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86TH CONGRESS HOUSE OF REPRESENTATIVES 1st Session

REPORT

No. 585

FILING TIME FOR REVIEW OF ORDERS OF REFEREES IN BANKRUPTCY

JUNE 26, 1959.-Referred to the House Calendar and ordered to be printed

Mr. FORRESTER, from the Committee on the Judiciary, submitted the following

REPORT

[To accompany H.R. 6556]

The Committee on the Judiciary, to whom was referred the bill (H.R. 6556) to amend subdivision c of section 39 of the Bankruptcy. Act (11 U.S.C. 67c) so as to clarify time for review of orders of referees, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

GENERAL STATEMENT

Section 39c of the Bankruptcy Act now provides that a petition for. review of an order of a referree must be filed "within ten days after. the entry thereof or within such extended time as the court may for. cause shown allow ***" On the face of it, this section would seem to require that a petition for review must be filed within 10 days or, if an extension of time is sought, it, too, must be requested within. 10 days.

However, the Supreme Court has held that a bankruptcy court may also, in its discretion, grant an extension even after the expiration of the 10-day period. In Pfister v. Northern Illinois Finance Corp. (317 U.S. 144, 153 (1942)), the Surpeme Court declared that although 39c limits an aggrieved party in seeking review as a matter of right after the 10-day period, it places no limitation upon the discretion of the bankruptcy court to entertain a petition for review after the expiration of that period.

The effect of this interpretation is that there is uncertainty in every bankruptcy proceeding as to the finality of each order of a referee. While it is true that bankruptcy courts are historically courts of equity, they are nevertheless adjudicating property rights and administering property in a dynamic society. During the course of a pro-.

ceeding, a referee may determine title to valuable property. He may have to decide whether a particular transfer is voidable as a preference or because of fraud. Certainly, the rightful owner whether he is the trustee or the transferee should not be hindered from disposing of that property by an overhanging threat that the aggrieved party may seek to upset the referee's order months after the order had been entered and after the normal statutory period for seeking review has expired.

This bill will provide a fixed limit on the time within which a court may entertain a request for extending the time for the filing of a petition for review. It requires a person who is seeking an extension to request the court for such an extension within the 10-day period which he normally has to file a petition for review. If there is no petition for review and no request for an extension of time within 10 days after entry of the order of a referee, then that date should be final. This bill embodies the recommendations of the Judicial Conference of the United States. A letter from the Administrative Office of the U.S. Courts requesting the introduction of this bill and explaining it is appended hereto.

ADMINISTRATIVE OFFICE OF THE U.S. COURTS,
Washington, D.C., April 16, 1959.

Hon. SAM RAYBURN,
Speaker, House of Representatives,

Washington, D.Č.

DEAR MR. SPEAKER: There is transmitted herewith, on behalf of the Judicial Conference of the United States, a bill to amend subdivision c of section 39 of the Bankruptcy Act (11 U.S.C. 67c) so as to clarify the time for review of orders of referees.

An explanation of the proposed bill is attached. Representatives of this office will be glad to appear before the committee and to provide any further information which may be desired concerning the bill. Respectfully,

WARREN OLNEY III, Director.

EXPLANATION OF PROPOSED BILL TO AMEND SUBDIVISION C OF
SECTION 39 OF THE BANKRUPTCY ACT (11 U.S.C. 67) SO AS TO
MAKE IT CLEAR THAT A PETITION FOR REVIEW BY ORDER OF
REFEREE MUST BE FILED WITHIN THE PRESCRIBED 10-DAY
PERIOD UNLESS TIME IS EXTENDED BY THE COURT

Subdivision c of section 39 now reads:

"c. A person aggrieved by an order of a referee may, within ten days after the entry thereof or within such extended time as the court may for cause shown allow, file with the referee a petition for review of such order by a judge and serve a copy of such petition upon the adverse parties who were represented at the hearing. Such petition shall set forth the order complained of and the alleged errors in respect thereto. Upon application of any party in interest, the execution or enforcement of the order complained of may be suspended by the court upon such terms as will protect the rights of all parties in interest."

