Bixby v. First National Bank of Elwood
Decision Date | 08 January 1958 |
Docket Number | No. 12037.,12037. |
Citation | 250 F.2d 713 |
Parties | Richard E. BIXBY, as Trustee in Bankruptcy of Cecil L. Slavens, Bankrupt, Plaintiff-Appellant, v. FIRST NATIONAL BANK OF ELWOOD, Defendant-Appellee. |
Court | U.S. Court of Appeals — Seventh Circuit |
Sigmund J. Beck, Indianapolis, Ind., Alan I. Klineman, Indianapolis, Ind., Bamberger & Feibleman, Indianapolis, Ind., of counsel, for appellant.
Henry C. Ryder, Keith W. Tyler, Indianapolis, Ind., Buschmann, Krieg, DeVault & Alexander, Indianapolis, Ind., of counsel, for appellee.
Before LINDLEY, SCHNACKENBERG and PARKINSON, Circuit Judges.
According to the judgment of the district court from which plaintiff, as trustee in bankruptcy of Cecil L. Slavens, bankrupt, has appealed, preferential transfers amounting to $11,519.50, made by the bankrupt to defendant on February 4th and 6th, 1954, are voidable. However, the district court refused to so adjudicate similar transfers between the same parties, amounting to not less than $28,785.30, on the ground that they were made prior to February 3, 1954. Plaintiff says this was error.
On April 19, 1954, an involuntary petition in bankruptcy (herein referred to sometimes as the "original petition") was filed. It alleged:
On April 29, 1954, Slavens filed a motion to dismiss the petition. The referee in bankruptcy on June 2, 1954 heard this motion and petitioning creditors' motion for leave to amend their petition, and he entered an order sustaining the bankrupt's contention that the aforesaid language in the petition was "defective in not specifically setting forth the acts of bankruptcy alleged". He gave leave to the petitioning creditors to file an amended petition by June 6, 1954, directing the bankrupt to plead thereto by June 16, 1954. The referee in bankruptcy further ordered that "if no Amendment to the Petition is filed on or before the 6th day of June, 1954, as herein provided for, the aforesaid Creditors' Petition shall be deemed dismissed."
No dismissal order was ever entered, because on June 3, 1954 an amended petition was filed. It alleged, inter alia:
"That within four months next preceding the filing of this petition, * * *, Slavens committed an act of bankruptcy, in that he transferred, while insolvent, certain of his property, by executing and delivering to the First National Bank of Elwood, Indiana, on or about February 4, 1954, a Chattel Mortgage covering all of the personal property machinery and equipment in his place of business in Elwood, Indiana, for the benefit of said First National Bank of Elwood, Indiana, a creditor, for or on account of antecedent indebtedness, the effect of which transfer will be to enable such creditor to obtain a greater percentage of its debt than some other creditor of the same class."
On October 28, 1954 Slavens was adjudicated a bankrupt. All proceedings from April through October 28, 1954 continued under the same caption and docket number in the bankruptcy court.
The amended petition set forth in specific detail divers alleged acts of bankruptcy, including that of February 4, 1954, supra. On June 15, 1954, Slavens filed a motion to strike and dismiss the creditors' amended petition. No ruling was made on that motion.
Plaintiff commenced this action on January 31, 1956 against defendant alleging voidable preferential transfers amounting to $61,475.15 made by the bankrupt to defendant during the period of January 25 to April 19, 1954.
Defendant filed its answer. On defendant's motion, the district court on July 27, 1956 granted a partial summary judgment in favor of defendant, holding that June 3, 1954 was the date that the petition initiating the proceedings was filed and "that only such preferential transfers made or suffered within four months before such date can be avoided * * *."
The judgment of July 27, 1956 was incorporated in the judgment appealed from.
Relevant statutory provisions are contained in the Bankruptcy Act. Section 1(13)1 provides:
"`Date of bankruptcy\', `time of bankruptcy\', `commencement of proceedings\', or `bankruptcy\', with reference to time, shall mean the date when the petition was filed;"
Section 60, sub. a(1)2 provides:
"A preference is a transfer, as defined in this title, of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition initiating a proceeding under this title, * * *."
Section 703 provides:
"(a) The trustee of the estate of a bankrupt and his successor or successors, if any, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt as of the date of the filing of the petition initiating a proceeding under this title, * * *."
General Order 37 In Bankruptcy4 provides in part:
"In proceedings under the Act the Rules of Civil Procedure for the District Courts of the United States shall, in so far as they are not inconsistent with the Act or with these general orders, be followed as nearly as may be. * * *"
Rule 15(c) of the Federal Rules of Civil Procedure,5 provides:
It is recognized that the general rules of pleading and practice apply to proceedings in bankruptcy. 8 C.J.S. Bankruptcy § 115, p. 534.
In 8 C.J.S. Bankruptcy § 114, p. 533, it is said:
"The filing of a petition, sufficient on its face, by three petitioners alleging that they are creditors holding provable claims of the requisite amount, the insolvency of defendant and the commission of an act of bankruptcy within the preceding four months, gives the bankruptcy court jurisdiction of the proceeding."
And § 117, at page 540, the following statement is added:
At page 543 it is said:
Later the petitioning creditors asked leave to amend to include allegations that "Claudon is insolvent" and also that he permitted attachments to be entered in the Circuit Court of Livingston County, Illinois, and levied upon his property and that he suffered or permitted certain creditors, which he named, with the amounts of their respective claims, to obtain through legal proceedings commenced on a stated date in said circuit court, attachment writs which were duly issued and delivered to the sheriff and levied on real estate of Claudon, etc.
We held that the amendment was properly related back to the date of the filing of the original petition, saying, at page 878:
"This order might be questioned if the amendment set forth a new act of bankruptcy, that is, a different act from that attempted to be set forth in the original petition; but if it set forth more perfectly the same act which was attempted to be set forth in the original petition, the order that it should relate back was proper."
A convincing statement of the reasoning which should prevail in the case at bar, is contained in the First Circuit case of Harney Shoes, Inc. v. National Fabric & Finishing Co., 44 F.2d 517. There the petitioning creditors, when confronted with a motion to dismiss their petition, were given leave to amend. At page 518, the court said:
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