Court Opinion

ID: 8765679
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:24:00.761043+00
Date Added: 2024-06-11T17:01:51.308958
License: Public Domain

REED, District Judge.
The failure of tire bankrupt to apply for a discharge in the first bankruptcy proceedings, and the approval of the record of such proceedings by the court without granting a discharge, are in effect a judgment by default in favor of his then existing ■ creditors that the bankrupt was not entitled to a discharge from their claims, and that judgment is conclusive in favor of such creditors. Kuntz v. Young, 131 Fed. 719, 65 C. C. A. 477. This decision is by the Court of Appeals of this circuit, and is controlling upon this court. When, therefore, it is made to appear to the court that a bankrupt under the act of 1898, who has failed to apply for a discharge within the time prescribed by that act, or has been denied a discharge by the court, files a subsequent petition to be discharged from-the same debts owing by him at the time of filing the prior petition, and schedules no assets, the proceeding should be dismissed, because by the prior proceedings it is conclusively determined that he is not entitled to a discharge from those debts.
The question arises: Was the referee authorized to dismiss the proceedings, of should he have referred the petition of the creditors therefor to the court for action thereon? This question does not seem to have been raised before the referee; and it is-not made a ground of *937the petition for review. The jurisdiction and duties of referees are prescribed by sections 38 and 39 of the bankruptcy act (Act July 1, 1898,. c. 541, 30 Stat. 555 [U. S. Comp. St. 1901, pp. 3435, 3436]). Section 38a provides that:
“Keferees respectively are hereby invested, subject always to a review by the judge, within the limits of their districts as established from time to time, with jurisdiction to (1) consider all petitions referred to them by the clerks and make the adjudications or dismiss the petitions. * * * (4) perform such part of the duties, except as to questions arising out of applications of bankrupts for compositions or discharges, as are by this act conferred on courts of bankruptcy and as shall be prescribed by rules or orders of the courts of bankruptcy of their respective districts, except as herein otherwise provided. * * * ”
Clause 1 above has reference to petitions in bankruptcy which have been referred by the clerk to a referee when the judge is absent from the judicial district, or division of the district in which the petition is pending, as provided by section 18f of the act. It has no application to proceedings like this, for this petition in bankruptcy was not referred to the referee, and the matter was referred to him only after the adjudication had been made, and then only for the usual proceedings after an adjudication. Clause 4 empowers referees to perform such of the duties of the court as shall be prescribed by rules or orders of the courts of bankruptcy of their respective districts, except as otherwise provided in the act. Rule. No. 11 in bankruptcy of this district empowers referees to exercise the duties conferred upon the courts of bankruptcy by clauses 2, 3, 5, 6, 7, 11, and 18 of section 2 of the bankruptcy act. None of these, however, authorizes the referee to dismiss a bankruptcy proceeding after the adjudication.
The obvious purpose of the petition of the creditor^ was to prevent the bankrupt from obtaining a discharge, and the effect of the order of the referee sustaining the same and dismissing the proceedings is to determine that the bankrupt is not entitled to a discharge. This he is not authorized to do, as that duty devolves alone upon the judge. Section 14 of the act. The order of the referee dismissing the proceeding is therefore unauthorized.
There are no assets, and, so far as appears from the record, further proceedings in the matter would only be to determine the right of the bankrupt to a discharge, and he presents with an answer to the petition of the creditors a petition for discharge which he asks leave to file. Should he be permitted to do this, the creditors may interpose in opposition thereto the prior proceedings as a conclusive adjudication in their favor that he is not entitled to the same. This would entail additional and unnecessary expense upon both the bankrupt and the creditors, which may and should be avoided. The fact that the creditors may have proved their claims before the referee in this proceeding, and examined the bankrupt and others at their first meeting, does not estop them from pleading the prior adjudication in their favor that the bankrupt is not entitled to be discharged from those claims. No element of an estoppel is involved in this action of the creditors; for, when the bankrupt filed his second petition in bankruptcy and procured himself to be adjudged bankrupt thereof, he voluntarily subjected himself to be examined by any of his creditors as authorized by the *938bankruptcy act. It was through no act of the creditors that he thus subjected himself to be so examined, or that they became entitled to file and prove their claims in the bankruptcy court.
As the only purpose of this second petition in bankruptcy is to procure a discharge, and as the entire record is before the court and the facts are not in dispute, it is in the interest of all the parties that the matter be now determined; and upon the authority of Kuntz v. Young, above, the proceedings will be dismissed. .. It is ordered accordingly.