(Dl8trict C'ourt, D. DeZawrJn.
BANKRUPTOy-DISCHARGE-SECTIONS 9 A1iD 21, Aar OF CONGRESB, JUllB 22, 1874, OONSTRUED.-Constructions given to sections 9 and 21 of the act of congress of June 22, 1874. This act effects a total repeal of the provisions in section 5112, in the Revised Statutes of 1874 and 1878, which proviso is in these words: "But this provision shall not apply to those debts from which the bankrupt seeks a Qlscharge which were con. tracted prior to the first day of January, eighteen hundred and sixtynine." BAME-SAME - ABSENCE OF AsSETB- CREDITORS CONSENTING TO DISOHARGE.-As the law now stands, only those creditors who have proven their claims can have them counted in the formation of the complete liability of the bankrupt to which the new law of one-third in value and one-fourth in number is applicable; but all creditors, no matter when their debts were contracted, can give or withhold assent to discharge of bankrupt, if he has not tbe requisite amount of assets, i. e., one-third in value, and one-fourth in number of the creditors who have proved their claims. 8AME-SAME-BoOKB OF BA1iKRuPT-OBSCURITIES IN.-Books are required of the bankrupt which are reasonably explanatory of the business conducted, and kept obviously with the intent of affording information as to that business. It is no reason to refuse a discharge to a bankrupt because there llre obscurities wh ich need explanation, when those obscurities are explained, and there is no evidence of fraud or deceit in the entries. BAME-BAME-AMENDMENT OF SClIEDULES.-When there Is no reason to withhold a discharge on the ground of fraud against the bankrupt laws, the court will order forllllli amendments made to the schedules which were omitted by the bankrupt through ignorance and mistake, and the case continued, in order that such proper returns may be made; and, upon compliance with the orders of the court, an application for discharge may be made at some future time.
In Bankruptcy. BRADFORD, D. J. Application for discharge of the hankrupt. The question which meets us at the threshold of the case is, the bankrupt having no assetR, has he produced the written assent, filed in this court, of a sufficient number and value of his creditors to entitle him to his discharge, standing the absence of all assets?
Amount of claims as admitted by the bankrupt $71,584:.30 against him, as per schedules filed, Amount of claims or debts proven before the 43,984:.12 register, Debts increased by proof of larger amountfl than set forth in bankrupt's schedule, as assumed in the argument on both sides, 8,281.39 -which, added to the aggregate scheduled debts of $71,584.30, $8,281.39-$79,865.69-being the total liability as principal debtor of the bankrupt, without regard to the time the debts were contracted. $26,621.89 One-third in value, $79,865.69, The amount of the claims of the creditors, who have assented to the bankrupt's discharge, $24:,667.60, which, deducted from $26,621.89, leaves a deficiency of $1,954.29, $26,621.89 24:,667.60
$ 1,954:.29 Prior to June, 1874, 50 per cent. of proven claims was necessary for the discharge of the bankrupt without the assent of his creditors, and if the bankrupt had no assets, or not the required amount, he must have had a majority in number and in value of his creditors who had proven their claims. The law as it then stood was in these words: "Section 5112. In all proceedings in bankruptcy commenced after the first day of January, 1869, no discharge shall be granted to a debtor whose assets shall not be equal to 50 per centum of the claims proved against his estate upon which he shall be liable as the principal debtor, unless the assent, in writing, of a majority in number and value of his creditors to whom he shall have become liable as principal debtor, and who shall have proved their claims, is filed in the case, at or before the time of the hearing of the application for discharge; but this provision shall not apply to those debts from which the bankrupt seeks a discharge which were contracted prior to the first day of January, 1869." Seotion 9 of the act of June 22, 1874, (18 U. S. Statutes,
IN BE TOWNSEND.
part 3, p. 180,) has the following provision, viz.: "And in case of voluntary bankruptcy no discharge shall be granted to a debtor whose assets shall not be equal to 30 per centum of the claims proven against his estate, upon which he shall be liable as principal debtor, without the assent of at least one-fourth of his creditors in number and one·third in value; and the provision in section thirty-three in' said act of March the second, eighteen hundred and sixty-seven, requiring 50 ·per centum of such assets, is hereby repealed. " In section 21 of the sarno last-cited act (18 U. S. Statutes, part 3, p. 186) is found this provision, viz.: "That all acts and parts of acts inconsistent with the provisions of this act be and the name are hereby repealed." There has been a difference of opinion in the United States courts as to the full effect of this latter law of June 22, 1874, on the law as laid down in both of the U. S. Revised Stat. utes of 1874 and 1878; some of the judges holding that it effected a full repeal of the law, and let in all creditors, without regard to the time of contracting their debts, to add their claims to the aggregate liability of the bankrupt, and thus create the necessity for him to produce a greater amount of assets than he would otherwise be required to do to obtain his discharge, and also let them in with subsequent creditors to give their assent to the discharge of the bankrupt in case there were no assets, or Jess than the required amount. Other judges hold that the act of June 22, 1874, parts of which are above recited, only repealed that part of the former law which required 50 per cent. of assets, in the bankrupt, of the proven debts against him, and a majority in value and number of the creditors who had proven their claims, and substituted in lieu thereof the 30 per cent. of assets, and, in default of that, the one-fourth in number and one.third in value of creditors whose assent was necessary to justify a. discharge, without the requisite amount of assets, and that the latter clause in the two Revised Codes, viz.: "but this provision shall not apply to those debts from which the bankrupt seeks a discharge, which were contracted prior to the first v.2,no.6-36
day of January, eighteen hundred and sixty-nine," remained unaffected by the later aot of June 22, 1874. Of oourse, in this latter view of the oase, all the oreditors whose claims were contracted prior to January 1, 1869, were altogether powerless to oppose the discharge of the bankrupt, either by adding their claims to the aggregate of his liabilities, and thus require a greater percentage of assets, or by refusing their assent to his discharge. In re Gifford, 16 National Bank. Register, September 26,' 1876, Justioe Withey, district judge of the western district for Michigan, sustains the former proposition, and says: "As the law now stands, we hold that in the absence of consent by
ereditors in voluntary cases, no matter when commenced, or when debts were contracted, the assets must pay thirty per cent., not
fifty per cent., or there can be no discharge; whereas, in com· pulsory cases, the bankrupt, if otherwise entitled thereto, is entitled to a discharge, irrespective of the assent of creditors or the amount of assets." He cites the opinion of Judge Lowell as confirming his own, ill In re Griffiths, 1 Central Law Journal, 506; and, also, that of Mr. Justice Miller, of the United States supreme court, reported in 1 Central Law Journal, (In re King,) 50l. Judge Drummond, of the United States circuit court, Indiana, In re Wheeler c/; Riggs, 19 B. R. 259, in a lengthy opinion, has supported this view of the case, and concludes by saying: "But, when we look at the whole scope of the amendment of 1874, and apply the language of the ninth Section to the case now before the court, it seems to me that it was the intention of congress to declare by that section that in any case of bankruptcy, when there were no assets eqnal to thirty per cent., if the bankrupt secured the assent of onefourth of his creditors in number, and one-third in valne, as there stated, that he was entitled to a discharge, irrespective of the time when the debts were incurred; and, therefore, I hold, contrary to the opinion of the district court, that the ninth section of the act of June 22, 1874, necessarily repealed the proviso to the 5112th section of the Revised Statutes, and
IN RE TOWNSEND.
that in this case, on the facts as conceded, the bankrupts are entitled to their discharge." Judge Blatchford has, In re Sheldon, expressed an opinion on this subject, but it was obiter dictum, as the proceedings all commenced before the twenty-second of June, 1874, aud consequently were not governed by that law. Judge Gresham, U. S. district judge for Indiana, has taken the Bame view of the case as Judge Blatchford. On the weight of the authorities (as far as I can inform myself) I shall follow Judge Drummond's opinion, and conclude that the act of June 22, 1874, altogether repealed the provisional clause of 5112 in both of the Revised Statutes, and that, as a necessary result, if there had (in this case) been any assets to entitle the bankrupt to a discharge, there must have been 30 per cent. of the claims proven against his estate upon which he is liable as a principal debtor, without regard to the time they originated; and if, as in the present case, there are no assets, then it is requisite to have the assent of one-third in value and one-fourth in number of his creditors to assent to his discharge, no matter when the claims of these creditors arose. By this repeal the creditors whose debts were contracted before the first day of January, 1869, whether they have proven their claims or not, are "entitled" to the same 8tatu8, as to giving or withholding their assent to a discharge of the bankrupt, as all the other creditors. As the law now stands, after the repeal of the provi8ion afore8aid, the bankrupt has to have- 30 per cent. of the proven cla.imB only, and, therefore, creditors who have not proven their claims cannot add them to swell the aggregate of the bankrupt's liability, but they are, in general terms, without any words of restriction as contained in the repealing act, let in to give or withhold their assent to the bankrupt's discharge where there are no, or not sufficient, assets. The exact wordil, showing no restriction in the repealing act, are as follows: "Without the assent of at least one-fourth of his creditors in nUJ;llber, and one-third in value." Thus it will be seen that upon this construction of· the law the bankrupt has not the requisite amount in value of creditors assenting to his dis-