United States District Court, Eastern District of Illinois
January 5, 1967
IN THE MATTER OF PHILLIP D. MILLER, BANKRUPT.
The opinion of the court was delivered by: Wise, District Judge.
This matter is before the Court on a Petition for Review of
an Order entered by William P. Carter, Referee in Bankruptcy,
on October 11, 1966, wherein the bankrupt's Motion to Dismiss
an Amendment to the Creditors' Petition was denied.
The record discloses that an involuntary bankruptcy
proceeding was instituted by the filing of a Creditors'
Petition on January 4, 1966, wherein it was requested that
Phillip D. Miller be adjudged a bankrupt. The creditors filing
said petition were M. Edward Robbins, William Weinberg, and
Robert A. Trowbridge. Service was had upon the alleged
bankrupt by publication. The alleged bankrupt failed to appear
to plead within the time permitted and on January 21, 1966, he
was adjudged a bankrupt.
On February 11, 1966, an Entry of Appearance was filed on
behalf of the bankrupt by his attorney and on February 15,
1966, his attorney filed a petition to set aside the
adjudication. This petition was ultimately stricken by the
Referee. On a Petition for Review decided simultaneously
herewith, said Order of the Referee was reversed, the
adjudication of bankruptcy was vacated, and the bankrupt given
ten days within which to plead any defense that he might have
to the Creditors' Petition that was filed on January 4, 1966.
On March 1, 1966, the bankrupt also filed a Motion to
Dismiss the Creditors' Petition for the reason that no act of
bankruptcy was shown in that the act of bankruptcy alleged in
said Creditors' Petition was based on a void judgment. No
hearing has been held and no Order has been entered by the
Referee on said Motion. Litigation is pending in the Illinois
Courts concerning the validity of said judgment and the
Referee in Bankruptcy has apparently been awaiting the outcome
of that litigation before passing on the bankrupt's Motion to
On March 15, 1966, pursuant to a written motion and order
thereon, the creditors who filed the January 4, 1966,
Creditors' Petition were granted leave to file an amendment to
their original Creditors' Petition and said amendment was
filed on March 15, 1966. The amendment alleged additional acts
of bankruptcy based on judgment liens allegedly obtained
against the bankrupt on December 2, 1965, and December 16,
1965. The bankrupt's Motion to Dismiss this amendment was
denied by the Referee and it is this Order that is now before
the Court on a Petition for Review filed by the bankrupt.
In his certificate on Petition for Review, the Referee in
Bankruptcy stated "that the question presented by the Petition
for Review is whether the Referee, in his discretion, may
permit an amendment setting forth acts of bankruptcy not
alleged in the original Creditors' Petition if the new alleged
acts of bankruptcy occurred less than four months prior to the
date of such amendment."
The bankrupt contends that (1) it was an abuse of discretion
to allow said amendment because the additional acts of
bankruptcy alleged in the amendment were well known to the
petitioning creditors and their attorney at the time original
Creditors' Petition was filed, and hence, should have been
included in the original Creditors' Petition, and (2) an
amendment alleging acts of bankruptcy occurring subsequent to
the act alleged in the original Creditors' Petition is
With respect to the bankrupt's second contention, it has
been held that the Bankruptcy Court, in its discretion, may
permit an amendment to set forth an act of bankruptcy not
alleged in the original petition. In re Meadville Pennsylvania
Distilling Co. (D.C.W.D.Penn. 1943), 51 F. Supp. 586; In re
Hamrick (D.C.N.D.Ga. 1909), 175 F. 279. 2 Collier on
Bankruptcy, 18.26. It has further been held that, ordinarily,
the discretion of the Bankruptcy Court in allowing amendments
to the involuntary petition will not be disturbed. Fierman v.
Frankfort Broom Co. (CA-3, 1934), 69 F.2d 827. The issue thus
narrows to the question of whether, under the facts and
circumstances of the case, the Referee was guilty of an abuse
of discretion in allowing the amendment to be filed.
There was no abuse of discretion by the Referee in allowing
the amendment to the original Creditors' Petition. It is
apparent that the amendment was provoked by the bankrupt's
collateral attack on the judgment of Investors Commercial
Corporation which constituted the act of bankruptcy set forth
in the original Creditors' Petition and that this collateral
attack was first raised after the adjudication of bankruptcy.
If the judgment of Investors Commercial Corporation (dated
September 21, 1965) had been attacked directly by the bankrupt
in the State Court prior to the filing of the original
Creditors' Petition in this Court, then it is only reasonable
to conclude that the petitioning creditors would have inserted
in the original Creditors' Petition the alleged judgment lien
of William Weinberg and Goldie Weinberg acquired on December
2, 1965, as an additional act of bankruptcy. It therefore
seems only reasonable that, by virtue of the bankrupt's
collateral attack on the September 21st judgment, the
creditors should be permitted to amend by alleging other
judgments obtained after September 21, 1965. The judgment lien
of John T. Allen (acquired on December 16, 1965) alleged in
the amendment had not yet ripened into an act of bankruptcy at
the time the original Creditors' Petition was filed on January
4, 1966, and hence, it could not have been included in the
original Creditors' Petition.
The Court fails to see any merit in the bankrupt's
contention that the additional acts of bankruptcy set forth in
the amendment could only be raised by the filing of a
Creditors' Petition in an entirely new bankruptcy proceeding.
If the bankrupt has any defenses to the alleged acts of
bankruptcy, he can raise them as well in the existing
bankruptcy proceeding as he could have in any bankruptcy
proceeding that the creditors would have been compelled to
file if the Referee had not permitted the filing of the
amendment. The bankrupt will be given an opportunity to plead
any defenses to the alleged new acts of bankruptcy, and by
virtue of an Order being entered simultaneously herewith, the
bankrupt will also be given an opportunity to plead any
further defenses he might have to the act of bankruptcy
originally alleged in the January 4, 1966, Creditors'
Petition. There is nothing in the record to indicate that the
bankrupt has been prejudiced in any way by virtue of the fact
that the alleged Weinberg judgment lien was not included as an
additional act of bankruptcy in the original Creditors'
Petition instead of being added by amendment. The same can be
said of the alleged Allen judgment lien that ripened into an
act of bankruptcy after the original Creditors' Petition was
filed. If the bankrupt has a defense to the three alleged acts
of bankruptcy, the bankruptcy proceeding will ultimately be
dismissed. If he has no defense, then it would actually have
been a waste of the bankrupt's assets for the Referee to have
denied the amendment and thereby put the creditors to the
expense of instituting an entirely new bankruptcy proceeding
for the purpose of alleging the additional acts of bankruptcy
which they alleged in the amendment to the Creditors'
Since there is adequate authority for allowing amendments
setting up acts of bankruptcy occurring after the act alleged
in the original Creditors' Petition, and since there are also
facts and circumstances present in this case justifying the
action taken, it is the opinion of the Court that it was
proper for the Referee to allow the filing of the amendment.
The Referee's Order denying the bankrupt's
Motion to Dismiss said amendment will therefore be affirmed.
This opinion shall serve as the Court's findings of fact and
conclusions of law, and an Order will be entered in accordance
© 1992-2003 VersusLaw Inc.