Abramson v. Boedeker

• Decision Date: 15 August 1967
• Docket Number: No. 23127.,23127.
• Citation: 379 F.2d 741
• Parties: Harold C. ABRAMSON, Trustee for Casco Chemical Corporation, Bankrupt, Appellant, v. Waller C. BOEDEKER, Appellee. UNITED STATES of America, Appellant, v. Harold C. ABRAMSON, Trustee for Casco Chemical Corporation, Bankrupt et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

379 F.2d 741 (1967)

Harold C. ABRAMSON, Trustee for Casco Chemical Corporation, Bankrupt, Appellant, v. Waller C. BOEDEKER, Appellee.

UNITED STATES of America, Appellant, v. Harold C. ABRAMSON, Trustee for Casco Chemical Corporation, Bankrupt et al., Appellees.

No. 23127.

United States Court of Appeals Fifth Circuit.

June 23, 1967.

Rehearing Denied August 15, 1967.

COPYRIGHT MATERIAL OMITTED

James R. Alexander, Philip I. Palmer, Jr., Palmer, Green, Palmer & Burke, Dallas, Tex., for appellant Abramson.

Richard M. Roberts, Acting Asst. Atty. Gen., Lee A. Jackson, Joseph Kovner, Donald W. Williamson, William Friedlander, Jeanine Jacobs, Attys., Dept. of Justice, Melvin M. Diggs, U. S. Atty., Dallas, Tex., Mitchell Rogovin, Asst. Atty. Gen., Washington, D. C., for the United States, William E. Smith, Asst. U. S. Atty., of counsel.

Robert F. Ritchie, Ritchie, Ritchie & Crosland, Carswell H. Cobb, Dallas, Tex., for appellee, Waller C. Boedeker.

W. E. Smith, Asst. U. S. Atty., Dallas Tex., for intervenor.

Before BROWN, COLEMAN, and AINSWORTH, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

Unlike their military counterparts, many cases neither die nor fade away. They simply go on. Cf. Bros, Inc. v. W. E. Grace Mfg. Co., 5 Cir., 1965, 351 F.2d 208, 209, note 1, cert. denied, 1966, 383 U.S. 936, 86 S.Ct. 1065, 15 L.Ed.2d 852. So it is here. Now back from a denial of relief on the merits after an earlier reversal for trial, In re Casco Chemical Co., 5 Cir., 1964, 335 F.2d 645, an intervening appeal which effectually reduced the amount of the Government's tax lien, Cash v. Campbell, 5 Cir., 1965, 346 F.2d 670, and a similar action ending adversely to the trustee in Kansas,¹ we must decide the merits.

The immediate question is whether the Trustee in Bankruptcy for Casco, through stepping into the shoes of one or more of three actual existing creditors is entitled to set aside distribution of funds due the Bankrupt for goods sold by it. This turns on several subsidiary questions. The first is whether the date of bankruptcy is the date of filing the original petition (October 4, 1961), or the date of the amended petition filed more than four months thereafter on February 26, 1962. If the latter, all washes out with the possible exception of the Government's tax lien. If the earlier date prevails, several questions arise under Texas law and its accounts receivable notification act.² The first is whether the debt was a covered account receivable, not an excluded debt represented by a negotiable instrument. Second, if covered, the question is whether the failure to record the statutory notice subordinates the unrecording assignee to subsequent liens. We answer all in favor of the Trustee (and Government) and reverse.

I. Date of Bankruptcy

For this and the other problems no purpose is served in repeating in detail the facts set out in our prior opinion. 335 F.2d 645, 646-648. The facts before the trial Court and on this appeal are drawn from a stipulated record. On October 5, 1961, the consent order was entered by the District Court which gave rise to the asserted vulnerable transactions. (Notes 11, 12, 335 F.2d 645, 647). The day before, October 4, 1961, an involuntary petition in bankruptcy was filed by one creditor which alleged three acts of bankruptcy in conclusory general terms.³ On February 26, 1962, more than four months after October 5, 1961, an amended petition was filed which in factual detail set forth the interpleaded judgment of October 5, 1961, and the transfer of the sums to the four named claimants.⁴ This was followed by the formal withdrawal of the defense by Casco, the Bankrupt, and an adjudication by agreement and default.

Reaching the conclusion that a plenary action, not summary proceeding, was required, the District Court earlier held, 335 F.2d 645, Part II, 648-650, that the date of bankruptcy was October 4, 1961, not the date of the amendment, February 26, 1962. In affirming lack of summary jurisdiction, we held that the date of bankruptcy was a matter for determination in the plenary proceedings to be held on remand, 335 F.2d 648. On the remand, the District Court changed its view and held that the date of bankruptcy was February 26, 1962, not the date of the original petition.⁵

Although the parties and the Court below persist in discussing this problem in terms of the doctrine of relation back, see 2 Collier, Bankruptcy ¶ 18.23 and ¶ 18.26 (14th ed. 1966), the answer cannot be found there. For it is perfectly obvious whether on general principles or on F.R.Civ.P. 15(c) that allegations concerning events occurring subsequent to the filing of the original petition cannot possibly relate back to the earlier date of filing. But that is a long way from an enforced conclusion that the date of bankruptcy here must have been the date of the amended petition.

