the court had the power exercised by the court below, and the discount company was fined for contempt of court because it failed to withdraw a notice of assignment filed with the employer of bankrupt. What was said by Judge Jones in that connection is pertinent here. Said he: 'The filing of the assignment of the wages with the bankrupt's employer the day after the adjudication was an effort to embarrass the administration of the estate, and to force the bankrupt by the sore pressure caused by withholding the wages to pay an illegal demand, from which a discharge would free him. It was nothing more than an effort to starve him into abandonment of his right under the law, in defiance of the orders made to enforce those rights. If a court of bankruptcy has no power to prevent creditors from making such use of assignments of wages, it had as well shut its doors, and abandon all effort to vindicate the rights which the statutes commit to its protection. The law does not make such weaklings of courts of bankruptcy. They have ample power to protect the bankrupt in the enjoyment of all his rights, and to frustrate the efforts of those who seek to defeat the practical enjoyment of them.'
'In Progressive Building & Loan Co. v. Hall, supra (4 Cir., 220 F. 45), this court held that the court of bankruptcy was without jurisdiction to enjoin action by a creditor residing in another district, but said that the bankrupt might obtain relief by an ancillary suit instituted in the district of the creditor's residence.
'Some question is raised as to whether the complainant should not have proceeded by motion or petition in the original bankruptcy cause instead of by instituting an ancillary suit in equity. As defendant has its principal office in the district of the bankruptcy, it would seem that complainant might have pursued either course. There can be no question, however, that the filing of the ancillary suit was proper. See In re Swofford Bros. Dry Goods Co., supra, D.C., 180 F. 549, 554.'
In Thummess v. Von Hoffman, 3 Cir., 1940, 109 F.2d 293, 294:
'The trustee in bankruptcy applied to the referee for an order on the bankrupt requiring him to pay over to the trustee a portion of the income which the bankrupt receives from the trust estate of his mother. The affidavit which the trustee filed with the referee for such purpose prayed 'that this Court make an order requiring the bankrupt to show cause why he should not be ordered to make payments at stated periods, in instalments and upon such terms as the Court may direct, out of his said income on account of his indebtedness as more particularly set forth in his schedules in bankruptcy filed herein.' The referee granted the trustee an order on the bankrupt to show cause, as prayed for.'
After hearing, the Referee dismissed the order to show cause and upon petition for review, Chief Judge Forman of this Court, being of the opinion 'that the Trustee in Bankruptcy must pursue the rights to which he deems himself entitled in such plenary action or proceeding as may be authorized by law,' affirmed the action of the Referee and the Court of Appeals affirmed Judge Forman's holding.
The application in that case would not seem as drastic as the action taken here in the entry of a personal judgment against the bankrupt, and yet Judge Forman felt that there was no jurisdiction to act in a summary way and that a plenary action was needed.
The learned Referee herein relies heavily upon In re Petroleum Conversion Corporation, D.C.Del.1951, 99 F.Supp. 899, affirmed 3 Cir., 196 F.2d 728, to support the jurisdiction of the Bankruptcy Court.
In that matter an alleged creditor of the bankrupt estate filed claim against the estate before the Referee and the Trustee asserted a counterclaim and setoff against the creditor and the matter was heard by the Referee. No objection to the Referee's jurisdiction or to the summary proceeding was made at the hearing before the Referee and the Referee found against the claimant and for the Trustee on the counterclaim. For the first time, upon review before the District Court, the claimant raised the jurisdictional question. The District Court, Leahy, J., held that the claimant had submitted to the Referee's jurisdiction, that the entry of judgment on the counterclaim was necessary and authorized under the section of the Statute, 11 U.S.C.A. § 11, sub. a(15), to 'Make such orders, issue such process, and enter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this title,' and, consequently the judgment issued by the Referee was valid and subsisting. This position was sustained in a per curiam opinion by the Court of Appeals of the Third Circuit.
