Turner v. Boston

Decision Date23 April 1968
Docket NumberNo. 22128.,22128.
Citation393 F.2d 683
PartiesMelvin Jack TURNER, Appellant, v. Julia L. BOSTON, Trustee in Bankruptcy, and Valley Credit Service, Inc., Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Donald D. McKown, (argued), Hillsboro, Or., for appellant.

Julia L. Boston, (argued), Portland, Or., in pro. per. Kenneth A. Holmes, Salem, Or., for appellees.

Before JERTBERG and BROWNING, Circuit Judges, and BOLDT, District Judge.

BROWNING, Circuit Judge:

Under the mistaken impression that more than six years had elapsed since the filing of his previous petition, appellant filed a second bankruptcy petition five years, eight months and three weeks after filing his first petition — one hundred days before the expiration of the six-year period provided by 11 U.S.C. § 32(c) (5) (1964).1 There were then no suits pending against him, and no execution or attachments had been levied against his property. There is no contention that the early filing was anything but an honest mistake. He was denied a discharge solely because the petition was prematurely filed.

He filed the present petition three years later, and thus nearly nine years after being discharged on his first petition. The obligations listed in the present petition consist of unsecured claims totaling $12,436.11, a claim secured by property valued at $90.00 in excess of the obligation, and $1,181.00 in unpaid taxes. $12,067.42 of the unsecured obligations were listed in appellant's premature petition — and were held below to be forever nondischargeable. Appellant lists only $368.64 in new unsecured obligations incurred in the three years after his premature petition, a disputed bill of $151.05 for a vacuum cleaner, and a $101.64 judgment obtained by "Investigators Inc."2

Appellant is employed as a well driller, earning about $3,600 a year. The origin of the $12,067.42 in old debts is suggested by a notation on the statement of affairs attached to his petition that he engaged in an independent rock hauling business from 1959 to 1963 — the four-year period preceding the filing of his premature petition.

Relying upon Chopnick v. Tokatyan, 128 F.2d 521 (2d Cir. 1942), the district court held that these debts might never be discharged because of the compulsion of the doctrine of res judicata and because of a fear that unless debtors are penalized for filing prematurely they will deliberately indulge in that practice to to obtain temporary relief from pressing creditors. In re Turner's Estate, 268 F. Supp. 918 (D.Ore.1967).

We are not concerned with defining and applying the rules relating to res-judicata — a doctrine created by courts to give finality to judgments disposing of particular controversies between parties and their privies. Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597, 68 S.Ct. 715, 92 L.Ed. 898 (1948).

Our task is the interpretation of specific federal legislation enacted by Congress in the exercise of a broad and plenary power conferred by Article I, Section 8, Clause 4 of the Constitution, to serve vital and quite different public purposes — the "equitable distribution of a debtor's estate, rehabilitation of the debtor, and protection of the credit structure against anything materially contributing toward its impairment." 1 Collier, Bankruptcy ¶ 0.03 at 6 (1967).

Although opinions dealing with the effect of the disposition of prior petitions upon the dischargeability of debts often employ the verbiage of res judicata, the decisions ultimately rest upon a determination of the meaning of the Act. See, e. g., Freshman v. Atkins, 269 U.S. 121, 124, 46 S.Ct. 41, 70 L.Ed. 193 (1926); Perlman v. 322 West Seventy-Second Street Co., 127 F.2d 716, 717-718 (2d Cir. 1942). In Holmes v. Davidson, 84 F.2d 111, 113 (9th Cir. 1936), we expressly declined to be limited by res judicata principles in reaching the result which we thought was required to effectuate the Act's purposes.

The question in the present case is simply whether Congress intended that denial of discharge on a premature petition should permanently foreclose discharge of the listed debts. If Congress did not, but instead intended only to delay discharge for the statutory six-year period, that legislative purpose cannot be defeated by a general judicial doctrine of finality. Kalb v. Feuerstein, 308 U.S. 433, 438-439, 444, 60 S.Ct. 343, 84 L.Ed. 370 (1940). The grant or denial of a discharge involves the exercise of equitable jurisdiction (cf. Hull v. Powell, 309 F.2d 3, 5 (9th Cir. 1962)) in the effectuation of the policy of the Bankruptcy Act. As the Supreme Court said in a similar situation, "the determination of that policy is not `at the mercy' of the parties * * * nor dependent on the usual rules governing the settlement of private litigation." Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661, 670, 64 S.Ct. 268, 273, 88 L.Ed. 376 (1944). Cf. Lawlor v. National Screen Service, 349 U.S. 322, 329, 75 S. Ct. 865, 99 L.Ed. 1122 (1958).

Furthermore, if Congress intended by section 32(c) (5) to delay but not foreclose the discharge of the listed debts, all that was or could have been decided by a refusal to discharge in accordance with section 32(c) (5) was that the debts were not then dischargeable because the six-year period had not elapsed. The application of the doctrine of res judicata in its fullest vigor to all that was or could have been decided would not affect the issue of the dischargeability of the debts on a petition filed after the six-year moratorium had passed. On any analysis, then, the question presented is the proper construction of section 32(c) (5).

