Court Opinion

ID: 8827055
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:50:44.021834+00
Date Added: 2024-06-11T17:04:48.761771
License: Public Domain

MAYER, Circuit Judge,
(after stating the facts as above). It will be noted that the original petition in involuntary bankruptcy was deliberately abandoned by the three creditors who filed it. When the petition was dismissed for failure to comply with the conditions of the order permitting the filing of an amended petition, the Glory Company was in the same position as any other person or corporation doing business unembarrassed by the bankruptcy court. Merchants could buy and sell their goods upon that assumption, and were entitled to rely upon the fact that bankruptcy proceedings were ended. Subsequent to the dismissal of the petition, the bankrupt had the right, if it so pleased, to sell or transfer its property in such manner as it desired, so far as concerned any rights existing or accruing under the original and subsequently dismissed the petition.
The restoration of the petition by way of amendment affected, not only the rights of the alleged bankrupt, but also those of creditors existent prior to the filing of the petition and creditors who became such after the dismissal of the petition. There are no terms in the bankruptcy court. In bankruptcy proceedings, the whole period from the filing of the petition to final disposition constitutes but one term. Sandusky v. National Bank, 23 Wall. 289, 23 L. Ed. 155; In re Jemison Mercantile Co., 112 Fed. 966, at page 972, 50 C. C. A. 641.
If the principle of the order below were accepted, an order might be made at any time to revivify a petition which had long been dismissed, and upon the faith of which dismissal the bankrupt and his creditors had proceeded to do business as men conduct business in the ordinary affairs of the business world.
It must be remembered that the filing of a petition in bank(ruptcy does not concern only the .petitioners and the bankrupt. By *112such filing there is set in motion the procedure of the bankruptcy-statute, which affects the rights of all the creditors, and a bankruptcy petition may not be dismissed as matter of course. On the contrary, under section 59g of the statute (Comp. St. § 9643), “a voluntary or involuntary petition shall not be dismissed by the petitioner or petitioners for want of prosecution or by consent of the parties until after notice to the creditors. * * * ” This and other provisions of the statute demonstrate that, when a petition is filed, the relations between the petitioners and the alleged bankrupt are not those of ordinary parties to a litigation, but that the rights of all creditors enter and continue throughout the various proceedings. Black on Bankruptcy. (3d Ed.) § 177.
The situtation at bar is somewhat analogous with the question disposed of in Matter of Hollins, 238 Fed. 787, 151 C. C. A. 637, where the court pointed out that after a composition was confirmed the bankruptcy court was without jurisdiction to pass upon claims made by third parties to the property thereafter turned over. In other words, the court held, as the Bankruptcy Act provided, that the title of the bankrupt to his property “shall thereupon revest in him.” Section 70f (Comp. St. § 9654).
So, in the case at bar, when the petition was dismissed, all of the proceedings incident to the petition ended, and the property of the bankrupt thereafter became again under his full control. It is, of course, immaterial that at a subsequent date another petition was filed, for such later proceedings cannot in any manner affect the restored status of the alleged bankrupt, created by the dismissal of the first petition.
The case at bar is entirely distinguishable from that class of cases where á petition has not been dismissed, and is pending, but leave has been given to amend the petition; and it is also distinguishable from those cases where creditors have intervened, as in In re Bolognesi, 223 Fed. 772, 139 C. C. A. 351 and In re Diamond Fuel Co., 283 Fed. 108, decided contemporaneously herewith. There may also be cases where, through some accident or mistake, a petition is dismissed. For instance, there may be an inadvertent default when a cause is called for trial upon the issues raiáed by a petition in involuntary bankruptcy and the answer .thereto. In such circumstances the court, of course, would have the ordinary powers possessed by the court in other causes, and might open the default in the exercise of a sound discretion.
Where, however, a petition, as here, was insufficient,, and leave was granted, to-the petitioners to amend, and the petition was then deliberately abandoned .bjr failure to conform with the conditions up-, on which amendment was permitted, we hold that there is no power in the District Court to order that such default be opened, and that a so-called amended petition be filed in place of the abandoned insufficient petition.
The order is reversed, with' costs, and the District Court is instructed to dismiss the amended petition.