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IN RE KELLY

July 7, 1933

In re KELLY


The opinion of the court was delivered by: AVIS

William F. Kelly was adjudicated voluntary bankrupt on September 21, 1932, and the proceedings were, on the same date, referred to Thomas L. Gaskill, referee, at Camden, N.J. The first meeting of creditors was held on October 31, 1932. No creditors appeared at this hearing, and the bankrupt was examined by the referee, and the referee, believing from this examination that the bankrupt had no assets, on that date signed an order declaring it a no asset case, and that until the further order of the court no trustee be appointed, and no other meeting of creditors be called. On the same date an order was also signed by the referee, adjourning sine die the first meeting of the creditors and the examination of the bankrupt. Claims were filed by sundry creditors, including National City Bank of New York, the petitioner herein; the latter's claim for $3,031.85, with interest from July 6, 1932, which claim was in due form and was allowed by the referee.

No other proceedings were had in this case until February 20, 1933, when counsel for the National City Bank filed a petition asking for the examination of bankrupt under the provisions of section 21a of the Bankruptcy Act (11 USCA § 44(a).

 On February 21, 1933, the order requiring the bankrupt to appear for examination on March 9, 1933, was signed by the referee.

 On the date fixed for the examination the bankrupt appeared, with his counsel, and filed a paper called "Objections to Examination," setting forth several reasons why the proceedings were improper and illegal, technical in their nature, and praying that the order for examination be set aside.

 On these objections the referee reserved his decision, required briefs from counsel, and finally set aside the order for the reasons given in an opinion duly filed.

 There were twelve objections raised by the bankrupt. All of the objections were either dismissed or not passed upon, excepting 3, 4, 6, and 7, and the court will, for the purpose of arriving at a conclusion on the present application, briefly discuss the questions involved in the reasons given by the referee for dismissing this order.

 The statute, under which the application was filed and the order made, reads as follows: "A court of bankruptcy may, upon application of any officer, bankrupt, or creditor, by order require any designated person, including the bankrupt and his wife, to appear in court or before a referee or the judge of any State court, to be examined concerning the acts, conduct, or property of a bankrupt whose estate is in process of administration under the provisions of this title. The wife may be examined only touching business transacted by her or to which she is a party, and to determine the fact whether she has transacted or been a party to any business of the bankrupt." 11 USCA § 44(a).

 The first reason assigned by the referee refers to the third objection, and is, briefly, that the petition for the order was not verified by the petitioner, or any qualified officer or agent of the petitioner, but by its attorney.

 It does not appear, upon a reading of the statute, that any petition is necessary. An order might be made on verbal application.

 The second reason is based on the fourth objection which claimed that no allegation of fact or law is set up in the petition to justify the order.

 If the application may be made orally, it does not seem that the application should state any fact, or suggest any particular circumstance to be discovered by the proceedings.

 I am inclined to the belief, that, after a person has been adjudicated bankrupt, under the provisions of section 21a, Congress intended that great latitude was to be extended to creditors in endeavoring to discover hidden assets, if any existed. The methods and extent of the examination is under the reasonable control of the referee, but the permission to make the examination should not be controlled in any way by the failure of applicant to set out the subjects upon which the bankrupt is to be examined. It is exploratory in its nature; the bankrupt himself being better acquainted with his assets and liabilities than any of his ...


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