In re Clinton Wine & Liquor

• Decision Date: 08 August 1941
• Docket Number: No. 28135.,28135.
• Citation: 40 F. Supp. 106
• Parties: In re CLINTON WINE & LIQUOR, Inc.
• Court: U.S. District Court — District of New Jersey

40 F. Supp. 106

In re CLINTON WINE & LIQUOR, Inc.

No. 28135.

District Court, D. New Jersey.

August 8, 1941.

Joseph Fishberg, of Trenton, N. J., for trustee.

W. S. Angleman, of Plainfield, N. J., for respondents.

FORMAN, District Judge.

Daniel Rappoport, trustee in bankruptcy, in a petition filed with the Referee made the following pertinent allegations: That on July 16, 1938, the Trenton Beverage Company obtained a judgment against the bankrupt in the sum of $711.80 in the Mercer County Court of Common Pleas; that execution issued, and the return of the levy indicated that a Ford truck was among the bankrupt's assets; that on July 21, 1938, the Cannizzaro Wine Co. obtained a judgment against the bankrupt in the District Court of the City of Trenton in the sum of $290.03, and that thereafter execution and levy was made upon the same Ford truck; that an involuntary petition in bankruptcy was filed against the bankrupt on July 25, 1938, and an adjudication in bankruptcy was duly entered thereon on August 15, 1938; that on July 26, 1938, a sale of the Ford truck was made pursuant to the execution and levy made in behalf of Cannizzaro Wine Co., and that the proceeds of the sale, $50, were credited thereon; that the petitioner believes that at the time of the above sale the Cannizzaro Wine Co. had knowledge of the prior levy under the judgment of the Trenton Beverage Co.; that the petitioner believes that the truck had a market value of $350 on July 26, 1938; that the truck has since been transferred by S. Sally Esposito, attorney of Cannizzaro Wine Co. and purchaser at the execution sale, to Rutgers Chevrolet Company, which in turn transferred it to the Strong Hardware Company; wherefore the petitioner prays that S. Sally Esposito, Rutgers Chevrolet Company and the Strong Hardware Company be required to show cause why they should not account to the Trustee for the value of the truck, or $350.

The Referee after hearing ordered that the respondents turn over the Ford truck to the trustee or account for its value, which was fixed in the sum of $350, but with leave given respondents to offer further proof of value upon two weeks notice to the trustee.

The Referee's decision revolves around the application of the following sections of the Bankruptcy Act:

"Every lien against the property of a person obtained by attachment, judgment, levy, or other legal or equitable process or proceedings within four months before the filing of a petition in bankruptcy or of an original petition under chapter 10, 11, 12, or 13 of this Act title by or against such person shall be deemed null and void (a) if at the time when such lien was obtained such person was insolvent * * *." Section 67, sub. a(1) Bankruptcy Act of 1938, 11 U.S.C.A. 107, sub. a(1).

"The court shall have summary jurisdiction of any proceeding by the trustee or debtor, as the case may be, to hear and determine the rights of any parties under this subdivision a. * * *" Section 67, sub. a(4), Bankruptcy Act of 1938, 11 U. S.C.A. 107, sub. a(4).

He concluded that the lien of the levy became effective within the meaning of Section 67, sub. a(1), and under the law of New Jersey on July 21, 1938, the date levy was made, citing McAdams v. Mundy, 79 N.J.L. 480, 76 A. 1031, and that the respondents had failed to prove that the bankrupt was solvent on that date. Accordingly, he held that since the lien existed only four days before the involuntary petition in bankruptcy, insolvency was presumed, In re Star Spring Bed Co., 3 Cir., 265 F. 133, and in that case a summary proceeding was not objectionable. Clarke v. Larremore, 188 U.S. 486, 23 S.Ct. 263, 47 L.Ed. 555.

The court in the case of In re Star Spring Bed Co., supra, was concerned with a transfer made by the bankrupt around six o'clock in the afternoon preceding the day on which an involuntary petition in bankruptcy was filed, and the problem was whether or not the bankrupt was insolvent at the time of the transfer. The court stated: "While we are not forgetful of the general rule that no presumption of insolvency at a date prior to that of filing the petition in bankruptcy arises from the adjudication (In re Rome Planing-Mill, D.C. 96 F. 812), yet we think reason demands, and that this rule does not, when insolvency is shown on one day, forbid, in the absence of countervailing evidence, a presumption that such condition existed at the close of the preceding day. No evidence having been offered in this case to rebut that presumption, we must find, as did the referee and the District Court, that the Star Company was insolvent at the...