Blackstone v. Everybody's Store, Inc.

• Decision Date: 10 September 1913
• Docket Number: 1,025.,1,024
• Citation: 207 F. 752
• Parties: BLACKSTONE et al. v. EVERYBODY'S STORE, Inc., et al. ZUCKER et al. v. SAME. In re EVERYBODY'S STORE, Inc.
• Court: U.S. Court of Appeals — First Circuit

207 F. 752

BLACKSTONE et al. v. EVERYBODY'S STORE, Inc., et al. ZUCKER et al. v. SAME. In re EVERYBODY'S STORE, Inc.

Nos. 1,024, 1,025.

United States Court of Appeals, First Circuit.

September 10, 1913

Lee M Friedman and Harvey H. Pratt, of Boston, Mass. (Friedman &amp Atherton, Julius Nelson, Tyler, Corneau & Eames, and Jacobs &amp Jacobs, all of Boston, Mass., on the brief), for appellants.

Boyd B Jones, of Boston, Mass. (Charles F. Choate, Jr., Frederick H. Nash, and William M. Morgan, all of Boston, Mass., on the brief), for appellees.

Before PUTNAM and BINGHAM, Circuit Judges, and ALDRICH, District judge.

ALDRICH District Judge.

In this case (that of Everybody's) the petition for an adjudication of bankruptcy was dismissed by the District Court upon consideration of the pleadings and proofs, and we see no reason for disagreeing with that result.

The position of the petitioning creditors involves a novelty, because they seek in limine, in a bankruptcy proceeding, to invoke processes of property elimination in order to bring the case within the jurisdiction of a bankruptcy court.

We do not think it the policy of the bankruptcy law that bankruptcy courts should at the outset seek to investigate, settle, and adjust ultimate rights in respect to titles, for the purpose of reducing apparent assets, and thus bringing the estate of a debtor within bankruptcy jurisdiction. It is difficult to believe that Congress intended that courts should adopt inquisitorial methods with respect to a person's business, to the end that his affairs should be thrown into bankruptcy.

It cannot reasonably be supposed that the bankruptcy statute intended that bankruptcy courts should anticipate questions as to the validity of record titles, which may possibly, at some future time, be raised by creditors of concerns who are strangers to the proceeding under the petition for adjudication. There is no reasonable and proper machinery for the adjustment of such ultimate rights in such a preliminary proceeding, and those who may have the right to avoid apparent titles would not be concluded by results based upon an investigation to which they were not a party. It would probably be the duty of any one in charge of the creditor interests of a concern like Everybody's Store to hold to the apparent titles, in all reasonable ways, in a situation like this, where the titles are voidable, rather than void, until some proper party in interest invokes the supposed right of avoidance.

Under a petition for an adjudication of bankruptcy, the court is not so much concerned with particular questions of ultimate rights as with the broader and more general question whether the bankruptcy law shall be put in operation. Remedies through bankruptcy proceedings are somewhat in derogation of the rules for relief which obtain in the ordinary course of common-law and equity proceedings; still the purpose of the bankruptcy statute is beneficent, and it should be so administered as to reasonably conserve the interests of creditors, and not to unreasonably wreck the apparent titles and the business of a debtor.

This court, now sitting as an appellate court of bankruptcy, has to consider two cases contemporaneously-- this one instituted by certain creditors of the Everybody's Store, Incorporated, and that of certain petitioning creditors of the concern of William S. Butler & Co., Incorporated. Both debtors are corporations, and the corporate and creditor rights and interests are doubtless more or less interrelated and interlocked.

Prior to the two petitions in bankruptcy, other creditors of the respective corporations had instituted proceedings in equity, and in each case receivers had been appointed and put in charge of the affairs of the business establishment.

In each bankruptcy proceeding the petitioners rely upon the receivership appointment in the prior equity case as an act of bankruptcy; but we are only concerned in this case with the prior equity proceeding instituted by Everybody's Store in so far as it bears upon the particular question whether such receivership appointment should be accepted as an act of bankruptcy. While in each bankruptcy petition the creditors rely upon the receivership appointment as an act of bankruptcy, it must be borne in mind that the cases differ in one very substantial sense, because in this case (that of Everybody's) the receiver was appointed under a bill in equity which, in stating its case for a receiver, expressly alleges solvency; while in the other (the Butler Case) the receiver was appointed under a bill in which an...