Goodrich v. Lines

• Decision Date: 12 January 1961
• Docket Number: No. 16722.,16722.
• Citation: 284 F.2d 874
• Parties: Coy C. GOODRICH, Appellant, v. Kal W. LINES, Trustee of the Estate of Goodrich Manufacturing Company, a co-partnership consisting of Coy C. Goodrich and Lulu Goodrich, Bankrupts, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

284 F.2d 874 (1960)

Coy C. GOODRICH, Appellant, v. Kal W. LINES, Trustee of the Estate of Goodrich Manufacturing Company, a co-partnership consisting of Coy C. Goodrich and Lulu Goodrich, Bankrupts, Appellee.

No. 16722.

United States Court of Appeals Ninth Circuit.

November 30, 1960.

Rehearing Denied January 12, 1961.

Christin & Davis, San Francisco, Cal., Howard B. Crittenden, Jr., San Francisco, Cal., for appellant.

Glicksberg, Glicksberg & Goldberg, Lawrence Goldberg, San Francisco, Cal., for appellee.

Before BARNES and HAMLIN, Circuit Judges, and MURRAY, District Judge.

HAMLIN, Circuit Judge.

This is a companion appeal to Goodrich v. Lines, No. 16510, 9 Cir., 284 F.2d 872. This case involves the same bankruptcy proceedings as those discussed in No. 16510, and the factual background recited in the opinion in that case will also be helpful in gaining an understanding of the issues presented by this appeal.

This appeal is concerned with occurrences subsequent to the decision of this Court in Goodrich v. England, 9 Cir., 1958, 262 F.2d 298, where this Court stated that the District Court did not err in refusing to dismiss appellant's petition for arrangement and that the referee in bankruptcy did not abuse his discretion in adjudicating appellant a bankrupt.¹ In that appeal Goodrich represented that subsequent to the adjudication in bankruptcy there had occurred a substantial shift in his relations with his creditors. In particular he contended that there had been a decision of the Armed Services Board of Contract Appeals which had the effect of eliminating the claim of the United States Government which had been filed for the amount of $325,000.² Appellant contended that this decision established that he owed the United States nothing, and on the contrary, that he had a claim against the United States for a substantial sum. He further contended that subsequent to the adjudication in bankruptcy his creditors had changed their attitude toward him, and that it was no longer in the best interests of the creditors that the bankruptcy be proceeded with. This Court, after stating that the District Court did not err in refusing to dismiss appellant's petition for arrangement and that the referee did not abuse his discretion in adjudicating appellant a bankrupt,³ proceeded to discuss the claims that were being made by appellant concerning the events that had occurred subsequent to the adjudication in bankruptcy in the following language:

"If these claims are true it may well be that it is no longer in the best interests of the creditors that bankruptcy be proceeded with. This, however, is a question which should appropriately be left to the determination of a referee in bankruptcy.

"We therefore remand this case to the lower court, with directions to refer it to a referee in order that he may determine, in the light of such evidence as the parties may present, whether dismissal or an adjudication of bankruptcy will at this time best protect the interests of appellant\'s creditors."⁴

At no place in its opinion did this Court pretend to pass on the validity of appellant's claims relating to occurrences subsequent to the adjudication in bankruptcy.

In response to the decision of this Court the District Court, on January 20, 1959, made an order referring the proceedings to the referee in bankruptcy "for determination, in the light of such evidence as the parties may present, whether the interests of the bankrupt's creditors will at this time be best protected by the adjudication of bankruptcy heretofore made remaining in effect or by the dismissal of this proceeding." Appellant now contends that the decision of this Court in Goodrich v. England had the effect of vacating the adjudication of bankruptcy which had been made by the referee. He claims that the District Court should have instructed the referee to determine whether a new adjudication in bankruptcy should be made or whether the proceedings should be dismissed. We do not so understand the former decision of this Court, and we believe that the interpretation placed upon this Court's decision by Judge Goodman in the District Court in his order of January 20, 1959, is entirely correct. We feel that the language used by this Court shows that it was not intended that the prior adjudication in bankruptcy be vacated.⁵ To interpret the decision otherwise would mean that this Court intended to set aside the adjudication in bankruptcy solely on the basis of Mr. Goodrich's unproven allegation that "the situation has changed." In view of these considerations and of the complexity of the contested issues of fact presented to the Court at that time, we cannot hold that this Court intended to vacate the prior adjudication in bankruptcy.

Appellant raises two other issues on this appeal. The first is that in refusing to dismiss the proceedings the District Court and the referee decided the case under a misapprehension of the provisions of 11 U.S.C.A. § 776(2);⁶ and the other is that in view of the invalidity of the claim of the United States the matter should be reversed with directions to dismiss.

After the case was referred back to the referee on January 20, 1959, a number of hearings were held. Appellant indicated that he had a plan to present to the referee, and a written plan was in fact presented on March 30, 1959. However, one of the provisions of the plan was that the United States would accept in consideration of its claim a second deed of trust upon certain real property. Appellant contended that the consent of all his creditors with the exception of the United States had been obtained, but appellee contended that this consent had been obtained a number of years prior to the present application and that it had been given subject to certain conditions which appellant had not fulfilled.⁷ The proceedings were continued so that it could be learned whether the United States would consent to the plan. It was later reported to the referee that the United States would not consent to the plan and that it would not accept junior securities, as appellant proposed, in settlement of its $325,000 claim. After considering the opposing contentions, the referee denied the motion to dismiss the bankruptcy proceedings. Appellant contends that the referee read 11 U.S.C. A. § 776(2)⁸ as requiring the consent of all of the creditors of appellant, and that he was in error in so construing the statute. We do not feel that the record supports the conclusion that the referee and the District Court felt that it was necessary that every creditor of appellant agree to a dismissal.⁹ Dismissal under these circumstances was a discretionary matter and there is nothing to lead this Court to believe that the tribunals below did not consider it as such....