Glint Factors v. Schnapp, 137.

• Decision Date: 03 March 1942
• Docket Number: No. 137.,137.
• Citation: 126 F.2d 207
• Parties: GLINT FACTORS, Inc. v. SCHNAPP.
• Court: U.S. Court of Appeals — Second Circuit

126 F.2d 207 (1942)

GLINT FACTORS, Inc. v. SCHNAPP.

No. 137.

Circuit Court of Appeals, Second Circuit.

March 3, 1942.

Ira M. Belfer, of New York City, for appellant.

Hecht & Glaser, of New York City, for petitioning creditor-appellee.

Before L. HAND, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

This petitioning creditor alleged in its original petition which was filed May 17, 1941, that the alleged bankrupt was insolvent and that she had while insolvent and within four months next preceding the filing of the petition committed acts of bankruptcy as follows:

"1. That the alleged bankrupt with intent to hinder, delay or defraud her creditors, and with intent and for the purpose of giving a preference contrary to the provisions of the bankruptcy Act and upon pretended and alleged antecedent indebtedness claim (sic) or alleged to be due from the said alleged bankrupt to divers persons, firms and relatives, transferred and set over unto said divers persons, firm (sic) and relatives, some of whose names are unknown to your petitioner, valuable property, consisting of money in a sum exceeding $2300.00 applicable to the payment of the debts of the said alleged bankrupt.

"2. That while insolvent as aforesaid the said alleged bankrupt transferred various moneys amounting in the aggregate to a sum exceeding $2300.00 to various of her creditors with intent thereby to prefer such creditors over other credits (sic) of the same class, the names of some of such preferred creditors being unknown to your petitioner."

The motion to dismiss the petition was on the ground that the allegations were too vague and indefinite to allege acts of bankruptcy within the jurisdiction of the court. While this motion was pending, the appellee on June 9, 1941 moved for leave to amend its petition by alleging fraudulent transfers and preferential payments, in the latter part of January 1941, of money in stated amounts to each of seven named persons. These persons were all relatives of the bankrupt and the aggregate amount transferred to them was alleged to be $2,250.

This appeal presents again the question of the proper exercise of discretion in permitting an amendment to a petition in bankruptcy where the amended petition counts upon fraudulent transfers and preferential payments made by the bankrupt within four months of the filing of the original petition but not within four months of the date of the proposed amendment. It has long been the law in this circuit that alleging, merely in the words of the statute, those acts of bankruptcy which are of the kind which were fraudulent under the Statute of Elizabeth was not sufficient. In re Condon, 2 Cir., 209 F. 800. But such allegations might be made good by timely amendment permitted in the sound discretion of the court. Bradley v. Huntington, 2 Cir., 277 F. 948; In re Havens, 2 Cir., 255 F. 478. If so made good, however, the date of the amendment was to be taken as the date of the first challenge to the act, or acts, of bankruptcy when adequately alleged in terms sufficiently specific. In re Fuller, 2 Cir., 15 F.2d 294; In re Triangle S. S. Co., D.C., 267 F. 300. If nothing in the original petition in such instances had been definite enough to permit identification with the amendment which must, accordingly, speak only as of its date, the four months' period to which the statute limits the avoidance of preferences and fraudulent transfers had to be computed from the date of the amendment. In re Condon, supra; In re Diamond Fuel Co., 2 Cir., 283 F. 108. Compare, Hovland v. Farmers' State Bank, 8 Cir., 10 F.2d 478. That was likewise true as to the amendment where an act of bankruptcy had been sufficiently alleged in the original petition and a separate, additional one was introduced by amendment. In re Haff, 2 Cir., 136 F. 78. Accordingly, the allowance of such amendments was made to depend upon whether or not the challenge would be an effective one, i. e. whether it would be within the period of four months after the alleged act of bankruptcy for otherwise amendment would be futile and was not allowable since it would not be a sound exercise of discretion.

But where, however, the object of the amendment was not to allege a new cause of action but merely to make defective allegations more definite and precise the court might allow it provided the original petition was still pending. In re Bieler, 2 Cir., 295 F. 78. In such a case the allowance has been made conditional upon whether the original pleadings were specific enough to make it appear that the amendment did but amplify the original charges. "A petitioning creditor must show that he has challenged the act of bankruptcy in season, and it is impossible to know whether he has, until he identifies what act he means." In re Fuller, supra 15 F.2d 295. When this condition was met, the expiration of the four months' period after the filing of the petition and before the amendment would not prevent its allowance. In re Flushing-Queensboro Laundry, Inc....