Hill v. Levy

• Decision Date: 24 November 1899
• Citation: 98 F. 94
• Parties: HILL et al. v. LEVY.
• Court: U.S. Court of Appeals — Fourth Circuit

98 F. 94

HILL et al. v. LEVY.

United States District Court, E.D. Virginia.

November 24, 1899

William P. McRae, for petitioning creditors.

Richard B. Davis, for bankrupt.

WADDILL District Judge.

The questions in this case arise upon a petition filed by Zora Hill against M. Levy, alleging the bankruptcy of the latter and asking that he be adjudicated a bankrupt in the involuntary proceedings thus inaugurated. The petitioner avers that the creditors of the alleged bankrupt are less than 12 in number, and that, therefore, one creditor whose debt exceeds $500 has the right to institute proceedings. The alleged ground of bankruptcy is that the said Levy, while totally insolvent, and within four months of the time of filing the said petition, executed a general deed of assignment, conveying all of his property and estate to trustees for the payment of his debts, making preferences among them in contravention of the bankruptcy law, and excluding petitioner, who held his note for the sum of $2,875.50. To this petition the defendant, Levy, filed his plea and answer, admitting insolvency and the existence of the assignment with preferences, but denied that he owed petitioner anything, and averred that his alleged debt was based upon a gaming consideration, which was void under the Virginia statute, whether in the hands of the original payee or an innocent holder thereof, and was not, therefore, a debt provable under the bankruptcy law. Said Levy further alleged that his creditors were more than 12 in number, and hence that petitioner could not, without other creditors joining with him, inaugurate involuntary proceedings in bankruptcy against him.

Upon this condition of the pleadings, considerable evidence was introduced, petitioner attempting to show that the bona fide creditors of the defendant were less than 12 in number, and that the debts sought to be set up by the defendant were either due to persons within the inhibited degree of relationship specified in the bankruptcy law, or of debts secured in the deed of assignment mentioned in the petition as an act of bankruptcy, and therefore should not be reckoned in the number of creditors in determining petitioner's right to file a petition against the said defendant.

Before the question of the right of the petitioner, a single creditor, to inaugurate the proceedings was determined, or indeed finally submitted to the court for its consideration two other persons, to wit, J. S. De Shazor and Bartlett Roper, trustee of Edwin P. Goodwin, bankrupt, filed their joint petition, and asked to join in the original petition against the defendant for involuntary bankruptcy. To these petitions Levy answered, denying the existence of any indebtedness due to either De Shazor or Goodwin, and averring that, if any indebtedness existed, said petitioners were so connected with the original petitioner that their debts were tainted with the gaming consideration aforesaid, and that therefore, they could not recover. Considerable evidence was taken on the question of the existence of the indebtedness and whether the same was based upon a gaming consideration; and the case is now finally submitted to the court for its determination upon the issues thus raised, and whether the defendant, Levy, should be adjudicated an involuntary bankrupt.

The first and most material question to be determined is whether, in point of fact, the original and intervening petitioners have provable debts against the bankrupt. If so, and said claims are not void by reason of the gaming consideration alleged to be incident to their inception, then the various other questions presented are unnecessary to be decided, as the creditors are sufficient in number and amount to institute the proceedings. The original petitioner claims to be a holder for value of a note of $2,875.50, drawn by M. Levy on the 13th of October, 1898, to the order of W. A. Porterfield & Co., and by them indorsed without recourse to the petitioner, said note being a renewal of two other notes, one for $2,184, dated in June, 1898, and another for $694, dated September 13, 1898, drawn by said Levy in favor of W. A. Porterfield & Co., and by them indorsed to the petitioner, Zora Hill. The intervening petitioner J. S. De Shazor is the holder of a duebill for $10 of the defendant Levy, and said Edwin P. Goodwin's trustee sets up an open account of $40 due him from said Levy.

W. A Porterfield & Co., it seems were grain brokers doing business in the city of Washington and various other places throughout the country, including the city of Petersburg, and the indebtedness with said Levy arose by reason of transactions between them in reference to the purchase of wheat by them for his during the year 1898. The defendant, Levy, insists that his transactions with said firm were mere speculations in grain; that he gave orders through an agent of W. A. Porterfield & Co.; that he had no dealings directly with said firm, so far as giving the orders were concerned; that his entire transactions contemplated dealing in futures in wheat, and the payment of the difference, according to the fluctuations of the market, between the contract price of purchase and the price for which the same were sold; and that no actual purchase or delivery of wheat was ever contemplated or intended. Said Porterfield & Co., on the other hand, insist that they do a legitimate brokerage business; that they acted solely as brokers in their dealings with Levy; that they were members of the Chicago Board of Trade, making purchases for said Levy and selling for him whenever requested so to do; that they had no manner of interest in what they did, further than to secure their commissions, and that each and every purchase of wheat they made contemplated an actual delivery, which could have been had whenever said Levy requested it; that the...