In re Steinberg, No. 59563.

• Court: United States District Courts. 9th Circuit. United States District Court (Southern District of California)
• Writing for the Court: Martin S. Stolzoff, Beverly Hills, Cal., Joseph J. Cummins, Los Angeles, Cal., for the respondent
• Citation: 138 F. Supp. 462
• Parties: In the Matter of Robert B. STEINBERG, Bankrupt.
• Decision Date: 16 January 1956
• Docket Number: No. 59563.

138 F. Supp. 462

In the Matter of Robert B. STEINBERG, Bankrupt.

No. 59563.

United States District Court S. D. California, Central Division.

January 16, 1956.

138 F. Supp. 463

Craig, Weller & Laughran, by William E. Bartley, Los Angeles, Cal., for the trustee.

Martin S. Stolzoff, Beverly Hills, Cal., Joseph J. Cummins, Los Angeles, Cal., for the respondent.

YANKWICH, Chief Judge.

Robert B. Steinberg petitioned on January 27, 1954, for an arrangement under Chapter 11 of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq. The petition was approved and referred to one of the Referees in Bankruptcy on the same day. An adjudication was made on April 21, 1954.

H. M. Gerson, the duly elected and acting Trustee of the estate, on July 9, 1954, filed a petition, which was amended on September 22, 1954, to determine the validity of certain deeds of trust and a chattel mortgage executed by the debtor. After hearings on various dates in 1954 and 1955, the Referee on April 21, 1955, filed his Findings and Order determining that Harold Kirsch, the beneficiary under the instruments, received a voidable preference under § 60, sub. a(1) of the Bankruptcy Act, 11 U.S.C.A. § 96, sub. a(1), by the delivery of certain instruments described as

(a) Deed of trust executed and verified on the 15th day of January, 1954, covering Lot 63 of Tract 9998, recorded on the 18th day of January, 1954, in Book 43617, page 46;

(b) Deed of trust as to Lot 39 of Tract 14494 executed and verified on the 15th day of January, 1954, and recorded on the 18th day of January, 1954, in Book 13617, page 47;

(c) A chattel mortgage executed covering certain personal property, office furniture and equipment, located at 1244

138 F. Supp. 464

South La Cienega Boulevard, Los Angeles, California, recorded on the 18th day of January, 1954, in Book 13617 at page 48

The Order specifically held that the "trust deeds and chattel mortgage are voidable and unenforceable against the trustee." Before me is Kirsch's petition filed on May 10, 1955, to review the Order.

I

The Power to Entertain Untimely Reviews

The trustee has questioned the right of the Court to entertain this review because it was filed after the expiration of the time limit (ten days) provided in the Bankruptcy Act, and no extension has been applied for or granted. Bankruptcy Act, § 39, sub. c, 11 U.S.C.A. § 67, sub. c.

The Referee declined to file a certificate because of the untimeliness of the petition for review. When directed to file the certificate, the question of the timeliness was reserved. To the question propounded by the Court whether the Referee would have granted the extension, if applied for before the expiration of the ten-day period, his answer is:

"It is not easy for me to answer. If counsel had set out in his petition some compelling reason, such as illness, other court commitments or even had set out that he had planned a vacation, I probably would have granted an extension. In the absence of any showing, I would have denied an extension upon the grounds that I set out in the order I quoted heretofore. Time has become an element in this case. The matter of this alleged preference should determine whether or not the trustee shall proceed with a plenary action to recover the personal property held adversely by the respondent. The filing of such an action normally should wait until this suit is finally determined. Aside from this matter, the estate has been fully administered."

Thus, the problem (an important one in the administration of bankruptcy), is again presented whether, absent an extension of time, the Court may entertain a petition for review.

The Referee, experienced and learned in the law, seems to be of the view that in case of untimeliness, the Referee should refuse to certify and that a special review should be taken of the Order of Refusal to determine whether there was abuse of discretion. I do not agree. The better policy is to entertain the review and leave it to the Judge to determine whether, in view of all circumstances, the matter should be heard on the merits.