Turning to that question, it should first be noted that the words of 11 U.S.C. § 32(c) (5), quoted in note 1, appear to constitute no more than a simple direction that a discharge is not to be granted if the bankrupt has been discharged on a petition filed within the preceding six years. The language of clause (5) is not directed against the premature filing of the petition, but at the too early grant of a discharge. Clause (5) applies only when the bankrupt "has been granted a discharge" on the prior petition. As we have recently said, "The Bankruptcy Act does not permit one to rid himself of his debts by going through bankruptcy every time he finds himself unable to pay his debts." In re Mayorga, 355 F.2d 89 (9th Cir. 1966). "The quoted section thus prescribes at least a six year interval * * * between * * * discharges in bankruptcy * * *." Id. at 90.

Professor Moore has stated, "The purpose of clause (5) is obviously to prevent a too frequent use of the Bankruptcy Act as a means of avoiding honest debt." 1 Collier, Bankruptcy ¶ 14.53 at 1422 (1967). The legislative materials support this judgment.

The proponents of clause (5) argued that "no person should have the benefit of the act * * * oftener than once in six years" (House Report 1698, 57th Cong., 1st Sess. 2 (1902)); and that clause (5) "will put an end to the possibility of debtors going through bankruptcy every month. The new period, six years, is an average arrived at from the suggestions received." Id. at 6.3 See also 35 Cong. Rec., 57th Cong., 1st Sess. 6940, 6941 (1902). The opponents of clause (5) interpreted it in the same way: "Even if we were to concede, though we do not, that there ought to be a limit to the right of the debtor to discharge, we affirm that one discharge in six years is carrying the restriction too far, especially in case a man is made an involuntary bankrupt and shows that he is entitled, under the narrow provisions of this law, to a discharge. In all cases we believe that the bankrupt, voluntary and involuntary, ought to be discharged as often as he makes the showing required by the act. Most crimes against the United States are barred by statutes of limitation of less than six years. If debtors are to be forgiven at all there is no reason for being less generous to them than to criminals." House Report 1698, supra at 5. See also 35 Cong. Rec., supra at 6945, 6947, 6948.

Thus the issue was whether a debtor should be allowed a discharge more often than once in six years. Nowhere in committee reports or in debate did the proponents suggest that clause (5) would bar discharge of the listed debts not only for six years but forever. Nor is any intimation to that effect found in the arguments of the opponents; and the vigor and specificity of the latter preclude any possibility that such a substantial extension of the burden imposed upon debtors would have passed without comment.

The congressional purpose of avoiding too frequent use of the Act to avoid debt is completely satisfied by denying discharge on any petition filed within the six-year period. It contributes nothing to this purpose to deny discharge of the prematurely listed debts on a subsequent petition filed after the six-year period has elapsed.

Moreover, as this case demonstrates, to render all debts prematurely listed by an innocent debtor forever bankruptcy-proof defeats the Bankruptcy Act's purpose "to `relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunates.' Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 554-555, 35 S.Ct. 289, 290, 59 L.Ed. 713 1915. This purpose of the act has been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor who surrenders for distribution the property which he owns at the time of bankruptcy, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934). Society is injured by forever saddling the debtor with undischargeable debts, for the discharge denied might have provided...

To continue reading

Request your trial
6 cases
  • In re Canganelli
    • United States
    • U.S. Bankruptcy Court — Northern District of Indiana
    • August 3, 1991
    ...avoid frequent honest debt. Perry v. Commerce Loan Co., 383 U.S. 392, 399, 86 S.Ct. 852, 856-57, 15 L.Ed.2d 827 (1966); Turner v. Boston, 393 F.2d 683, 685 (9th Cir.1968); See also, 4 Collier on Bankruptcy, 15th ed. supra, ¶ 727.11, and cases cited Since the Debtor converted his case from C......
  • Matter of Lincoln Plaza Towers Associates
    • United States
    • U.S. Bankruptcy Court — Southern District of New York
    • October 24, 1980
    ...verbiage of res judicata, the decisions ultimately rest upon a determination of the meaning of the Bankruptcy Act." Turner v. Boston, 393 F.2d 683, 684 (9th Cir. 1968) (emphasis in text), citing Perlman v. 322 West Seventy Second Street Co., 127 F.2d 716, 717 718 (2d Cir. 1942). Contra: In ......
  • In re Williams
    • United States
    • U.S. Bankruptcy Court — District of Maryland
    • June 28, 2005
    ...Loan Co., 383 U.S. 392, 399, 86 S.Ct. 852, 856-57, 15 L.Ed.2d 827 (1966)(interpreting Bankruptcy Act § 14(c)(5)); Turner v. Boston, 393 F.2d 683, 685 (9th Cir.1968)(interpreting Bankruptcy Act § Unlike §§ 546(a)(1), 548(a)(1) and 549(d), § 727(a)(8) is not a statute of limitations for the a......
  • Tidewater Finance Co. v. Williams
    • United States
    • U.S. District Court — District of Maryland
    • May 9, 2006
    ...74 (citing In re Mendoza, 16 B.R. 990, 993 (Bankr.Cal.1982); In re Canganelli, 132 B.R. 369, 379 (Bankr. N.D.Ind.1991); Turner v. Boston, 393 F.2d 683, 685 (9th Cir.1968)); see also Discussion § II n. 4, supra (discussing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005's......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT