Meinhard v. Pincus

PARDEE, Circuit Judge (after stating the facts as above). In Roden Grocery Company v. Bacon, reported in 133 Fed. 515, 66 C. C. A. 497, this court held: “While the creditor holding a waiver note given by a bankrupt has no lien on specified property — in fact, no lien at all — and the debt represented by such note is one within the purview of the bankrupt law, to be discharged by proper proceedings thereunder, yet the rights of said creditor are to be so far recognized as to require the withholding of the bankrupt’s discharge a. reasonable time to permit the creditor to assert in the proper state tribunal his alleged right to subject the exempt property to the satisfaction of his claim. Lockwood v. Exchange Bank, 191 U. S. 291, 23 Sup. Ct. 751, 17 L. Ed. 10(51. This being the case, it would seem that it is to the interest of the general creditors that such right should be prosecuted and enforced pending the bankruptcy, and prior to proof of debt, to prevent the creditor holding the waiver from taking a dividend on his whole claim from the general assets and thereafter availing himself of the right resulting from the waiver to proceed against the exempt property. As the creditor holding a waiver may proceed to assert his right in a state tribunal pending the proceedings in bankruptcy, it follows that the form his action may take in the state tribunal is of no concern in the bankruptcy court, unless such writs are issued and proceedings had as directly interfere with property passing to the trustee in bankruptcy, or with exempt property not claimed by the bankrupt and in actual custody of the bankruptcy court. The ruling of the referee and the order of the District Judge complained of in the petition for revision are largely based on the finding that under the evidence in the case the petitioner here, although asserting in the state tribunal that he holds a waiver contract, in fact had no waiver. The undisputed evidence shows that the petitioner held prima facie waiver contracts as claimed. Whether the bank [738] rupt could avoid or defeat such contracts was for the state courts to decide, and the issue seems to ust to he wholly immaterial in the bankruptcy court. If an application should be made to withhold a bankrupt’s discharge, to which he would otherwise be entitled, to give time to a creditor claiming to hold a waiver note to assert his rights to proceed against exempt property in the state courts, then it would be proper for the bankruptcy court to inquire whether or not the creditor really held such waiver note; but even then it is doubtful whether the court would go beyond a prima facie case and undertake to settle the rights between the parties.” The foregoing seems to be very pertinent in the instant case, where a creditor of the bankrupt, holding a written waiver of homestead exemption, has instituted a suit in the state court, which is now pending, to have his rights enforced against the exempt property of the bankrupt; and the only question is whether the court will order the bankrupt’s discharge withheld for a reasonable time to enable the creditor to prosecute his rights in the state court, and as preliminary thereto will undertake to decide on the merits of the creditor’s claimed waiver. As indicated in the case of Roden Grocery Co. v. Bacon, supra, we were then of opinion that the court’s inquiry should go no further than to ascertain whether or not a prima facie waiver existed in the case, and the fact that the bankruptcy court is without jurisdiction to pass upon and adjudicate the question of waiver vel non seems to be good reason for such opinion; and, as the applying creditor has actually commenced a suit in the state court which has jurisdiction in the premises, greater force is given to the proposition that the bankruptcy court should not attempt to prejudge the matter. The learned District Judge has furnished an elaborate opinion on the validity of the waiver in this case, and counsel have supplemented it with many pages of argument, and citing authority, supporting and attacking the judge’s opinion; but we do not feel called to follow, as our conclusion could only be an opinion, and not a decision. Whether the facts and circumstances in this particular case avoid the waiver is for the state court to decide, and the court below should throw no obstructions in the way. The order appealed from is reversed, and the case is remanded, with instructions to withhold the discharge of the bankrupt, Max Pincus, a reasonable time, for Meinhard & Bro. to prosecute and have adjudicated in the state courf their alleged right to subject the exempt property of the bankrupt to the satisfaction of their claim.