In re Fleishman

120 F. 960, 1902 U.S. Dist. LEXIS 25

• Court: District Court, N.D. Illinois
• Decided: December 2, 1902
• Docket: No. 7,165
• Status: Published

Opinion

KOHLSAAT, District Judge.

Bankrupt’s mother bequeathed one-half of. the residue of her estate to Rosa Fleishman, wife of the bankrupt, in trust “to pay over the interest and income * * * to my dear son, Moses S. Fleishman, free from the claims or rights of any of the creditors of said Moses S. Fleishman to attach or garnish the same, or in any way to subject the same to the debts of said Moses S. Fleishman; to pay over from time to time to said Moses S. Fleishman so much of the principal of said trust fund as to said Rosa Fleishman shall seem proper, in such manner that the same shall be free and clear from the rights of any of the creditors of said Moses S. Fleishman to attach or garnish the same, or otherwise to subject the same to the debts of said Moses S. Fleishman.” The principal fund amounts to $20,000. This matter now comes on to be heard upon exceptions to the referee’s report. The only exception I deem material to be disposed of is that “the bankrupt has not surrendered all his property and rights of property.” A bankrupt who does not surrender his estate to the trustee is not entitled to a discharge, even though he may have scheduled it and otherwise have complied with the statute. He must surrender to his creditors all property rights and benefits which are under his control, and which he has the legal power to transfer, except his exemptions. In re Harrison, 46 Minn. 331, 48 N. W. 1132. The fact that the rights or property interests which he holds cannot be reached by creditors is not the measure of his duty in such a case. In enacting the bankruptcy statute, the congress invoked its sovereign authority to provide a method whereby the individual could be freed from his lawful obligations. The act provides an extraordinary remedy in the interest of the debtor and against the rights of the creditors, and the true intent thereof is to enable the debtor to place all his estate at the disposal of his creditors, and himself go free. If he has his property so disposed of as to be out of reach of his creditors, but still his own, with power to assign his rights, why should he not, when' he asks for .the benefit of this extraordinary relief, surrender whatever he has the power to surrender ? If he were compelled to go into bankruptcy, it would be different. He is not required to apply for this discharge, nor can he get it and yet keep back what belongs to his creditors. He has the alternative either to surrender all his property interests for the benefit of his creditors, and be' discharged from his debts, or to keep the same, and be denied the benefits of the act. In the case before the court, there can be no claim that the bankrupt has any transferable interest in the principal fund at the present time. 2 Perry, Trusts, § 555, and cases cited. That seems to rest entirely on the option of the trustee. But the income is payable to the bankrupt, subject only to its being free from the interference of creditors. The payments can be ascertained, and the extent of bankrupt’s interest therein arrived at, should he voluntarily assign the same to the trustee. He is not compelled to do this, and cannot be forced so to do, but unless he does he cannot be discharged in bankruptcy.

The report of the referee recommending the discharge is disapproved, and the discharge is denied.