I had thought that the matter was settled by the Opinion filed in 1945 in Matter of C. & P. Co., D.C.Cal., 63 F. Supp. 400, 403-404. The Referee frankly states in his certificate that he was not familiar with the ruling. Although many attorneys appearing for trustees and some of the referees have questioned it, in a recent opinion I reaffirmed the ruling in the case to the effect that the referee and the Judge of the Court have the right to hear and entertain a review out of time. In re F. P. Newport Corp., D.C.Cal.1956, 137 F. Supp. 58.¹

The ruling was based upon an analysis of the Section and of the decision of the Supreme Court in Pfister v. Northern Illinois Finance Corp., 1942, 317 U.S. 144, 63 S.Ct. 133, 87 L.Ed. 146. In that case, the Supreme Court, after referring to the discretion which, at all times, existed in the bankruptcy court, as a court of equity. to entertain an untimely review,

138 F. Supp. 465

stated that the object of the section was not to do away with the power or restrict it

"Section 39, sub. c, was intended to establish definitely and clearly the proceeding for review of a referee's order in the interest of certainty and uniformity but the legislative history reveals no intention to change the preexisting rule as to power. Indeed, the Chandler Act by the amendment of § 2(10) sought to conform the act to the prevailing practice as to the bankruptcy court's exercise of its appellate jurisdiction over referee's orders. We do not think Section 39, sub. c, was intended to be a limitation on the sound discretion of the bankruptcy court to permit the filing of petitions for review after the expiration of the period. The power in the bankruptcy court to review orders of the referees is unqualifiedly given in § 2 (10) 11 U.S.C.A. § 11(10). The language quoted from Section 39, sub. c, is rather a limitation on the `person aggrieved' to file such a petition as a matter of right.

"The review out of time of the Commissioner's Orders is then a matter for the discretion of the District Court." Pfister v. Northern Illinois Finance Corp., supra, 317 U. S. at page 152, 63 S.Ct. at page 139.

Before and after this ruling, lower Federal Courts have been very liberal in entertaining petitions for review, whether a formal extension of time had been obtained or not.² Indeed, the Court of Appeals for the Fifth Circuit has held that where the petition is out of time, and the Court, nevertheless, proceeds to rule on the merits, its power to hear and determine cannot be questioned:

"* * * The Court below in ruling against the appellant's petition for review noted that same had been filed late, but the order does not show what view the Court may have taken about the question of good cause for an extension of time, although the Court's decision clearly was on the merits of appellant's petition for review. * * * The Court could have dismissed said petition for review on the ground of the belated filing date, but that was not done, and we think that the only question is whether the Court had discretion to hear the petition for review in spite of appellant's failure to file same within the time prescribed in the above section of the law. That provision of the law is not jurisdictional, and notwithstanding the appellant's default, the Court had the power to hear and determine said petition for review." Oppenheimer v. Oldham, 5 Cir., 1949, 178 F.2d 386, 390; and see, Thomas Corporation v. Nicholas, 5 Cir., 1955, 221 F.2d 286, 289, note 5.

It should be added that the Bankruptcy Act specifies, among the duties of the Clerk of the Court, that he shall

"deliver to the Referees all papers which may be referred to them." Bankruptcy Act, § 51(4), 11 U.S.C.A. § 79(4).

General Order 20, 11 U.S.C.A. following section 53, states that, after reference, papers, other than those which call for action by the judge,

"may be filed either with the referee or with the clerk."

The filing of a petition for review, even out of time, cannot, therefore, be refused. In re Sadler, D.C.Cal.1952, 104 F.Supp. 886, 889.

II

Suggested Procedures on Untimely Reviews

As to the situations which may arise following the filing of a petition out of time, the preceding discussion calls for

138 F. Supp. 466

the following conclusions and declarations of policy

Notwithstanding any action or failure to act on the part of the referee, the Court has the right to entertain the petition.

Its discretion being at least co-equal with that of the referee, the reviewing court should not be called upon to exercise its own discretion until a certificate of review is before it.

A truncated review dealing only with the question of the referee's exercise of discretion would not give the Court a proper perspective of the background upon which the exercise of the right to review depends.

To the contention that this method involves...