The opinion of the court was delivered by: RAYFIEL
This is a petition to review an order of Hon. Sherman D. Warner, Referee in Bankruptcy, dismissing the specifications filed by a creditor and granting discharges to the bankrupts.
The facts, as stipulated before the Referee, are as follows:
On September 1, 1953 the bankrupts' firm filed a petition for arrangement pursuant to Chapter XI, Section 322 of the Bankruptcy Act, 11 U.S.C.A. § 722. The said matter was duly referred to Hon. Samuel C. Duberstein, a Referee in Bankruptcy, who, after granting leave therefor, permitted the bankrupts to propose a second amended plan of arrangement. The said plan provided (1) for the payment of all priority claims in full, or in accordance with stipulations entered into between the bankrupts and said priority creditors, (2) for the payment to unsecured creditors of 100% of their claims in the following manner:
(a) 5% on January 15, 1954
(b) 24% in 12 payments of 2% each, payable quarter-annually thereafter, commencing April 14, 1954;
(c) 71% in 17 payments of 4% each, quarter-annually thereafter, commencing April 15, 1957, and one payment of 3%, payable on October 15, 1962.
The said plan provided (1) for the execution by the bankrupts of promissory notes to evidence the aforesaid indebtedness; (2) for the deposit of certain security, and (3) for the payment, in cash, of all administration expenses on the confirmation of the plan.
The said second amended plan was confirmed by the requisite creditors in number and amount, and an order confirming the same was signed by Hon. Samuel C. Duberstein on January 25, 1954. In conformity therewith, each creditor who had filed a proof of claim which had been allowed, received a promissory note, signed by the bankrupts, providing for the payment of his claim in full in the manner prescribed by the plan.
The creditors received payment of the installment of 5%, which was due on January 15, 1954, and four installments, each of 2%, which were due on April 15, 1954, July 15, 1954, October 15, 1954 and January 15, 1955, or a total of 13%. On October 7, 1955 an involuntary petition in bankruptcy was filed against the bankrupts. They duly consented to adjudication, and the matter was referred to Hon. Sherman D. Warner, Referee in Bankruptcy.
The first meeting of creditors was held and closed, and April 30, 1956 was designated as the last day on which creditors could serve and file specifications in opposition to the discharge of the bankrupts. On April 28, 1956 one Samuel Fishman, a creditor of the bankrupt, duly filed specifications of objection to bankrupts' discharge, to which the bankrupts have served and filed their answer.
The specifications of objections are as follows:
'1. Within six years prior to the bankruptcy herein, to wit, on September 1, 1953, the bankrupts filed a petition for an arrangement under Chapter XI, Section 322, of the Bankruptcy Act, in the United States District Court, Eastern District of New York, and on January 25, 1954, said arrangement was confirmed by the Court; that the bankrupts failed to carry out the terms of said arrangement and defaulted in the terms of said arrangement.
Thereafter, and on October 7, 1955, an involuntary petition in bankruptcy was filed against the bankrupts in the United States District Court, Eastern District of New York, and on the same date the bankrupts consented to an order of adjudication.
2. Upon information and belief, within six years prior to the bankruptcy herein, to wit, on January 25, 1954, the bankrupts had an arrangement by way of composition confirmed under the Act of Congress relating to bankruptcy in a proceeding in the ...