In re Curtis

• Decision Date: 24 January 1899
• Citation: 91 F. 737
• Parties: In re CURTIS et al.
• Court: U.S. District Court — Southern District of Illinois

91 F. 737

In re CURTIS et al.

United States District Court, S.D. Illinois.

January 24, 1899

Wilson & Warren and Smith & Hairgrove, for petitioning creditors.

John A Bellatti and Brown, Wheeler, Brown & Hay, for respondent debtors.

ALLEN District Judge.

On the 11th day of August, 1898, certain co-partners, doing business in Waverly, Morgan county, Ill., under the firm name and style of the Bank of Waverly, made a general assignment of their individual and partnership property for the benefit of their creditors. This assignment, by its terms, was made pursuant to an act of the general assembly of the state of Illinois entitled 'An act concerning voluntary assignments and conferring jurisdiction therein upon county courts,' in force July 1, 1877. A. W. Reagel, the assignee, took possession only of the partnership property and proceeded, under the direction of the county court of Morgan county, to administer the estate. Pursuant to section 2 of the state statute, the assignee notified all of the creditors to present to him their claims, under oath or affirmation, within three months. The tenth section of the statute provides that creditors who do not file their claims within that time shall not participate in the dividends until after the payment in full of all claims so presented. Among the creditors who filed their claims under oath were George W. Caruthers, William T. Cox, and William A. Sims and others who are petitioners herein. On the 23d day of September 1898, the insolvent co-partners, Reagel, their assignee, and the creditor George W. Caruthers, filed a petition in the Morgan county court, and procured to be entered therein on the same day a decree authorizing and directing Reagel, assignee, Albert Rohrer, one of the co-partners, and his wife, Jane C. Rohrer, to execute and deliver to Caruthers a warranty deed conveying certain land, said to be the individual property of the co-partner Rohrer; the conveyance to be in part payment of Caruthers' claim; the decree, however, providing that such credit on Caruthers' claim should be subject to a proportionate rebate in the event that the assets of the estate should be insufficient to pay all of the creditors in full. Caruthers joined in the petition, and acquiesced in the entry of the decree, upon the express understanding, however, and agreement of albert Rohrer, one of the partners, made in the presence and with the approval of Reagel, the assignee, that they would provide him with a certain bond, fully indemnifying him for any moneys which he might be required to pay back, in the event the estate did not pay out in full. This bond they failed or refused to provide, and the conveyance to Caruthers was never made, but, instead, the assignee made arrangements to dispose of the land otherwise. On the 1st day of November, 1898,-- at the very earliest date possible, under the national bankrupt act,-- Caruthers, Cox and Sims, whose claims aggregated about $18,000, filed their petition in this court, praying that the co-partners doing business as the Bank of Waverly might be adjudged bankrupts, alleging as an act of bankruptcy the making of the general assignment to Reagel for the benefit of their creditors. Afterwards other creditors joined in this petition. No question is made but that the requisite number of creditors and amount were joined in the petition. The debtors filed an answer to this petition, in which they admitted the act of bankruptcy, but alleged that the petitioners were estopped to set it up as such, by reason of their having filed their claims under it with the assignee, and that Caruthers was also estopped by reason of his participation in the Morgan county court proceedings. The act of bankruptcy being admitted, the question to be determined is whether this estate shall be administered in this court, and the property secured to the creditors, in the manner provided by the national bankrupt act, or whether it shall be administered under the general assignment made by the debtors in the county court.

There can be no doubt but that from the 1st day of July, 1898, the date of the passage of the national bankrupt act, the operation of all state insolvency laws was suspended. Manufacturing Co. v. Hamilton (Mass.) 51 N.E. 529; In re Bruss-Ritter Co., 90 F. 651; and In re Rouse, Hazard & Co. (Oct. term, 1898; Cir. Ct. App. 7th Cir.) 91 F. 96. If this estate is to be administered under the general assignment, it must be in the county court, and pursuant to the provisions of the Illinois statute, recited in the deed of assignment, giving the county courts jurisdiction of such proceedings, and providing the manner in which the estate shall be secured to creditors. It is contended, however, that the particular statutes of Illinois relating to voluntary assignments are not such insolvent laws as are suspended by the national bankrupt act. But this question is not now an open one, since the supreme court of Illinois, in Hanchett v. Waterbury, 115 Ill.,at page 227, 32 N.E. 196, thus interprets this very statute:

'A careful consideration of the several sections constituting the above act--particularly the seventh and last-- leaves little, if any, doubt in our minds that it is essentially, in its framework and detail, a general insolvent law, and that it was so intended by the legislature. By its provisions a new and special jurisdiction is created and conferred upon the county courts of the state, in exercise of which it is manifest they would, to say the least of it, be greatly embarrassed if any interference with them by other tribunals were permitted, where the jurisdiction has once attached. Indeed, to permit such interference would practically defeat the chief object of the statute, namely, to provide a convenient, expeditious, and inexpensive tribunal, through the instrumentality of which an insolvent debtor may make an entirely equitable distribution of his effects among his creditors.'

This construction of this law of Illinois by the supreme court of the state is conclusive upon this court.

In addition to this characterization by the supreme court of Illinois, it is to be observed that the main objects of this statute and of the national bankrupt act are identical. In Boese v. King, 108 U.S. 379, 2 Sup.Ct. 765, the supreme court of the United States, in writing of the last bankrupt act, finally states:

'The primary object of which, as this court has frequently announced, was to secure equality among the creditors of a bankrupt.'

And this same conclusion was reached and announced in Buchanan v. Smith, 16 Wall. 277, and Mayer v. Hellman, 91 U.S. 496. In White v. Cotzhausen, 129 U.S. 329, 9 Sup.Ct. 309, the voluntary assignment act of Illinois was also before the supreme court of the United States; and, speaking of its object, it is there said:

'The main object of this legislation is manifest. It is to secure equality of right among the creditors of a debtor who makes a voluntary assignment of his property.'

The object of enumerating in the national bankrupt act what shall constitute an act of bankruptcy is for the very purpose of specifying with certainty what estates shall be administered in the bankrupt court. And, in declaring that whosoever should attempt to distribute his estate by a general assignment should be adjudged a bankrupt, it is also the plain intent of the law that such person should not be permitted, after the 1st day of July, 1898, to do so, but instead, such estate must be administered in the precise manner pointed out by the national bankrupt act. From this it is obvious that not only the main objects of the state and federal laws are identical, but also that they both expressly provide a manner of administering the estate of whosoever shall make a general assignment. This being the case, one must yield to the other. One must be operative, and the other inoperative. Both cannot be in full force and effect at the same time. Which remains paramount and operative cannot be in doubt. That the state law shall be suspended is now well settled, and it is therefore the opinion of this court that the proceedings under the general assignment made by the Bank of Waverly, and in the Morgan county court, are wholly unauthorized and void. Public policy, as manifested by the bankrupt act, demands that all insolvent estates (of a certain value) shall be administered in the bankrupt court, and in accordance with a uniform system. The contract of assignment of August 11, 1898, which provides for administering the estate, not under the supervision of the bankrupt court and in accordance with the provisions of the bankrupt act, but in accordance with the statutes of Illinois, is contrary alike to the spirit of the national law now in force and to public policy. As against the proceedings herein in bankruptcy, the assignment under the state...