humphrey's R., 289; 3 Dess. R., 269-'70; 3 Cranch R., 300, 307; 9 Ga. R., 9, 14, 15; 15 Alab. R., 553-'4; 2 Zab. R., 541; 25 Vt. R., 339. See also Robt. Fraud. Conv., 520; 1 Dall., 380; 1 Bin. R., 263; 3 Har. and J., 13; 6 ib., 82; 5 Bin. R., 247.)

Fraud vitiates everything into which it enters. It is like the deadly and noxious simoom of arid and desert climes. It prostrates all before its contaminating touch, and leaves death only and destruction in its train. No act, however solemn, no agreement, however sacred, can resist its all-destroying power.

All acts into which fraud enters are nullities.

Neither a bona fide debt nor an actual advance of money will sustain a security infected with fraud. (Per Sandford, Chancellor, 2 Sandf. Ch. R., 631.)

In the case of Downer v. Rowell, (25 Vt. R., 339,) the Supreme Court of Vermont, in construing the bankrupt act, says: 'The statute in effect declares, that in case the discharge and certificate were superinduced by fraud, they may be impeached on that ground, as being null and void.'

And if a judgment is null and void, it is the same thing as though it had never been rendered, and is 'unavailable for any purpose,' (Per Thompson Ch. J., in Borden v. Fitch, 15 J. R., 140; 11 S. and Mar. R., 464; 11 La. R., 533; 11 Eng. Ch. R., 448-'9;) and may be collaterally disallowed and disregarded. (Slocum v. Wheeler, 1 Day's Con. R., 429, 449; 6 How. Miss. R., 285; 8 Sm. and Mar. R., 519.)

Such being the law, then, there can be no ground for saying that the discharge and certificate should have been annulled by a direct action, instituted for that purpose, in the bankrupt court. (2 Kernan's R., 166; 8 Alab. R., 855, 864.)

Indeed, it has been held, by high authority, that the District Court never had any jurisdiction to entertain such a proceeding. (Mabry et al. v. Herndon, 8 Alab. R., 855.)

But if it could be shown, or was conceded, that the bankrupt act gave such jurisdiction to that court, yet, as the act has been unconditionally repealed, with no saving clause in the repealing act, except for the purpose of finally completing and determining causes then pending, the District Court is clearly without any jurisdiction for such a purpose. (4 Seld. R., 265.) For the law is well settled, that whenever a statute from which a court derives its jurisdiction a repealed, the jurisdiction of the court is gone, even as to suits then pending, except so far as it is expressly saved by the repealing act, and that the original act conferring jurisdiction is to be regarded as though it had never existed. (Dwarris on Stat., 676; Miller's Case 1 Wm. Blak. R., 451; 4 Yeates R., 394; 5 Cranch, 281; 11 Pick., 350; 21 Pick., 373; 1 Hill, 324; 5 Blackf. R., 195; 15 Con. R., 242; 4 Humph. R., 427; 4 Seld. R., 265, 269.)

No action of nullity, then, was or could by any possibility be necessary to entitle the complainants to recover, either at law or in equity, on their original demands.

Nor was it at all necessary to apply to the District Court for leave to impeach the discharge and certificate. Chief Justice Ruffin, in 8 Ired. R., 142, says it is the duty of the court 'to hold a discharge obtained by fraud as ineffectual and void, whenever the fraud shall appear. The remedy of the creditor is not an application to the court of bankruptcy, upon the ground of fraud newly discovered, but by replying the fraud of the bankrupt to the plea of discharge, so as thereby to avoid the bar.' And the same doctrine is laid down by the Supreme Court of Alabama, in 8 Alab. R., 864.

In Sims v. Slocum, (3 Cranch, 300, 307,) Chief Justice Marshall says: 'When the person who has committed the fraud attempts to avail himself of the act, so as to discharge himself from a previously-existing obligation, or to acquire a benefit, the judgment thus obtained is declared void as to that purpose.'

And in Mabry et al. v. Herndon, (8 Alab. R., 856-'7,) Chief Justice Collier, also, in an elaborate opinion, said: 'Thus we see, that although the statute contemplated a boon to the debtor, viz: a release from indebtedness, it exacted, on his part, perfect integrity in yielding up everything that was liable to his debts. If this was not done, but something was wilfully withheld to which the creditors were entitled, the fact of concealment is denounced as a fraud; and upon its being made known, the court was required to refuse its sanction to the bankrupt's discharge. And if the proceedings are formally consummated by a final decree, and a certificate consequent thereupon, it is competent for any court of judicature, upon the fraud being established, to treat the certificate as a nullity.' (See also Mitf. Eq. Pl., 239.)

The Supreme Court of Tennessee, in the case of Gupton v. Connor, (11 Humph. R., 289,) well says: 'If the fraud appear pending his suit against his creditors, no decree of discharge could be made. If it appear afterwards, its effect is to annul and destroy the discharge and certificate, as though they had never been obtained.'

And in Cogburn & Powell v. Spence & Elliott, (15 Alab. R., 553-'4,) the Supreme Court of Alabama very truly remarks: 'The bankrupt act does not intend, nor in any manner undertake to restrain a creditor who has a cause of action against a bankrupt, from sueing him, although the bankrupt may have obtained his final certificate of discharge. It only gives the bankrupt a complete defence against the cause of action when sued. That the whole scope of the act was to furnish the bankrupt with a complete defence to suits brought against him, is still more apparent from the fact that the certificate is not a bar, if the debt is of a fiduciary character, or if the discharge be obtained by fraud. The act, therefore, only intends to arm the bankrupt with a perfect defence against all debts discharged by the certificate obtained in pursuance of the act. The creditor may, however, sue on his demand; otherwise, he could not dispute the bona fides of the certificate, and the bankrupt must rely on his certificate in bar of the suit.'

Chancellor Desaussure, too, in Lowe v. Blake, (3 Dess., 269, 270,) in relation to an insolvent discharge, uses this strong and forcible language: 'That in case there was any fraud or concealment in obtaining this discharge, this court is not bound to give effect to the discharge obtained in any other court. That it is essential to the jurisdiction of this court to detect fraud, and to prevent its having its intended effect; and even formal judgments at law cannot resist its all-searching...