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In re Cantwell

decided: February 4, 1981.



Before Adams and Sloviter, Circuit Judges, and Brotman, District Judge.*fn*

Author: Sloviter


This is an appeal from an order of the district court sitting in bankruptcy which reversed an order of the bankruptcy court and thereby dissolved a stay of appellee's discharge in bankruptcy. Appellee claims the district court order is not appealable, that the matter is now moot, and that the court did not abuse its discretion in dissolving the stay. We do not reach the merits because, for the reasons stated below, we hold this appeal must be dismissed.


The relevant facts are not in dispute. On June 26, 1978 appellee, Gerard J. Cantwell, filed a voluntary petition in bankruptcy.*fn1 In accordance with Bankruptcy Rule 404(a), the bankruptcy court entered an order on August 29, 1978 setting November 1, 1978 as the last day for filing complaints objecting to the discharge. November 1, 1978 was also fixed as the day on which the discharge would be granted if no complaint were filed.

In his schedule of debts, Cantwell listed among his creditors appellants, Continental Bank and Beatrice and Samuel Pitt. Apparently, Cantwell and his wife were co-sureties with the Pitts for a corporation's debts to Continental. Continental had confessed judgment against both Cantwell and his wife in January 1974, but the judgment was opened as to Mrs. Cantwell in April 1975 and remained open when Mr. Cantwell filed his petition in bankruptcy.

Mr. and Mrs. Cantwell own a house as tenants by the entirety. Under Pennsylvania law, entireties property can be attached only to satisfy the joint debts of a married couple. Therefore, Continental needed a joint judgment against the Cantwells to perfect a lien which it claimed to have on this property, and the Pitts intervened in the state proceedings to press their claim for contribution from the Cantwells for money they alleged to have paid to Continental in partial or complete satisfaction of their obligations as sureties.

In order to reach the property held by Mr. and Mrs. Cantwell as tenants by the entirety, Continental and the Pitts sought from the bankruptcy court relief from the automatic stay provided by Bankruptcy Rule 401(a) whereby the filing of a petition operates to stay commencement or continuation of any action against the bankrupt and the enforcement of any judgment against the bankrupt. On October 4, 1978, the bankruptcy judge entered an order providing such relief pursuant to Bankruptcy Rule 401(d) which permitted them to proceed with the state court action against the Cantwells. Continental and the Pitts also filed a "complaint" in the bankruptcy court to stay the discharge of Mr. Cantwell until their claims against Mrs. Cantwell could be reduced to judgment. Continental sought such a stay in an effort to secure a joint judgment before discharge to enable it to attempt enforcement of its lien against the entireties property. On November 1, 1978 the bankruptcy court granted their request and stayed Mr. Cantwell's discharge pending final determination of the state court action.

Mr. Cantwell appealed the grant of the stay to the district court. In an order dated April 22, 1980, the district court reversed the November 1, 1978 order of the bankruptcy court and dissolved the stay. The district court relied on the reasoning of the decision in Harris v. Manufacturers National Bank of Detroit, 457 F.2d 631 (6th Cir.), cert. denied, 409 U.S. 885, 93 S. Ct. 118, 34 L. Ed. 2d 142 (1972), where the court enjoined execution of a joint judgment against entireties property following a husband's discharge in bankruptcy. The Harris court and the district court here both stressed that section 17 of the Bankruptcy Act reflects Congressional intention that a discharge in bankruptcy should release a spouse from joint as well as several debts and bar execution on a joint judgment. Continental Bank and the Pitts appealed the district court's order to this court on April 30, 1980.*fn2

On June 30, 1980, the Pitts filed a motion with the bankruptcy court for the entry of a qualified discharge of Mr. Cantwell. The same day this motion was sub silentio denied when the bankruptcy court granted Mr. Cantwell his discharge in bankruptcy. There has been no appeal from the order of discharge.

Appealability of the Order

Appellee argues that we have no jurisdiction over this appeal. Section 24(a) of the Bankruptcy Act, 11 U.S.C. ยง 47(a) (1976), which establishes the jurisdiction of appellate courts in bankruptcy cases provides, in relevant part:

The United States courts of appeals ... are invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, ...

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