Feder v. Goetz

• Decision Date: 18 February 1920
• Docket Number: 62.
• Citation: 264 F. 619
• Parties: FEDER v. GOETZ.
• Court: U.S. Court of Appeals — Second Circuit

264 F. 619

FEDER v. GOETZ.

No. 62.

United States Court of Appeals, Second Circuit.

February 18, 1920

Leon Dashew, of New York City (Leo Oppenheimer, of New York City of counsel), for petitioner.

Marcus Helfand, of New York City, for respondent.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS Circuit Judge.

An appeal brings up both law and fact, and a petition to review brings up matter of law only. The order involved in this case is one which denied to the bankrupt his discharge, and it was entered on May 28, 1919. The appeal was taken on June 4 1919, and on the same day the petition to revise was filed. The time for taking an appeal is limited by the Bankruptcy Act (Comp. St. Secs. 9585-9656), which, however, contains no express time limit within which a petition to revise must be filed. In re Leterman, Becher & Co., 260 F. 544 . C.C.A. . . . . The matter in this circuit is governed by our rule 38 (235 F. xi, 148 C.C.A. xi), which declares that petitions to revise must be filed and served within 10 days after the entry of the order sought to be revised.

The question of time does not arise in this case, as both the appeal and the petition to revise were taken in time. The appellant, however, is not entitled to avail himself of both remedies. The revisory jurisdiction does not extend to orders which are appealable. In re Loving, 224 U.S. 183, 32 Sup.Ct. 446, 56 L.Ed. 725. And an order which grants or denies to the bankrupt his discharge is by section 25a, subd 2 (section 9609), one from which an appeal can be taken. The petition to revise is therefore dismissed, and the case will be decided upon the appeal.

In the case now before the court the referee recommended that the bankrupt's discharge should be denied, on the ground that the assignment amounted to a fraudulent transfer. The District Judge reversed him, and declared that a general assignment per se is not a bar to a discharge. He added that under section 14b, subd. 4, intent to hinder, delay, or defraud creditors must be shown, in addition to the mere act of making a general assignment for the benefit of creditors.

As the bankrupt, proceeding under the law of the state of New York, made a general assignment for the benefit of creditors on May 29, 1918, and a petition in bankruptcy was filed against him on May 31, 1918, which was followed by an adjudication of bankruptcy on June 24, 1918, it is said that no discharge can be granted, and that we must hold that the general assignment worked a transfer of the bankrupt's property and was necessarily made 'with intent to hinder, delay or defraud his creditors. ' Section 3a, subd. 1 (Comp. St. Sec. 9587). There is nothing in the record which discloses that the bankrupt had any such intent as a matter of fact. If he had that intent, it is because it must be presumed to have existed from the fact that the assignment was made.

Proceedings in bankruptcy are strictly statutory. A discharge can be refused only on grounds specifically mentioned in the Bankruptcy Act.

The first English Bankruptcy Act was passed in 1542 (34 & 35 Henry VIII, c. 4), and it granted no discharge from unpaid debts. A second act was passed in 1570 (13 Eliz.c. 7), which likewise contained no provision for a discharge, and it was not until the act of 1705 (4 Anne, c. 17) that provision was made in that country for a discharge. For many years, in order that a bankrupt might be entitled to a discharge under the English law, it was necessary that his assets should equal a certain percentage of his debts and that a certain per cent. of his creditors should assent to his discharge.

In the United States the first Bankruptcy Act was passed in 1800, and it followed in its main features and often in its language the English bankruptcy laws, and it provided under certain limitations for a discharge of the bankrupt. 2 Statutes at Large, pp. 19, 30, 31. Discharge was provided for, too, in the second act, passed in 1841. 5 Statutes at Large, pp. 440, 443. The third act, passed in 1867, also provided for a discharge, but still made it very difficult for the discharge to be obtained. 14 Statutes at Large, pp. 517, 531, 532, 533. And see 15 Stat.at Large, p. 227.

