Sanborn v. Creditors

By the Court, Sanderson, J.:

This is a proceeding under the statute for the relief of insolvent debtors and the protection of creditors.

The discharge of the petitioner was opposed by one of the creditors upon the ground that he was possessed of property which he had fraudulently omitted from his schedule. To this accusation of fraud the petitioner made no answer, and the creditor moved for judgment of guilty, as in case of default, which was denied. Thereupon the petitioner asked leave to amend his schedule by adding thereto a list of property which had been omitted when his schedule was first prepared, because, as alleged, he supposed, and was advised by counsel, that he had no legal or valid claim thereto. This motion being resisted by the opposing creditor, was denied. Thereupon the petitioner moved that he have leave to withdraw his petition, and that all the proceedings be dismissed, which motion was also denied, but the Court, immediately thereafter, of its own motion, and for the reason that the petitioner had failed to answer the accusation of fraud, ordered the entire proceedings to be finally dismissed. From this order the opposing creditor has appealed.

The only points made on the appeal are: first—that the order of dismissal should have been so worded as to retail, the property of the insolvent for distribution among his creditors; and, second—so as “to forever deprive the insolvent of the benefit of the laws passed for the relief of insolvent debtors in this State;” which mean, if we understand them, that there should have been no order of dismissal at all, but a final judgment, denying the petitioner a discharge from his debts, and forever depriving him of tho benefit of all laws which have been or may be passed in this State for the relief of insolvent debtors, yet accepting the surrender of his estate and distributing it among his creditors; which, we think, would be a very novel judgment, and one not authorized by the statute. The statute, as its title imports, was intended for the relief of insolvent debtors and the protection of creditors. The “relief” and the “protection,” for which it provides, proceed pari passu. If the debtor, for any cause, is entitled to no “ relief,” the creditors are entitled to no “protection,” for they stand in need of none, except such as is afforded by the general laws in relation to the collection of debts. Hence, if, upon the trial of an accusation of fraud, the debtor is found guilty, the final judgment is that his discharge be denied, and that he be forever deprived of the benefit of the laws passed for the relief of insolvent debtors in this State. • (Sec. 23.) With this judgment the entire proceedings terminate, and the relation of the petitioner and his creditors in respect to each other, and to the estate of the former, remain as at the commencement, except that the petitioner becomes liable to the pains and penalties provided in the twenty-fifth section.

If the Court below committed any error, as against the appellant, it was in denying his motion for judgment (of the character above indicated) upon the failure of the petitioner to answer the accusation of fraud within the time fixed by the Court. •

What course is to be pursued where the petitioner fails to answer an accusation of fraud, the statute fails to provide in terms, yet we think it can be readily inferred. The statute does not authorize a judgment against the petitioner of the character already indicated, merely upon his failure to answer the accusation of fraud. It only provides that after having received the insolvent’s answer to the accusation the Court shall order a jury to be summoned for the purpose of trying the issue thus joined, and if the jury find the accusation to be true, that the insolvent shall forever be deprived of the benefit of the laws passed for the relief of insolvent debtors in this State, which is to say, that a judgment to that effect shall be rendered against him. Thus no power is given to the Court to adjudge him guilty of fraud, except upon the verdict of a jury, upon an answer or plea of not guilty, and no power is given to the Court to compel him to answer, or to answer for him. Such being the case, it follows that the failure, or refusal, of the insolvent to answer amounts to nothing more than a failure to prosecute his proceeding, for which, as in all other cases, the Court may enter a judgment of dismissal, as was finally done in the present case. Of such a result the creditors cannot complain, for the proceeding being discontinued they are at liberty to proceed in the ' ordinary way to subject the property of the debtor to the payment of their claims. The creditors, as such, are interested only to the extent of defeating the discharge of the insolvent debtor; the.remaining consequences are in the nature of punishment for crime, and lie between the insolvent and the people of the State.

'Whether, after an accusation of fraud has been made, the insolvent can be allowed to amend his schedule, we need not-determine. If the Court below erred in not allowing it to be done in this case, the error was not against the appellant, but the respondent, who has not appealed.

Judgment affirmed.