In re Black Diamond Copper Min. Co.

• Court: Arizona Supreme Court
• Writing for the Court: CAMPBELL, J.
• Citation: In re Black Diamond Copper Min. Co., 85 P. 653, 10 Ariz. 42 (Ariz. 1906)
• Decision Date: 30 March 1906
• Docket Number: Civil 944
• Parties: In the Matter of THE BLACK DIAMOND COPPER MINING COMPANY, a Corporation, in Bankruptcy; SOTO BROS. & RENAUD, Appellants

85 P. 653

10 Ariz. 42

In the Matter of THE BLACK DIAMOND COPPER MINING COMPANY, a Corporation, in Bankruptcy; SOTO BROS. & RENAUD, Appellants

Civil No. 944

Supreme Court of Arizona

March 30, 1906

APPEAL from a judgment of the District Court of the Second Judicial District. Fletcher M. Doan, Judge. Reversed.

Proceedings in involuntary bankruptcy of The Black Diamond Copper Mining Company. From an order refusing to adjudicate the company a bankrupt, and from an order making an allowance of attorney's fees, Soto Bros. & Renaud, petitioning creditors, appeal.

The facts are stated in the opinion.

James Reilly, for Appellants.

The court erred in permitting the bankrupt to introduce the testimony of Nat Hawke, as to an alleged compromise of the claim of Soto Bros. & Renaud, because there was no issue before the court, no pleadings, and no notice that such questions would be tried. Bankruptcy Act, sec. 18, (e) and (f). The court erred in making the orders of July 28th and July 31, 1905, dismissing the proceedings. When the petitioning creditors withdrew from the case, they did not and could not thereby dismiss their petition, which remained of force for all other creditors, and petitioning creditors were thereby bound under their bond for all costs incurred up to that time, including their attorney's fee. Bankruptcy Act, sec. 4 (e). And neither the petitioning creditors, not even the court, had authority to dismiss the petition until after notice to creditors. Bankruptcy Act, sec. 59 (g); In re Plymouth Cordage Co., 135 F. 1, 000, 68 C.C.A 434. Sec. 58 of the Bankruptcy Act, subds. (a), (b), and (c) specifies what notices shall be given, and when and by whom. It was the duty of counsel for petitioning creditors to press the case until he secured an adjudication of bankruptcy and a reference of the case, when other creditors would be notified and could present their claims. See Bankruptcy Act, sec. 64 (b), subd. 3; In re Habegger, 139 F. 623, 71 C.C.A 607; Randolph v. Scruggs, 190 U.S. 533, 23 S.Ct 710, 47 L.Ed. 1, 165; Fed. Cas. No. 1,214. This court has jurisdiction to consider this matter. Ingram v. Wilson, 125 F. 913, 60 C.C.A. 613.

OPINION

CAMPBELL, J.

-- On November 25, 1904, the California Vigorit Powder Company, Harper & Reynolds Company, and F.W. Braun Company, filed a petition in bankruptcy against The Black Diamond Copper Mining Company, a corporation. Several acts of bankruptcy were alleged. Summons was duly issued and served, and December 10, 1904, fixed as the return day. On the return day counsel entered appearance for the company and secured from the court an order granting thirty days' extension of time in which to plead. No answer having been filed within this extended time, the court, on January 23, 1905, further extended the time to plead until March 1, 1905. No answer was filed within the extended time, nor has any answer ever been filed. It appears in the minute entries in the record that on April 3, 1905, counsel for the petitioners and for the bankrupt appeared before the court, and the court heard argument upon some matter, the nature of which is not disclosed, and continued the matter for the term. On May 9, 1905, it similarly appears that the testimony of two witnesses was taken. The record does not disclose the nature of the testimony taken. The matter was then continued to May 11th. No action was taken on May 11th, and on May 18th the minutes recite that the case was continued by consent for a further hearing on May 31, 1905. On June 1, 1905, the appellants, Soto Bros. & Renaud, copartners, filed a petition setting forth the same acts of bankruptcy contained in the original petition, that they are creditors, and prayed leave to join in the original petition, and that the respondent company be adjudged a bankrupt. On June 2, 1905, the copper company filed what is denominated a "demurrer" to this request and petition, setting forth that the original petitioners have been settled with and their claims paid. It is further alleged that "the records of this court also show that the claim of petitioners for $2,150 and the claim of N. O. Bagge have been paid, and that they are not any longer creditors of the corporation." No answer is made to the allegations of the petition alleging the commission of acts of bankruptcy. So far as the record discloses, no ruling was made on the demurrer. On June 5, 1905, the appellants filed an amended petition to which no answer has been made by the copper company. On July 28, 1905, the court entered the following order: "It is by the court ordered that the counsel for the petitioning creditors, W. J. Kirkpatrick, be allowed a fee of two thousand dollars. It is further ordered, upon the payment by the defendant company herein of the counsel fee, that this proceeding be dismissed." On July 31, 1905, the court extended the order of July 28th to include the petition of appellants. Appellants have appealed from the order refusing to adjudicate the copper company a bankrupt and the allowance of the attorney's fee. The attorney's fee mentioned in the order as a condition precedent to dismissal is for the attorney who represented the original petitioners.

The question first presented is whether the court erred in refusing to adjudicate the copper company a bankrupt and in dismissing the petitions. We are not aided in this investigation by any brief on behalf of the appellee. It is alleged by appellant, and it also appears from certain papers accompanying the very imperfect record in this case, that instead of filing an answer to the original petition the copper company confined itself to compromising the claims of the creditors, and that the various extensions of time within which to plead were secured with that end in view; that among those with whom settlements were effected were the original petitioning creditors. The action which the appellee attempted is what is sometimes termed an "informal composition." Such compositions are subject to the rights of any creditor who may appear and present his claim. In re Lockwood, (D.C.) 104 F. 794.

It is first to be observed that by the plain provision of the Bankruptcy Act appellants had a right to join in the original petition. Section 59 (f) reads: "Creditors, other than original petitioners, may at any time enter their appearance and join in the petition or file an answer and be heard in opposition to the prayer of the petition." Act July 1, 1898, c. 541, 30 Stats. 562 (U.S. Comp. Stats. 1901, p. 3445). What, then, was the duty of the court, -- the original petition showing acts of bankruptcy and there being no answer denying them? Section 18 (b) of the Bankruptcy Act, as amended (act Feb. 5, 1903, c. 487, 32 Stats. 798, [U.S. Comp. Stats. Supp. 1905, p. 685]), provides that "the bankrupt or any creditor may appear to plead to the petition within five days after the return day, or within such further time as the court may allow." Section 18 (e) provides: "If on the last day within which pleadings may be filed none are filed by the bankrupt or any of his creditors, the judge shall, on the next day, if present, or as soon thereafter as practicable, make the adjudication or dismiss the petition." Act July 1, 1898, c. 541, 30 Stats. 551, (U.S. Comp. Stats. 1901, p. 3429). Section 18 (f) provides that, "if the judge be absent from the district on the next day after the last day on which pleadings may be filed, and none have...