Court Opinion

ID: 6831614
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:54:34.090521+00
Date Added: 2024-06-11T16:04:34.763571
License: Public Domain

MANTON, Circuit Judge
(dissenting).
Below an order was entered granting the application made on November 5, 1924, by three intervening creditors of the bankrupts who ask to amend nunc pro tune as of the date of its filing, June 26, 1922, an involuntary petition in bankruptcy against the above-named bankrupts. The order thus granted included the revising petitioner, Charles A. Stoneham, individually and as a general partner with the bankrupts. The firm was known as E. M. Fuller & Co., and they were adjudicated bankrupts on July 20, 1922. The order here sought to he revised did not vacate or,set aside that adjudication upon granting the leave to amend nunc pro tunc the petition in bankruptcy. Thus, more than two years after the adjudication, Stone-ham becomes a party to the bankruptcy petition, and, if the order below is sustained, his property, whether acquired before or since that adjudication, becomes part of the bankrupts’ estate. The authority of the court to grant this order is here challenged. Because the court had not the authority to enter such an order nunc pro tune, it is unnecessary to discuss the question of the exercise of discretion of the District Judge, although I think under the circumstances here disclosed, if authority were vested to exercise a discretionary power in granting the order, it should have been refused.
The prevailing opinion points out the absence of authoritative decision, and in effect says the case is therefore one of first impression. It has long been settled that the filing of an amended pleading in an action at law or suit in equity, wherein new parties are sought to be introduced, is tantamount to the commencement of a new suit. In re Broadway Savings Trust, 152 F. 152, 81 C. C. A. 58; United States v. Martinez, 195 U. S. 469, 25 S. Ct. 80, 49 L. Ed. 282; Miller’s Heirs v. M’Intyre, 6 Pet. 63, 8 L. Ed. 320; French, Trustee, v. Hay, 89 U. S. (22 Wall.) 238, 22 *556L. Ed. 799; Brandenberg on Bankruptcy, § 171. If this adjudication prevails, it brings into the bankruptcy court not only firm assets, but Stoneham’s individual property. Francis v. McNeal, 228 U. S. 695, 33 S. Ct. 701, 57 L. Ed. 1029, L. R. A. 1915E, 706. The force and effect of the petition of the interyening creditors on December 15,1924, the date of the entry of the order and amended petition, amounted to an independent proceeding against Stonehain, and this as of June 26, 1922, the date of the filing of the original petition. Section 3b of the Bankruptcy Act (Comp. St. § 9587) provides that a petition against an alleged bankrupt must be filed within four months after the commission of the act of bankruptcy. There is ample authority for correcting errors, uncertainty of a petition, and insufficiency of statements, such corrections taking the form of an amendment; but such amendments may not have the effect of permitting the petitioners to file without the period mentioned in the statute. In re Stevenson (D. C.) 94 F. 110; In re McGraw (D. C.) 254 F. 442; In re Morosco Holding Co. (D. C.) 296 F. 516.
The effect of the present order, under the form of an entry as nune pro tune, is to extend the time specified in the. statute beyond the four-months period. Judge Shelby spoke for this court in a bankruptcy case (In re Louisell Lumber Co., 209 F. 784, 126 C. C. A. 508), and said: “But the doctrine of relation back is not applicable where the amendment sets up a new cause of action, or where to cause it to relate back would have the effect of depriving an adverse party of a substantial right on which no attack was made in the original pleading. When an amendment introduces a new caused action, the statute of limitations will run against it to the time when it is filed” — citing Union Pacific Ry. Co. v. Wyler, 158 U. S. 285, 15 S. Ct. 877, 39 L. Ed. 983; Sicard v. Davis, 6 Pet. 124, 8 L. Ed. 342. -And further: “This rule is as well settled as the one first stated, and is applicable to amendments to petitions in bankruptcy.”
Again we said in Re Morosco Holding Co., supra: “An amendment to avail them would of necessity have to specify an act of bankruptcy committed within four months i from the date of the amendment. * * * ‘The date of the amendment must be taken as the date from which the four-months period of section 3b is to be calculated.’ ”
It is apparent that the rule regarding the amendment of a petition in bankruptcy ^proceeding is covered by the same rules as relate to pleadings in other actions and as Brandenberg says in section 171 of his work: “An amended'petition which sets up the same cause of action asserted in the original pleading, merely giving greater precision to charges already made, is regarded as a continuation of the original and relates back so as to take effect as of the date of the original. -* * * The filing of an amended pleading is not the commencement of a new suit, unless it states a new cause of action or seeks more extensive relief or brings ip new parties.”
The Supreme Court, in United States v. Martinez, supra, said: “For obvious reasons, a party brought into court - by an amendment, and who has for the first time an opportunity to make defense to the action, has a right to treat the proceeding, as to\him, as commenced by the process which brings him into court.”
The rule prevailing in the state of Hew York is announced to he: “If, between the time' o'i the commencement of the suit and the time when the new parties are brought in, the period of limitation has expired, they may plead the statute in bar of their liability, although the defense may not be available to the original defendants. It would be unreasonable in such ease to construe the amendment as relating to the time of the eommenefement of the action, so as to deprive new parties of the defense of the statute and their right to plead it, is saved without any express reservation in the order of amendment.” Shaw v. Cock, 78 N. Y. 194.
At this late date intervening creditors have no lawful right to bring Stoneham into a court of bañkruptcy, and to permit it to be done under the guise of a nune pro tunc order is to extend the four-months period of the statute. Such an amendment is destructive of his rights; it is drastic and does not serve the purposes intended by section 3b of the Bankruptcy Act. Indeed, he is in effect deprived of his defenses for the adjudication still subsists. The adjudication is binding and conclusive upon the bankrupts and creditors as much as a judgment inter partes on due hearing in a court of competent jurisdiction. In re Hecox, 164 F. 823, 90 C. C. A. 627.
For these reasons I dissent.