It is true, of course, that to initiate an involuntary proceeding, one of the six specified acts of bankruptcy must have occurred within four months prior to the filing of the petition. § 3, 11 U.S.C.A. § 21. But once a single act of bankruptcy has occurred and the petition has been timely filed with adequate allegations, the power of the Trustee acting for the general estate to reach back and unscramble transactions which are vulnerable to specific sections of the Act, e. g., §§ 67, 70, etc., is not restricted to those transactions occurring within the four months' prefiling period.⁶ More important, neither is it restricted to those specific transactions set forth in the involuntary petition. In other words, a single act of bankruptcy adequately alleged — no matter how insignificant in terms of dollars or relation to other unalleged suspect transactions — triggers the whole thing.⁷

Phrasing the problem as we do, whether the allegations of the involuntary petition are adequate is essentially a question of procedure. Through General Order 37⁸ this brings directly into play the Federal Rules of Civil Procedure "in so far as they are not inconsistent with the Act or with the general orders." 1 Collier ¶ 2.81; Georgia Jewelers, Inc. v. Bulova Watch Co., 5 Cir., 1962, 302 F.2d 362, 366. Except that § 18c, 11 U.S.C.A. § 41, requires that "petitions for both voluntary and involuntary bankruptcy shall be verified under oath," 2 Collier ¶ 18.36, nothing in General Order 5 prescribing the content and form of the petition nor in the official forms, see General Order 38, is inconsistent with F.R.Civ.P. 8(a) (2) which requires merely a "short and plain statement," the standard under 8(e) being that each "* * * averment of a pleading shall be simple, concise, and direct." See 2 Collier ¶ 18.092.2, citing 2 Moore, Federal Practice, ¶ 8.12, it should "be noted that * * * Rule 8(a) (2) does not require the pleading of facts as distinguished from conclusions of law." There is no reason, therefore, why the involuntary petition should not be read with all of the liberality of the usual civil complaint. Conley v. Gibson, 1957, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80; Georgia Jewelers, Inc. v. Bulova Watch Co., supra, 302 F.2d at 366; Barber v. Motor Vessel "Blue Cat", 5 Cir., 1967, 372 F.2d 626, and see especially cases cited p. 627, n. 1.

Consequently, as Collier points out, despite the sometime use of the term "jurisdictional facts" as a basis for a particular procedural ruling, deficiencies in pleadings cannot really be "jurisdictional." "There is no basis for assuming that the pleading of an act of bankruptcy, for instance, is any more `jurisdictional' than the pleading of a petitioning creditor's claim. Nor is it reasonable to suppose, on reading the Act and the General Orders, that a given defect in pleading might be `jurisdictional' * * * at one stage of the proceedings, and `non-jurisdictional' at a subsequent stage. Far more preferable is the view that defects in pleadings are not `jurisdictional'; that whether or not they may be cured depends upon the power of amendment, and that a bankruptcy court has ample jurisdiction to permit amendments." Serving as a prelude for our further discussion, the text concludes, "Aside from a few isolated instances, juridical opinion amply supports these views." 2 Collier ¶ 18.05 at p. 20.

But in considering the cases, a distinction must be kept carefully in mind. The fact that the Bankruptcy Court on a timely objection made by the debtor-alleged-bankrupt concludes that the allegation of the act of bankruptcy is not factually detailed enough and that therefore an amendment is required in the interest of good orderly administration, is not the equivalent of a holding that the petition is so totally defective that it is a nullity, the jurisdiction of the court has never been invoked, and the critical times have not begun to run.⁹

The key is the defensive position taken by the debtor-alleged-bankrupt. This is surely so ever since the 1938 Amendments¹⁰ which took away from creditors the right to contest an involuntary petition. This was a deliberate congressional choice to avoid abuses arising from the self-interest of creditors seeking by procedural or other objections to hang on to self-help preferences which were otherwise vulnerable. 2 Collier ¶ 18.33. Since the creditor cannot oppose the petition directly, he ought not to have the right to gain the same benefit through a collateral attack.¹¹

Against this background we align ourselves with the First, Second, Third, Seventh and Eighth Circuits in holding that allegations in the wording of the statute, although vulnerable to objection by the debtor-alleged-bankrupt thus setting in train questions of relation back of proffered amendments, are not "jurisdictionally" defective.

Thus, in Commercial Credit Corp. v. Skutt, 8 Cir., 1965, 341 F.2d 177, where the petition was challenged as "so fatally defective" on its face as to deprive the Bankruptcy Court of jurisdiction, the Eighth Circuit has this to say. "This contention overlooks the fact that the Congress, not...