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IN RE SCHWARTZ

November 12, 1936

In re SCHWARTZ


The opinion of the court was delivered by: BYERS

BYERS, District Judge.

Motion to confirm report of referee denying discharge.

The specifications as originally filed are four in number; the referee permitted an amendment to the third, by adding the name of a creditor to those said to have been omitted from the schedules; he also permitted a fifth specification to be added by amendment, specifying property alleged to have been knowingly and fraudulently concealed from the trustee with intent to hinder, etc., the items being articles of furniture, etc., covered by a chattel mortgage given to the creditor whose name was so added to the third specification.

 The first specification presents an interesting question of law, in that it is based upon a prior voluntary petition filed in this court by the bankrupt, in which the same debts were listed as those from which he now seeks discharge, although he did not obtain a discharge from them in the first proceeding, and the opportunity to apply therefor did not exist when the specifications in this proceeding were filed.

 The facts are that, on February 13, 1935, this bankrupt filed his petition in voluntary bankruptcy, was at once adjudicated, and the proceedings in due course were referred to a referee in bankruptcy. Those proceedings were abandoned; that is to say, the bankrupt never paid the indemnity to the referee in accordance with General Order X, as amended in 1933 (11 U.S.C.A. following section 53), and six months after the filing of the petition, namely, during the month of August, 1935, the referee filed a recommendation of dismissal.

 The referee here treats the first proceeding as one in which the bankrupt has been denined his discharge, and consequently he holds that no discharge can be had in this proceeding as to the debts that were scheduled in the first. This conclusion is based upon the decision in Freshman v. Atkins, 269 U.S. 121, 46 S. Ct. 41, 70 L. Ed. 193.

 That case involved successive bankruptcy proceedings separated by a period of seven years, and there were certain creditors common to both. In the first, an application for discharge had been made, and the referee had filed his report recommending that it be denied, but the report was not confirmed by the court until after the second proceeding had been instituted. The conclusion was announced that the pendency of the first application precluded a consideration of the second, as to the same debts, and many cases in the lower courts were cited to the same effect. The language following may be quoted: "A proceeding in bankruptcy has the characteristics of a suit, and since the denial of a discharge, or failure to apply for it, in a former proceeding is available as a bar, by analogy the pendency of a prior application for discharge is available in abatement as in the nature of a prior suit pending, in accordance with the general rule that the law will not tolerate two suits at the same time for the same cause."

 The question for decision here is whether the earlier proceeding initiated by this bankrupt falls within the above rule.

 The status of the first proceeding, upon the filing of the referee's recommendation of dismissal, was that the proceeding had terminated. It could have been the subject of an order of dismissal, which the court could have made whether the bankrupt opposed it or not. In re Crisp (D.C.) 239 F. 419.

 If the bankrupt had sought to reinstate the proceeding after its termination, he would have failed. Zimmerman v. Eden, 60 App.D.C. 338, 54 F.2d 449.

 An application for a discharge cannot be maintained separate and apart from a bankruptcy proceeding. It is merely relief which a bankrupt may seek as an incident to turning over his property to a trustee for equal distribution among his creditors.

 The court could not have entertained an application for discharge, after the bankruptcy proceeding initiated by the petition and adjudication had terminated, even though the bankrupt was responsible for that result. This must be clear within section 14 of the act, as amended (11 U.S.C.A. § 32), which is in part: "Any person may, after the expiration of one month and within twelve months, subsequent to being adjudged a bankrupt, file an application for a discharge in the court of bankruptcy in which the proceedings are pending * * *." (Italics added.)

 There was no proceeding pending after the referee noted the relinquishment. One was pending which was potentially adequate to support later steps, such as the meeting of creditors pursuant to section 55 of the act (11 U.S.C.A. § 91), and the application for discharge pursuant to section 14, and so continued until it became apparent, by the action of the referee, that for all purposes the proceeding had been abandoned and therefore had become incapable of supporting either or both of the said subsequent steps.

 Since the bankrupt could not have sought discharge after there ceased to be a pending proceeding and within the time limited by section 14, that is, by February 13, 1936, it is not perceived how he can now be said to have suffered a denial of discharge through "failure to apply for it within the statutory time" within the decision of Freshman v. Atkins, supra.

 It is thought that in this respect the present case is essentially different from Pollet v. Cosel (C.C.A.) 179 F. 488, 30 L.R.A. (N.S.) 1164, in which the petition for discharge in the first proceeding had been dismissed for failure to prosecute and appear for examination. And In re Fiegenbaum (C.C.A.) 121 F. 69, in which there had been a denial of discharge on the merits, in the first proceeding; and the like case of In re Kuffler (C.C.A.) 151 F. 12. And also In re Mayer (D.C.) 4 F.Supp. 203, in which it is assumed that no application was made at all for discharge in the first proceeding (the reference ...


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