It is felt by this Court that there is a clear distinction between In re Petroleum Conversion Corporation and the case at bar which we will attempt to set forth, as follows:
Here, as there, the individual has submitted to the jurisdiction of the Court and it is felt that the Court has, to some degree, a measure of jurisdiction over the person of the bankrupt. However, it is felt that in the instant case the Referee did not have jurisdiction over the particular subject matter, namely, the entry of an individual judgment against the bankrupt upon the claim of a creditor. It is the view of the Court that this judgment in no wise is necessary for the orderly administration of the bankrupt estate and this, as the Court interprets it, is the limited power granted to the Referee under the Act, supra. The Referee holding the debt nondischargeable and entering judgment against the individual bankrupt in no way aids the administration of the bankrupt's estate nor is it necessary for the enforcement of the provisions of the Bankruptcy Act but only aids the individual creditor in pursuing his individual rights against the bankrupt.
It is true, as seen from the foregoing discussion, that the Bankruptcy Court may hold a debt dischargeable where such unusual and compelling circumstances exist that the bankrupt is inadequately protected by his remedy in a non-bankruptcy tribunal. However, the exercise of this ancillary jurisdiction is strictly limited to situations where the bankrupt has inadequate remedy in a non-bankruptcy court and is not to be interpreted as general jurisdiction to determine the dischargeability of claims.
Under the facts of this case there was no mention of inadequate remedy in a non-bankruptcy court and here we have the creditor asking to have the debt held nondischargeable rather than the bankrupt seeking relief.
This feeling on the part of the Court is strengthened by the fact that there has been an Act introduced in the 86th Congress and passed by the House of Representatives on September 7, 1959, and presently pending before the Senate known as House Resolution 4150 entitled, 'An Act to amend the Bankruptcy Act to authorize courts of bankruptcy to determine the dischargeability or nondischargeability of provable debts.' This Act supplements Section 11 of Title 11 U.S.C.A., specifically sub-section a, pertaining to the powers of the Referees and giving them authority to determine the dischargeability of proven debts.
'Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection a of section 2 of the Bankruptcy Act, as amended (11 U.S.C. § 11, sub. a), is amended by adding at the end thereof the following:
'(22) Upon application of the bankrupt and the creditor concerned determine the dischargeability or nondischargeability of all provable debts. If a case is reopened solely for the purpose of determining such dischargeability or nondischargeability, no additional filing fees shall be collected.'
Of course it is not complete logic to say that because Congress is considering giving the authority to the Referees that they do not now have it, but one can infer that if it was felt by the legislative body that the Referees under the present legislation had authority to declare a debt dischargeable or nondischargeable there would be no need for such pending legislation. This just buttresses the thinking of the writer that presently the Referees, at the very least, do not have the authority to enter a personal judgment in favor of a creditor filing the claim which the Referee has found to be nondischargeable.
No diversity of jurisdiction exists, the jurisdictional amount, i.e., $ 10,000, exclusive of interest and costs, is not involved, therefore, this Court could not entertain a plenary action on the claim of the alleged plaintiff.
No cases have been cited and this Court has been unable to find any case where the entry of such a judgment as here has received the approval of a court, either appellate or district.
To the contrary it has been held in Re Anthony, D.C.E.D.Ill.1941, 42 F.Supp. 312, at page 316:
'* * * The bankruptcy court can not afford the creditor complete relief but only partial relief at the best. It cannot carry through and render a judgment upon a creditor's unreleased claim upon which execution may issue against the bankrupt's after-acquired assets. To give such partial relief would in no measure serve to promote the purposes of the Act or the policy therein established. If it had been intended that the bankruptcy court must render such partial relief to a creditor under such circumstances the Act would have so provided and this it fails to do.'
In this light the Court feels constrained to limit the jurisdiction as expressed by the statute and not to enlarge it to include such vast summary powers. To that end, the Court feels compelled to hold that the learned Referee was without jurisdiction to enter such a judgment and it is void and of no effect, and will be stricken from the record of this Court.
This holding, striking the judgment, will make unnecessary passing upon the merits of the application for the issuance of a writ of capias ad satisfaciendum herein, and such application will be denied.
Counsel will prepare an appropriate order.