In re Stilwell
| Decision Date | 26 August 1940 |
| Docket Number | No. 16461.,16461. |
| Citation | 34 F. Supp. 457 |
| Parties | In re STILWELL. |
| Court | U.S. District Court — Western District of New York |
Harry M. Young, of Mayville, N. Y., for bankrupt.
Falk, Phillips, Twelvetrees & Falk, of Buffalo, N. Y., for petitioning creditors.
This is a motion to vacate the bankrupt's discharge granted on July 13, 1940, on the ground that it was entered in violation of Section 58 of the Bankruptcy Act, 11 U. S.C.A. § 94, and further to dismiss bankrupt's proceedings for discharge on the ground that the proceedings have been abandoned.
The above-named bankrupt was adjudicated such on November 10, 1930. On March 23, 1931, bankrupt filed a petition for a discharge and on that date an order to show cause why the same should not be granted was issued, returnable on May 18, 1931. This order directed the publication and the mailing of a copy thereof to all creditors. There is nothing of record to disclose that any proceedings were taken on the return date of the order to show cause. There is nothing of record to show that either publication or mailing of the order to show cause as directed was had, or that there was any publication or mailing of such order at any time. The bankrupt does not now claim that any notice was given. On July 10, 1931, the referee issued an order directing the bankrupt to show cause why an order should not be made returning the papers to the clerk of this court because of non-prosecution. Service of the last-mentioned order to show cause was duly made, and there being no appearance upon the return date thereof, an order was made directing that the order to show cause and the application for discharge be returned to this court with a recommendation that it be withheld until disbursements in the sum of $22.56 were paid. It was not until July, 1940, when the aforesaid disbursements were paid, that without notice a discharge was entered on July 13, 1940.
Section 58 of the Bankruptcy Act provides, insofar as is applicable here:
The manner prescribed by subdivision a is by mailing. Subdivision d provides that notices of meetings other than the first meeting may be published as the court directs. Here the order of the court directed mailing of notices at least ten days and the publication of the notice once thirty days before the return date.
The giving of notice as directed as aforesaid was a condition precedent to the right to a discharge. The whole proceedings provided by statute looking to a discharge would be senseless if this were not so. Almost any number of authorities with unanimity have held this to be the law. Among those cited in the briefs and others are these: In re Hall, Fed.Cas. No. 5922; In re Bellamy, Fed.Cas. No. 1266; In re Lederer, D.C., 125 F. 96; Lindeke v. Converse, 8 Cir., 198 F. 618; In re Langfeldt, D.C., 253 F. 458; Ellison & Sons v. Weintrob, 4 Cir., 272 F. 466; Rash v. Metzger, 3 Cir., 31 F.2d 424; In re Martin, 7 Cir., 38 F.2d 629; In re Ingrao, D.C., 40 F.2d 946. The instant case is not comparable either to In re Downing, D.C., 199 F. 329, or In re D'Alessio, D.C., 24 F.Supp. 563, cited by the bankrupt, for in each of these cases the question was whether the notice given had been properly served.
While it is true as stated in Re Carobine, D.C., 8 F.Supp. 605, that the court is only empowered under the Bankruptcy Act (Section 15, 11 U.S.C.A. § 33) to disturb a discharge on the ground of fraud, it is equally true that the court sitting in equity has the inherent power to set aside a discharge where it has been granted through the failure to meet the statutory requirements precedent to a discharge. The numerous citations in the Carobine case and cases above cited furnish ample authority for this conclusion.
Should the entire proceedings looking to a discharge be set aside on the ground of laches? The court, it seems to me, has the same authority in this connection that it has in vacating the discharge. Naturally the question of delay in the prosecution of the proceedings for a discharge has been many times considered by the courts. It is obvious that in the absence of any statute fixing definitely the time within which a discharge may be granted, the courts cannot arbitrarily fix such a time. Each case must be determined on its own peculiar facts. In one case a long period of delay, as here, may constitute laches; in another, it may not. Through honest mistake or oversight long delay may be...
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