The main purpose of the bankruptcy statutes of both countries was to furnish a better protection to creditors, and it was not within the purpose to grant a discharge even to honest debtors. The early Bankruptcy Acts were acts for creditors and against debtors. It is surely a matter of some significance, therefore, that when the United States provided for the discharge of bankrupt debtors an assignment for the benefit of creditors, while in England regarded as an act of bankruptcy, was not considered as morally objectionable and did not prevent a discharge. If Congress intended that an assignment for the benefit of creditors should have a different effect under our system, we are inclined to think that intention would have been clearly indicated.

Under the act of 1867 the grounds for refusing a discharge were collated in ten separate paragraphs. The act of 1898 when it was originally introduced into Congress, specified nine distinct classes of cases in which no discharge was to be granted, and they continued in the bill until its final revision by the conference committee. It provided that the bankrupt should be discharged--

'unless he has * * * (2) given a preference as herein defined, and within six months prior to the filing of the petition against him, which has not been surrendered to the trustee; * * * (4) made a transfer of any of his property which any creditor who has proved his claim in the proceedings might, at the time of the filing of the petition, have impeached as fraudulent if he had been a judgment creditor, unless such property shall have been surrendered to the trustee; * * * or (7) secreted or conveyed any of his property to avoid its being administered in bankruptcy, or any document relating to his property in contemplation of bankruptcy; or (8) transferred any property otherwise than in the ordinary course of his business, in contemplation of bankruptcy. * * * '

As finally adopted there were only two grounds left in the act for denying the discharge. These were: (1) That the bankrupt had committed an offense punishable by imprisonment as provided in the act. (2) That with fraudulent intent to conceal his true financial condition, and in contemplation of bankruptcy, he had destroyed, concealed, or failed to keep books of account or records from which his true condition might be ascertained.

The amendment of February 5, 1903 (32 Stat. 797), enlarged the grounds for refusing a discharge, adding the only one which it is now material for us to consider, and which is found in section 14b (section 9598), which reads as follows:

'Or (4) at any time subsequent to the first day of the four months immediately preceding the filing of the petition transferred, removed, destroyed, or concealed, * * * any of his property, with intent to hinder, delay or defraud his creditors. * * * '

And the question which this case presents is whether a general assignment for the benefit of creditors and which gives no preferences must be regarded in law as a transfer made with intent to hinder, delay, or defraud creditors, there being an entire absence of actual fraud.

The English Bankruptcy Act of 1890 enumerates with considerable particularity the grounds for refusing a discharge to the bankrupt, but does not expressly declare that an assignment for the benefit of creditors shall constitute a ground, either for refusing a bankrupt his discharge or for suspending his discharge. The grounds specified may be found in the margin. ^[1]

The fact that giving 'an undue preference to any of the creditors' is specified, while an assignment for benefit of creditors generally and without a preference is not referred to, leads us to infer, there being no decision to the contrary in England which has come to our attention, that the law of that country remains to-day as it was said to be by Judge Cadwalader in Barnes v. Rettew, 2 Fed.Cas. 868, No. 1,019 (1871), that an assignment for the benefit of creditors did not bar a discharge.

In Barnes v. Rettew, supra, there may be found an exceedingly interesting exposition of the early bankruptcy law of England. Judge Cadwalader, in the course of his opinion in that case, referring to the law in 1799 and 1803, when all bankruptcies in England were in form involuntary, but in fact for the most part were quite the reverse, says of an assignment for the benefit of creditors that it was in itself only constructively fraudulent, and that it was, in the absence of actual fraud, no objection to the bankrupt obtaining a discharge from his debts, in the proper subsequent stage of the proceedings. Then in 1825, when the voluntary system of bankruptcy was introduced, the above principle was still adhered to; Judge Cadwalader declaring that the cases are numerous in which bankrupts obtained their discharge notwithstanding the fact that they had made assignments for the benefit of creditors within six months; the statute providing that an assignment should not be regarded as an act of bankruptcy unless a commission should issue within that period. He says:

'In England an assignment like that in question, though an act of bankruptcy, has been considered morally unobjectionable, and sometimes an honorable act, as affording to any creditor an option to proceed in bankruptcy, or to all the creditors a right of obtaining a distribution without any bankruptcy'-- citing 1 Christ. Bankr. Law (2d Ed.) 187-189.

The actual question in Barnes v. Rettew was not the question presented in the case at bar, as to whether an assignment for the benefit of all the...