Court Opinion

ID: 6847969
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:31:51.094962+00
Date Added: 2024-06-11T16:05:01.077634
License: Public Domain

HICKENLOOPER, Circuit Judge
(dissenting) .
Section 14b of the Bankruptcy Act, as amended (title 11, U. S. C., § 32 [11 USCA § 32]), provides that the District Judge shall hear an application for discharge and investigate its merits, and shall discharge the applicant unless he “(5) has been granted a discharge in bankruptcy within six years.” Subdivision c of section 14 provides that: “The confirmation of a composition shall discharge the bankrupt from Ms debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge.” It has accordingly boon generally accepted that for the purpose of applying the provisions of the Bankruptcy Act the prior confirmation of a composition is to be regarded as the true equivalent of a prior discharge. Compare, U. S. v. Hammond, 104 F. 862, 864 (C. C. A. 6). A bankrupt is thus powerless to secure a discharge under this section if he has made a composition within six years. See In re Radley, 252 F. 205 (D. C., N. D. N. Y.); In re Massell, 285 F. 577 (D. C., Mass.); In re Holst, 45 F.(2d) 661 (D. C., E. D. N. Y.); Rosenberg v. Borofsky, 295 F. 500 (C. C. A. 1). Compare Friend v. Talcott, 228 U. S. 27, 35, 33 S. Ct. 505, 57 L. Ed. 718. The question here is whether the selfsame prior confirmation of a composition which would bar a subsequent discharge under section 14b (5) will likewise bar the subsequent confirmation of a composition .under section 12d (2), title 11, U. S. C., §30 (11 USCA §30).
Although compositions are in a sense voluntary proceedings on both sides, and partake in some respects of the nature of contacts of settlement, they are governed by and arise under the Bankruptcy Act, and are compulsory as. to the dissenting minority. No right to a discharge by this route can exist unless, under all the provisions of the Bankruptcy Act, it affirmatively appears that Congress intended a debtor to have such ro*458lief. Nor can the right, once given, be considered recurrent and unlimited, if it fairly appears from the act that such was not the intent of Congress; and, in deciding this question, the parts of the act relative to composition are to be construed in pari materia with all other provisions therein. Cumberland Glass Co. v. DeWitt, 237 U. S. 447, 35 S. Ct. 636, 59 L. Ed. 1042. Thus, in the present case, the question resolves itself into whether, under all the provisions of the act, it fairly appears that Congress did not intend to confer upon a debtor the right to be relieved of his debts, in whole or in part (as, for example, 49.9 per cent, in number of creditors and in amount of debts), more often than once in every six years. This seems to me to be the proper interpretation of the act.
Section 12d (2) provides that the judge shall confirm the composition if satisfied that “the bankrupt has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to his discharge.” Since confirmation of a composition within six years does bar a discharge under section 14, it would seem to follow that it must likewise bar the subsequent confirmation of a composition under section 12, if such composition may be fairly considered the “act” of the debtor, and unless the use of the word “guilty” creates an exception to and limitation of the various bars to a discharge enumerated in section 14 which would otherwise be incorporated by reference in section 12. That a composition is in a very true sense an “act” of the debtor would seem apparent, since it must originate with his offer and be carried into effect by his efforts. That the word “guilty” in section 12 does not limit the extent of the .incorporation by reference to such acts only as are criminal or wrongful in their nature seems to me to follow from the history of the legislation and the decisions construing it.
The language of section 12, that “the bankrupt has not been guilty of any of the acts, '* * * ” has not been changed since the original enactment of the .Bankruptcy Act in 1898, when, of course, it referred only to the offenses or wrongful acts which alone then prevented a discharge under section 14b. By the Act of February 5, 1903, e. 487, § 4, 32 Stat. 797, Congress added “in voluntary proceedings been granted a discharge in bankruptcy within six years” to the provisions of section 14b. The language of section 12 was not then modified. Thus by the 1903 amendment, Congress first added to the statutory bars to obtaining a discharge one which was not in its essence an offense or wrongful act. Before this amendment, section 12d (2) applied to all of the obstacles to discharge enumerated in section 14b. It would seem to me that the mere fact that the language of section 12 remained unchanged is insufficient to show an intent upon the part of Congress that section 12 should not continue to incorporate by reference all of the obstacles to discharge enumerated in section 14; or that the mere retention in section’12 of the words “been guilty,” appropriate •enough when the act was first passed, impliedly created an exception to the obstacles to discharge so incorporated.
There is no precedent directly adjudicating the question now presented, whether pri- or confirmation of a composition, within six years, will bar a subsequent confirmation of composition; but in Bluthenthal v. Jones, 208 U. S. 64, 66, 28 S. Ct. 192, 52 L. Ed. 390, we find the Supreme Court specifically referring to the provision of section 14b (5), as then expressed, “in voluntary proceedings been granted a discharge in bankruptcy within six years,” as an “offense.” True, the confirmation of a composition was not there involved, but it is interesting to note that the Supreme Court imputed to each of the provisions as to what constituted a bar to a discharge under section 14, including what was then and is now section 14b (5), the character and nature of an offense, and referred to it as being “committed” by the debtor, and that this is in complete harmony with the language employed in section 12d (2).
In Collier on Bankruptcy (13th Ed.) p. 451, in referring to section 12d (2), the author says: “But since the confirmation of a composition discharges the bankrupt, it is reasonable that the same grounds which prevent a discharge on a direct petition should also prevent a discharge on an application for confirmation of a composition. The intention clearly is to prevent one who cannot get a discharge from securing its equivalent through a composition.” Remington on Bankruptcy, 1930 Supp. to vol. 7, § 3119½, specifically lays down the proposition that “the confirmation of a composition in voluntary bankruptcy being in effect a discharge of the bankrupt in voluntary bankruptcy, would seem, if it takes place within six years, to be a bar not only to a subsequent discharge but also to a- subsequent composition.” The voluntary character of the prior proceeding is no longer of moment. Act of May 27, 1926, c. 406, § 6, 44 Stat. 663 (Suppl. to title 11, U. S. C., § 32 [11 USCA § 32]). In Re Mirkus, 289 F. 732, 735, 31 A. L. R. *459435 (C. C. A. 2), the court, in considering a somewhat analogous question, says: “The tests for barring discharges are identical with those barring compositions.”
For the reasons above stated, and in view of the general unanimity of opinion as expressed by the most eminent of the writers of text-books upon the subject, and as indicated by the opinions of previously decided cases, scarce as the latter are, that section 12d (2) must be construed as if it incorporated by references all of the grounds which would bar a discharge under section 14, and not only those which partook of the nature of wrongful acts, I am of the opinion that the judgment of the District Court should be affirmed. I am unwilling to depart from the generally accepted construction without precedent and withouf what seems to mo to be a compelling reason. Beneficent results to the bankrupt should neither, in my judgment, override the weight of considered opinion by those eminently qualified upon the subject, albeit they are text-writers and not judges, nor what to me seems the logical construction of the act. The necessity for tho opinion of a District Judge, that the composition is “for the best interests of the creditors,” and the requirement of approval by a majority in number and amount of such creditors, show an effort on the part of Congress to safeguard the minority in every composition, but [ do not feel that they show an intent, even remotely, that the unwilling creditor must sacrifice a part of his claim upon recurrent compositions of the habitual bankrupt whenever and as often as a single District Judge and a majority in number and amount of his fellow creditors can be induced to so decide. The unwilling minority should, I think, be left to decide upon the advisability of the settlement for themselves, until Congress more clearly indicates that its (to me) apparent intent was not its true intent.