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IN RE GILBERT'S HOTEL

September 25, 1969

In the Matter of GILBERT'S HOTEL, INC., Bankrupt

Tenney, District Judge.


The opinion of the court was delivered by: TENNEY

MEMORANDUM

TENNEY, District Judge.

 Alleging various errors in the final Order of Referee in Bankruptcy R. Lewis Townsend, dated January 22, 1969, the Gordon Construction Corporation, a creditor of bankrupt Gilbert's Hotel, Inc., petitions this Court for review from that Order. Respondents Tarry Brae Hotel, Inc. and Morris Gimple cross-move for an order dismissing the petition for review for allegedly failing to comply with the provisions of Section 39, sub. c of the Bankruptcy Act, 11 U.S.C. § 67(c).

 On November 16, 1965, Bankrupt, as landlord, executed and delivered a lease on its realty known as Gilbert's Hotel in South Fallsburg, New York, to Tarry Brae Hotel, Inc. By the terms of this lease, which entitled Tarry Brae to occupancy until September 16, 1966 "unless the foreclosure sale under the New York Business Development Corp. mortgage takes place sooner in which case this lease shall end upon such sale", the tenant agreed to pay the rent of $1.00 upon the signing of the lease and, in addition, "to keep the hotel premises heated, cared for and maintained during the entire period of this lease, whether the hotel is open for business or not, in order to guaranty that the hotel shall be known to be open" and thereby preserve and maintain the public's good will. On November 22, 1965, an involuntary petition in bankruptcy was filed against the Bankrupt.

 By his order of January 22, 1969, which affirmed his original decision dated April 14, 1966, the order thereon dated June 13, 1966 and the decision of July 6, 1966, Referee Townsend rejected the claim of the Gordon Construction Corporation (hereinafter referred to as "Gordon") that this lease was executed to hinder, delay and defraud creditors in violation of Section 67, sub. d of the Bankruptcy Act, 11 U.S.C. § 107(d), and for damages against Tarry Brae Hotel, Inc., Morris Gimple, Anne Gilbert and Carl Gilbert, as the principals involved, for the alleged illegal use and occupancy of the hotel.

 On January 30, 1969, a petition for review signed by J. Stanley Shaw, as attorney for both Gordon and the trustee in bankruptcy, Carl Goldstein, was filed with Referee Townsend. This petition was rejected by the Referee on the grounds that Shaw was unauthorized to act for the trustee and, further, that Shaw's $10.00 check to cover the filing fee was not certified and was erroneously made payable to "United States District Court" instead of to "Clerk, U.S. District Court". Referee Townsend also extended the time in which Gordon could file another petition for review to February 6, 1969. Shaw submitted a new petition on February 3, 1969, which was again rejected by the Referee, who further extended the time for Gordon to file a revised petition to February 10, 1969. This petition was submitted by Shaw on February 6, 1969.

 Respondents argue that this petition for review should be dismissed pursuant to Section 39, sub. c of the Bankruptcy Act, 11 U.S.C. § 67(c), General Orders in Bankruptcy 21, 37 and "the applicable sections of the Federal Rules of Civil Procedure" as untimely, not made by a party in interest, but rather by that party's attorney, and unverified.

 Section 39, sub. c of the Bankruptcy Act provides:

 
"A person aggrieved by an order of a referee may, within ten days after the entry thereof or within such extended time as the court upon petition filed within such ten-day period may for cause shown allow, file with the referee a petition for review of such order by a judge * * *. Unless the person aggrieved shall petition for review of such order within such ten-day period, or any extension thereof, the order of the referee shall become final."

 Referee Townsend obviously treated Shaw's defective petitions for review as applications for an extension of time to file a revised petition. The ten-day period for filing provided in Section 39, sub. c is a limitation on the filing of a petition for review by a person aggrieved thereby as a matter of right, but should not be considered as a limitation on the discretionary power of the Referee to grant leave to make a late filing. This is especially so where the extensions granted by the Referee did not exceed ten days and were promptly and timely complied with. Finkelstein v. Keith Fabrics, Inc., 278 F.2d 635, 638 (5th Cir. 1960); see Potucek v. Cordeleria Lourdes, 310 F.2d 527, 529-530 (10th Cir. 1962), cert. denied, 372 U.S. 930, 83 S. Ct. 875, 9 L. Ed. 2d 734 (1963); In re Sorenson, 215 F. Supp. 814 (D.Utah 1963). Having timely filed the initial petition for review, which was rejected by the Referee, Shaw should not be required to perform the purely perfunctory and meaningless act of petitioning for an extension of time for refiling which had already been granted by the Referee.

 While it is true that Shaw, not being "a person aggrieved" by the order of the Referee, had no right on his own motion to seek review of that order, In re Foreman, 15 F.2d 51 (2d Cir. 1926), since the text of the petition for review indicates that it was taken on behalf of Gordon, "a person aggrieved", the district court may consider the petition for review as though signed by Gordon. In re F. P. Newport Corp., 137 F. Supp. 58, 60 (S.D.Cal.1955), aff'd, Newport v. Sampsell, 233 F.2d 944 (9th Cir.), cert. denied, 352 U.S. 942, 77 S. Ct. 264, 1 L. Ed. 2d 238 (1956).

 There exists a dearth of authority on the question of the verification of petitions for review. However, the Court in In re Peppers Fruit Co., 24 F. Supp. 119, 121 (S.D.Cal.1938) noted:

 
"There appears to be nothing in the Bankruptcy Act, or the general orders, or the rules of this court, which require that a petition for review be verified; although this has apparently been the customary practice."

 General Order in Bankruptcy 37 makes the Federal Rules of Civil Procedure applicable to proceedings under the Bankruptcy Act "in so far as they are not inconsistent with the Act." Rule 11 of the Fed.R.Civ.P. provides that "[except] when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit." In order to achieve greater procedural uniformity and to eliminate any inconsistency with the law in most other proceedings in the Federal Courts, Section 18, sub. c of the Bankruptcy Act, 11 U.S.C. § 41(c), which provided that "[all] pleading setting up matters of fact shall be verified under oath", was amended in 1959 to read "[petitions] for both voluntary and involuntary bankruptcy shall be verified under oath." In light of this, and the absence of any requirement in the rules of this court for verification of petitions for review, I believe that the requirement for verification in ...


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