The opinion of the court was delivered by: WOOLSEY
The report of the special master is confirmed, and the recommendations therein made are in all respects approved.
The bankrupt may have his discharge.
I. The sole question involved in this very interesting motion is whether a composition effected between the bankrupt and his creditors in connection with a previous involuntary bankruptcy proceeding will, under section 14b (5) of the Bankruptcy Act, 11 USCA § 32 (b) (5), prevent his discharge in the present proceeding because a discharge herein is sought within six years of the order confirming the composition above mentioned. There is not any other ground for objection to the bankrupt's discharge.
The facts have been stipulated as follows:
"1. That on December 2, 1929 an involuntary petition in bankruptcy was filed against the bankrupt herein individually and as a co-partner in the firm of Kornbluth & Rothenberg.
"2. That as appears in the certified copy of the order of confirmation of composition in the said matter of Kornbluth & Rothenberg, a composition was confirmed by order of Judge Bondy, dated February 20th, 1930. It is agreed that the said certified copy of order of composition be marked in evidence as objecting creditor's Exhibit 1, of this date.
"3. On March 21st, 1931, the bankrupt herein filed a voluntary petition in bankruptcy in the United States District Court for the Southern District of New York.
"4. That the claim of the Manufacturers Trust Company, the objecting creditor herein, as filed herein, is based upon the unpaid settlement notes given pursuant to the composition in the matter of Nathan Kornbluth, bankrupt herein and Morris Rothenberg, individually and co-partners doing business as Kornbluth & Rothenberg."
Judge Bondy's order of February 20, 1930, confirming the composition offered by the bankrupt in connection with the involuntary proceeding of December 2, 1929, which is referred to in the second paragraph of the stipulation of facts, and which is submitted with the record by the special master, shows that the composition was for 100 per cent. of the bankrupt's liabilities, and was payable 17 1/2 per cent. in cash and 82 1/2 per cent. in notes of the bankrupt, payable at intervals during a period of four years. The notes maturing within the first fifteen months were indorsed by third parties; those of later maturity, amounting in all to 50 per cent. of the composition, were not indorsed.
The discharge was granted by the referee acting as special master.
II. The objecting creditor contends that under a proper construction of the provisions of section 14c of the Bankruptcy Act, 11 USCA § 32 (e), which reads, "The confirmation of a composition shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge," the bankrupt was granted a discharge in bankruptcy" on February 20, 1930, when the composition which he offered to his creditors was confirmed.
Therefore it is argued, because of the provisions of section 14b (5) of the Bankruptcy Act, he cannot be granted the ...