228 F. 533 | W.D. Ky. | 1915
S'. O. Miller, a creditor of the bankrupt, filed his proof of -debt upon a note dated April 21, 1909, for $425, due April 21, 1910, with interest from date until paid, subject to a credit of $136. Payment of the note was secured by a mortgage executed simultaneously with the note upon certain real estate. The mortgage was not recorded until March 1, 1915, only a short time before the adjudication in bankruptcy on April 20, 1915. The referee allowed the claim as a secured debt.
The trustee filed a petition before the referee, praying that the claim be reconsidered, and that it be “disallowed in so far as it is sought to
“It is stipulated as an agreed statement of facts, for the purpose of the trial and determination of the trustee's petition for the reconsideration and rejection of the mortgage claim of S. O. Miller, on the real estate of the bankrupt, in so far as the same is a lien as against the creditors herein: That the said mortgage debt was made in good faith, and for a present valuable consideration, to wit, money loaned, and that the mortgagee failed to record his mortgage until March 1, 1915, by neglect, and did not purposely secrete the same, nor have any agreement with the mortgagor, or other persons, to withhold the same from record, or to defraud the creditors herein, or other persons, by doing so; that the creditors of the bankrupt herein had no knowledge or information of the existence of said mortgage, until after their debts against the bankrupt had been created, and extended credit to the bankrupt without knowledge or information of the said mortgage lien existing against bis said real estate. The creditors know, at the time they extended this credit, the bankrupt owned this real estate, but did not know of the existence of*536 this mortgage, and extended credit in part because of their knowledge of his-ownership of this real estate, and not knowing of the existence of this mortgage.”
It is nowhere claimed that any of the bankrupt’s debts were created before the purchase of the land or the erection of the improvements-thereon (section 1702), nor is it claimed that any creditor had sued out any attachment against the property or caused it to be levied thereon.
At last the matter was brought to trial on October 21st. The referee then heard such testimony as was offered, and, after argument,.announced his judgment and conclusions thereon, but said-that he would dictate his order and enter it the following day. On October 22d, before the decree was in fact entered by him, the trustee moved to dismiss without prejudice his petition for a re-examination of Miller’s claim and its disallowance, the referee overruled the latter motion of the trustee, and entered the decree denying the petition to reconsider and disallow Miller’s claim pursuant to the decision announced on the 21st, but which he took time to draw .up in form. He embraced in the decree a clause overruling the trustee’s motion to dismiss his petition without prejudice.
The trustee then filed this petition to have reviewed by the court so much of the order of the referee entered on October 22, 1915, as refused to allow him to withdraw his petition for a reconsideration and disallowance of Miller’s claim, or else to dismiss the same without prejudice. The other portions of the referee’s order of the date last named are not complained of or directly sought to be disturbed by the petition for a review. The trustee manifests his purpose to pitch the controversy here upon fhe question of his right to dismiss his petitions filed June 2d and August 6th without prejudice.
We think it was well within the discretion of the referee, under the facts stated, to refuse, at that stage, to permit the trustee to frustrate the whole purpose of the trial by dismissing his petition, after speculating upon the chances of obtaining the referee’s favorable decision upon the case he had brought, and which the referee had already decided-against him, although there had been no formal entry of an order upon the decision he had announced. Ordinarily a plaintiff may dismiss his suit, but in cases where it has gone as far as in this instance, and where great injustice might be done, the trial court has a discretion which may be exercised. See the opinion of the Circuit Court of Appeals, delivered by Judge Taft, in City of Detroit v. Detroit City R. R. Co. (C. C.) 55 Fed. 569, 572, and Pullman Car Co. v. Transportation Co., 171 U. S. 138, 146, 18 Sup. Ct. 808, 43 L. Ed. 108.
It appears that the bankrupt and his wife joined in the mortgage to Miller, and that they therein waived the benefit of the homestead exemption. But his waiver was solely for the benefit of Miller and for the security of his debt alone. To hold that Miller should be confined to the homestead, so as to give other creditors the right to the entire surplus, would be tp hold that the bankrupt and his wife waived the homestead exemption for the benefit of all the creditors, instead of for Miller alone. The statute (section 1706) hardly permits a construction so latitudinous, but in the absence of controlling interpretation to the contrary by the Court of Appeals it might most plausibly be held that, in order that any particular creditor may have the benefit of a waiver of the homestead exemption, there must be a direct waiver in favor of his particular debt.
A waiver of homestead rights in favor of all creditors cannot be worked out through a waiver made to one creditor only, nor can the latter form of waiver entitle all creditors to a right to marshal securi
Without pursuing the subject further, we conclude that the referee did not abuse his discretion. The petition for a review of his order should be dismissed, and the order sought to be reviewed should be, and it is, approved and affirmed.