Opinion
No. 142.
December 11, 1944.
Appeal from the United States District Court for the Southern District of New York.
Proceeding in the matter of Henry H. Raphiel, bankrupt, to whose discharge the Morris Plan Industrial Bank of New York, a creditor, objected. From an order of the district court affirming a referee's order denying him a discharge, the bankrupt appeals.
Reversed.
On November 14, 1928, an involuntary petition in bankruptcy was filed against appellant and one, Samuel Raphiel. Thereafter appellant was duly adjudicated bankrupt, but no application for a discharge from his then existing indebtednesses was made by appellant.
On February 4, 1929, appellant was indicted for unlawfully, wilfully, knowingly, and fraudulently concealing from his trustee in bankruptcy merchandise and moneys amounting to approximately $25,000, and for destroying documents relating to his affairs as a bankrupt, to which indictment he pleaded guilty, and was sentenced to six months' imprisonment. Thereafter, and on November 23, 1943, the present bankruptcy proceedings were begun by a voluntary petition in bankruptcy filed by appellant; on that day an order of adjudication was entered.
In the schedules filed by the appellant on November 23, 1943, he set forth debts owing by him to those who were his creditors at the time of the previous bankruptcy, as well as a number of new debts which the bankrupt had incurred not less than five years after the earlier petition was filed against him.
Appellee filed specifications of objections to appellee's discharge on the ground that, because of the facts above narrated, appellee had committed offenses punishable by imprisonment under the Bankruptcy Act. Appellant, at the hearing before the Referee, admitted the truth of the facts stated in appellee's specifications. A motion was then made for a discharge of the appellee from all his debts except those that were involved in the 1928 proceeding. The Referee denied a discharge to the bankrupt, not only from the debts involved in the first bankruptcy, but from the new debts that he had incurred from 1933 down to the filing of the second petition in 1943. Upon a petition to review, the order of the Referee was affirmed by order of the court below. From this order appellant appeals.
Samuel J. Siegel, of New York City, for appellant.
Henry W. Parker, of New York City, for appellee.
Before L. HAND, AUGUSTUS N. HAND, and FRANK, Circuit Judges.
Under § 14, sub. c of the Bankruptcy Act, 11 U.S.C.A. § 32, sub. c, there are seven grounds for refusing a discharge. Where a discharge is barred under § 14, sub. c(2-7) because of a wrongful act of the debtor, a future discharge will be denied only in regard to those who were creditors at the time that the wrongful act occurred, or became creditors within the time specified by the Act. But the doctrine adopted by the district court would prevent the discharge in bankruptcy as to all creditors for all time when the wrong committed is a bar under § 14, sub. c(1). Neither § 14, sub. c nor any other provision of the Act makes such a differentiation, and there is nothing in the legislative history to justify it. We cannot believe that Congress had any such intention. The court below properly followed our earlier decision, In re Lesser, 2 Cir., 234 F. 65. But, as we think that decision was wrong, we hereby overrule it. We do so the more readily because no one can possibly have relied upon that decision to his detriment except to the extent that appellee may have done so in filing its specifications and in asserting its position on this appeal; such reliance we do not consider sufficient to block the eradication of an obviously unsound precedent.
See also In re Sieben, 7 Cir., 89 F.2d 935.
Appellant should be granted a discharge from all debts except those involved in the earlier bankruptcy proceedings.
Reversed.