Subdivision c was added to section 39 by the Chandler Act of 1938 for the purpose of clearly outlining the procedure to be followed in obtaining a review of a referee's order, and in the interest of certainty and uniformity. Prior to the Chandler Act, the right to have orders of the referee reviewed by the judge was governed by General Order 27. Subdivision e incorporated into the act the essence of former General Order 27, which has been abrogated. It also was intended to remedy a previous deficiency in both the Bankruptcy Act and the general orders in that a definite period of 10 days has been provided as the time in which to file a petition for review. General Order 27 contained no time limitation, though local rules in various districts prescribed a time within which the application must be filed. See "Collier on Bankruptcy," 14th edition, volume 2, section 39.16. See also "Remington on Bankruptcy," volume 8, section 3406.

Section 39c stipulates "ten days after the entry thereof" as the period within which a petition for review of a referee's order must be filed. Generally the failure to file within this time, unless an extension is granted, is fatal to the petition for review. However, in In Re Steinberg ((S.D. Calif. 1956) 138 F. Supp. 462), the court held that the expiration of the 10-day period does not preclude the court from entertaining a petition for review, having power to exercise its own discretion in the matter. The effect of the expiration of the 10-day period is only that a petitioner cannot have a review as a matter of right. See "Collier on Bankruptcy," 14th edition, volume 2, section 39 20 and the other cases cited under note 8.

Uncertainty as to the finality of a referee's order now exists because of the holdings of some courts that a bankruptcy court may entertain an untimely petition for review, even in the absence of an extension of time. In view of this an arenament to section 39c is needed that will fix a definite period of time within which an application for review must be filed. The bill would amend section 39c so as to make it clear that the petition for review must be filed within the prescribed 10-day period or within such extended time as the court may allow upon petition for extension filed within such 10-day period.

The Judicial Conference of the United States, at its meeting in March 1959, upon the recommendation of its Committee on Bankruptcy Administration, approved the proposed

measure.

CHANGES IN EXISTING LAW

In compliance with clause 3 of rule XIII of the House of Representatives, there is printed below in roman existing law in which no change is proposed, with matter proposed to be stricken out enclosed in black brackets, and new matter proposed to be added shown in italics:

SECTION 39C OF THE BANKRUPTCY ACT

c. A person aggrieved by an order of a referee may, within ter days after the entry thereof or within such extended time as the court upon petition filed within such 10 day period may for cause shown allow, file with the referee a petition for review of such order by a judge and serve a copy of such petition upon the adverse parties who were represented at the hearing. Such petition shall set forth the order complained of and the alleged errors in respect thereto. Upon application of any party in interest, the execution or enforcement of the order complained of may be suspended by the court upon such terms as will protect the rights of all parties in interest.

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JUNE 26, 1959.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. DAWSON, from the Committee on Government Operations, submitted the following

REPORT

[To accompany H. Res. 295]

The Committee on Government Operations, to whom was referred the resolution (H. Res. 295) to disapprove Reorganization Plan No. 1 of 1959, having considered the same, report favorably thereon without amendment and recommend that the resolution do pass.

(Reorganization Plan No. 1 of 1959 which is set forth in H. Doc. No. 140, 86th Cong., follows:)

REORGANIZATION PLAN No. 1 OF 1959

Prepared by the President and transmitted to the Senate and the House
of Representatives in Congress assembled, May 12, 1959, pursuant
to the provisions of the Reorganization Act of 1949, approved June
20, 1949, as amended

CERTAIN LAND EXCHANGES AND OTHER MATTERS

SECTION 1. Except as otherwise provided in section 2 hereof, the following functions are hereby transferred to the Secretary of Agriculture:

(a) The functions of the Secretary of the Interior under the Act of March 20, 1922, 42 Stat. 465, as amended (16 U.S.C. 485, 486), with respect to exchanges of non-Federal lands for national forest lands or timber.

(b) The functions of the Secretary of the Interior under the Act of February 2, 1922 (42 Stat. 362), with respect to exchanges of lands in private ownership within or within six miles of the Deschutes National Forest for national forest lands, or for timber from any national forest, in the State of Oregon.

(c) The functions of the Secretary of the Interior under the Act of June 7, 1924 (43 Stat. 643), except section 2 thereof, with respect to exchanges of privately owned lands for national forest timber in New Mexico.

(d) The functions of the Secretary of the Interior under the Act of January 12, 1925 (43 Stat. 739), except section 2 thereof, with respect to exchanges of privately owned lands for national forest timber in New Mexico.

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