In re Black Diamond Copper Mining Co.

• Decision Date: 27 March 1908
• Docket Number: Civil 1045
• Citation: In re Black Diamond Copper Mining Co., 11 Ariz. 415, 95 P. 117 (Ariz. 1908)
• Parties: In the Matter of the BLACK DIAMOND COPPER MINING COMPANY, a Corporation, in Bankruptcy. SOTO BROTHERS & RENAUD, a Copartnership, and ALBERT STEINFELD & COMPANY, a Copartnership, Appellants
• Court: Arizona Supreme Court

95 P. 117

11 Ariz. 415

In the Matter of the BLACK DIAMOND COPPER MINING COMPANY, a Corporation, in Bankruptcy. SOTO BROTHERS & RENAUD, a Copartnership, and ALBERT STEINFELD & COMPANY, a Copartnership, Appellants

Civil No. 1045

Supreme Court of Arizona

March 27, 1908

APPEAL from a judgment of the District Court of the Second Judicial District, in and for the County of Cochise. Fletcher M. Doan Judge. Affirmed.

For former report, see 10 Ariz. 42, 85 P. 653.

Proceedings in involuntary bankruptcy of the Black Diamond Copper Mining Company. From orders disallowing claims filed by them Soto Brothers & Renaud and others appeal.

James Reilly, for Appellants.

The court erred in granting repeated continuances by consent of petitioning creditors, after bankruptcy confessed, because such continuances were contrary to the reason and spirit of the bankrupt law. Act of Cong. July 1, 1898, 30 Stats. at Large, 544 et seq., as amended by Act of Feb. 15, 1903; 32 Stats. at Large, 797 et seq. The compromise and settlement set out by the bankrupt was an attempt to defeat the bankrupt law and a usurpation of the power of the court. Sec. 12 of the Act cited above, subds. A, B, C, D, E. The bankrupt had no authority to use the money belonging to the estate, to make any compromise with creditors, and it had no power to issue bonds; such bonds bound no person or property. Mueller's Trustee v. Nugent, 184 U.S. 1, 22 S.Ct. 269, 46 L.Ed. 405; Cumber v. Wane, 1 Smith's Lead. Cas., 9th Am. ed. 1888, 613; Fuller v Kemp, 138 N.Y. 231, 33 N.E. 1034, 20 L.R.A. 785; Schlessinger v. Schlessinger, 39 Colo. 44, 88 P 970, 8 L.R.A., N.S., 863; 1 Cyc. 319; Chicora Fer. Co. v Dunan, 91 Md. 144, 46 A. 347, 50 L.R.A. 401; Howard v. Norton Morgan Co. (Ariz.), 89 P. 541; Flenor v. Flenor, 30 Ky. Law Rep. 543, 99 S.W. 258.

Ben Goodrich, for Appellee.

Failure to rescind promptly is an affirmation of the contract, and the restoration must be entire, except where consumed or altered before knowledge of facts authorizing rescission. Old Dominion etc. Co. v. Bigelow, 188 Mass. 315, 108 Am. St. Rep. 493, 74 N.E. 653; Grymes v. Sanders, 93 U.S. 62, 23 L.Ed. 798; Bancroft v. Bancroft, 110 Cal. 375, 42 P. 896; Marston v. Simpson, 54 Cal. 189; Getty v. Devlin, 54 N.Y. 415; Upton v. Tribilcock, 91 U.S. 55, 23 L.Ed. 203; Ward v. Sherman, 192 U.S. 175, 176, 24 S.Ct. 227, 48 L.Ed. 395; Watts v. White, 13 Cal. 321; Collins v. Townsend, 58 Cal. 608.

OPINION

NAVE, J.

-- In November, 1904, several creditors of the Black Diamond Copper Mining Company, a corporation, hereinafter called the "company," filed a petition in bankruptcy against said company. An adjudication of bankruptcy was made in November, 1906, pursuant to the order of this court in a former appeal of this same case (In re Black Diamond Cop. M. Co., 10 Ariz. 42, 85 P. 643), and the matter was referred. Soto Bros. & Renaud, hereinafter called "Soto Bros.," and Albert Steinfeld & Co., hereinafter called the "Steinfeld company," have appealed from orders disallowing claims filed by them against the bankrupt, successively made by the referee, and, upon review, by the district court.

In March, 1905, several months after the filing of the petition in bankruptcy, but before the adjudication, appellants, who were then creditors of the company, made informal compositions with it. Similar settlements were effected between the company and other creditors, as disclosed in our former opinion, cited supra. The settlement with the Steinfeld company consisted of the payment to it of $800 in cash and the delivery to it of $600 in bonds of the company, the Steinfeld debt being originally in the sum of $1,600. The indebtedness to Soto Bros. was in the sum of $4,300.99. The company paid to them $2,150.48 by a check, which was subsequently cashed, and at the same time delivered to them a certificate signed by it, reading as follows: "This is to certify that there is due Soto Bros. & Renaud from this company, in bonds of said company, the face value of $4,300, which is to be delivered to them by Mr. Hoffman, president of this company, within a few days, and when so delivered, together with the check paid to them this day of $2,150.48, is payment in full of their account, and this due-bill ceases to be of any value, and is null and void (merchandise and cash account)." It will be observed that by this arrangement Soto Bros. were to receive bonds of a face value equal to the full amount of the debt, and in addition one-half of the amount of the debt in cash, by check. Three days after this transaction Soto Bros. advised the company that they would not accept the bonds, and that they repudiate the settlement. The bonds, nevertheless, were delivered at their place of business, and left with one of the partners against his protest. An attempt was afterward made by Soto Bros. to return the bonds to the company by mail. At the hearings of this matter each party disclaimed knowledge of the whereabouts of these bonds. Without detailing the nature of the claims filed by these appellants, it is sufficient to state that they were disallowed, by reason of the view that they were settled by the informal compositions.

It is contended by appellants that the filing of the petition in bankruptcy against the company deprived it of power to effect a composition in any other way than that prescribed by the bankruptcy law; hence that the settlements are void, and that the bonds also are void. The terms of these bonds are not disclosed by the record before us. We do not entertain the view that these informal settlements are void, although for a variety of reasons they may be found voidable at the instance of other creditors. The bankruptcy law does not provide that compositions, though informal, or preferences, shall be void as between the parties. Neither appellant complains because of the inequality in the settlements...