Court Opinion

ID: 9443483
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:22:01.734414+00
Date Added: 2024-06-11T17:15:58.031615
License: Public Domain

LINDLEY, Circuit Judge
(dissenting in part).
I agree with the majority except as to two particulars. In the first place I find ■myself unable to join in the conclusion that the order of confirmation was beyond the power of the court because the extension approved included a promise upon the part of the debtor to turn over amounts from his future wages sufficient to discharge his debts in full.
Chapter XI, the provisions of which the debtor had a right to invoke, as the majority holds and as I agree, provides in Section 306 of Article 2, 11 U.S.C.A. § 706, that an “ ‘arrangement’ shall mean any plan of a debtor for the settlement, satisfaction, or extension of the time of payment of his unsecured debts, upon any terms”; Chapter XI, Article 8, Section 356, 11 U.S.C.A. § 756, that “An arrangement within the meaning of this chapter shall include provisions modifying or altering the rights of unsecured creditors generally or of some class of them, upon any terms or for any consideration”; and Section 357, 11 U.S. C.A. § 757, that “An arrangement within the meaning of this chapter may include * * * (3) provisions for specific undertakings of the debtor during any period of extension provided for by the arrangement, including provisions for payments on account”. It seems dear to me that by these sections Congress intended that a debtor might come into court under Chapter XI and procure an extension of his debts upon any terms or consideration whatsoever accepted by the creditors and approved by the court, including his promise to pay his debts in full over an extended period.
*62Such cases as Local Loan Co. v. Hunt, 292 U.S. 234, 243, 54 S.Ct. 695, 78 L.Ed. 1230; McKeever v. Local Finance Co., 5 Cir., 80 F.2d 449, 452, and Wood v. Scott, 6 Cir., 180 F.:2d 252, 253, I think, do not reach this point. They go merely to the proposition that the future earnings of a debtor are no part of his estate existing .at the'time he files his petition in bankruptcy. The date of the petition is the cleavage line between the old estate and the new; nothing coming to the debtor after that line has beén passed constitutes any part of his estate which passes to his creditors. Consequently the court is never authorized to seize and take over the future earnings of a bankrupt without his consent and over his objection. This, I think, is the full import of those decisions; they do not in any wise impinge upon a debtor’s right voluntarily to offer and secure approval of an arrangement whereby he promises to surrender part of his future unpledged estate in payment of his debts in full over an extended period of time. It follows, I think, that the arrangement was clearly within the provisions of Chapter XI. Zwanzig on Bankruptcy Practice and Procedure, 1948 Ed. p. 479; Kinkead v. J. Bacon & Sons, 6 Cir., 230 F. 362 at page 366; Collier on Bankruptcy, 14th Ed. 1941, Vol. 8. I find no requirement in any provision of the •chapter that the debtor must have property in esse, before he can secure confirmation of an extension plan, whereby he promises to pay all his debts out of future ■earnings. Indeed, such a requirement, it seems to me, would defeat the remedial purposes contemplated by Congress.
Nor can I bring myself to assent to the proposition that a debtor is barred from procuring confirmation of an extension arrangement to pay his debts in full by the fact that he has within six years been discharged in bankruptcy. By the provision against frequently repeated bankruptcies, it was intended to prevent a debtor from time and again, after short intervals, discharging his debts by paying only a small percentage thereof; where the agreement is to pay the debts in full the reason for the rule fails. In other words, in this case the debtor seeks no discharge except such as he will achieve through payment of his
debts in full. The bankruptcy court is .a court of equity. It had congressional authority to receive the debtor’s petition and to confirm-his plan. Whether a discharge should be allowed eventually is dependent entirely upon whether he pays his debts in full. It seems to me that the District Court had the right to say that the order of confirmation should not constitute a discharge until a showing had been made to the court that the arrangement had been fully executed. And, even were this an improper provision, I do not know why this court could not correct the situation by its mere deletion.
It seems to me illogical and at odds with the remedial nature of the legislation that a debtor who proposes to pay his debts in full should be barred from doing so because he had been discharged in bankruptcy within the six years immediately preceding. In In ré Thompson, D.C., 51 F.Supp. 12, 13, the court said that the “bar to a second discharge in bankruptcy within six years had a definite and desirable purpose. It was to prevent the creation of a class of habitual bankrupts,' to prevent debtors from going through bankruptcy and escaping payment of their debts whenever and as frequently as they chose. * * * The reasons why a debtor should not be allowed to accomplish this result as frequently as he chooses have no application to the situation where the debtor offers to and does pay his debts in full”; and continued “It is evident that the statute intended a distinction between the terms ‘composition’ and ‘extension’ ; and that the difference is between a proceeding wherein a debtor settles his indebtedness in an agreed amount less than the amount owed and a proceeding wherein he merely obtains an extension of time within which to pay in full.” The ’ court was of the opinion that the legislative history supported this reasoning and quoted from the report to the House of Representatives concerning Section 14 as follows: “The former clause (5) was changed to include compositions, and is intended to resolve the conflict between the cases. Inasmuch as the confirmation of the composition operates as a discharge, there is no reason why it should not be so treated. It may be thought that this provision should *63be expanded to constitute the confirmation of an extension or plan or reorganization on objection to a subsequent discharge; but in the case of an extension it is contemplated that debts shall be paid in full”.
I would affirm the order.