In re Farthing

• Decision Date: 18 January 1913
• Parties: In re FARTHING.
• Court: U.S. Court of Appeals — Fourth Circuit

202 F. 557

In re FARTHING.

United States District Court, E.D. North Carolina.

January 18, 1913

[Copyrighted Material Omitted]

L. L Tilley and J. A. Giles, both of Durham, N.C., and Armistead Jones & Son, of Raleigh, N.C., for petitioners.

J. S Manning and Victor S. Bryant, both of Durham, N.C., for respondent.

Winston & Biggs, of Raleigh, N.C., Percy Reade, Branman & Brawley, Guthrie & Guthrie, and W. L. Foushee, all of Durham, N.C., and B. S. Royster, of Oxford, N.C., for creditors.

CONNOR District Judge.

J. W. Smith and three others filed their petition in this court on December 12, 1912, containing the essential jurisdictional averments in regard to residence, amount of general indebtedness, on the part of the respondent, etc. They further allege that they are creditors of respondent 'having provable claims against him which amount, in the aggregate, in excess of the amount of securities held by them, to five hundred ($500) dollars,' etc.

They further allege:

'That the nature and amount of your petitioners' claims and the securities held by them, if any, are as follows: Negotiable notes executed by said G. C. Farthing and held and owned by your petitioners, viz., A. N. Blalock, $500; J. A. Walker, $500; J. W. Smith, $4,800; Raschad Tilley, $225-- all of which said negotiable notes are now due and owing to your petitioners by the said G. C. Farthing. That within four months next preceding the filing of this petition, viz., on the 23d day of August, 1912, the said G. C. Farthing, while insolvent, committed an act of bankruptcy, in that he did on the 23d day of August, 1912, transfer, assign, and convey all of his property, both real and personal, except certain property theretofore conveyed to his wife, to trustees for the benefit of his creditors, which said deed of transfer, assignment, and conveyance is attached hereto and asked to be taken and considered as a part of this petition.'

The petitioners ask that the respondent be adjudged bankrupt, etc.

In the deed of assignment, a copy of which is attached to the petition, it is recited:

'That, whereas the said G. C. Farthing is indebted to various parties and desires to secure the payment of all his indebtedness of every kind by an equitable disposition of his property and effects among his creditors,' etc.

The property conveyed is described as:

'All the real estate and interest in real estate owned by G. C. Farthing and situate in the city of Durham, or elsewhere, in Durham county, state of North Carolina (excepting residence lot below referred to) and reference is made as a part of this description, as fully as if incorporated herein, by metes and bounds, to the description found in the following deeds and conveyances to G. C. Farthing, recorded in the office of the Register of Deeds of Durham county in books and pages, as follows, to wit.'

Following this language is a list of deeds, etc.

The same description is given of the real estate owned by respondent in the counties of Orange and Wake:

'Also all other real estate and interest in real estate owned by G. C. Farthing wherever located, and whether specifically referred to herein or not,' etc.

A number of shares of stock in incorporated companies and banks, choses in action, policies of insurance on the life of James E. Shepherd, 'and all other personal property of all kinds, of whatever nature or description, and wherever located,' etc., is transferred to the trustees named in the deed of assignment. The residence of respondent is excepted. The trustees are directed to take immediate possession of the property conveyed and assigned, and to sell the same in the manner, at the time, and upon the terms set forth in the deed, and to apply the proceeds to the payment, without preference, to the creditors of the assignor. His wife joins in the execution of the deed for the purpose of releasing dower and homestead rights. The other provisions in the deed of assignment are not material to the question presented upon the pleadings. The petition is signed by each of the petitioners and verified in the following words:

'The petitioning creditors * * * do hereby severally make solemn oath that the statements of fact contained in the foregoing petition are true, according to the best of their knowledge, information, and belief.'

Respondent demurred to the petition, assigning as grounds of demurrer: (1) That the nature and amount of the petitioners' claims do not appear, etc. (2) That the nature and amount of the claims of the petitioners is not alleged with sufficient definiteness and particularity as will enable respondent to answer the same, or to know the nature of the indebtedness, etc. (3) That the petition fails to show the nature, amount, and character of the securities, if any, held by the petitioners, etc. (4) It does not appear from the petition that the said G. C. Farthing has committed any act of bankruptcy within the meaning and purview of the Bankrupt Act of 1898, and the amendments thereto. (5) That said petition is not properly verified within the meaning of the law, etc.

The cause was argued upon the petition and demurrer; no motion for amendment being made before the hearing. The grounds of demurrer will be disposed of in the order in which they are assigned. The two first are directed to the same point and may be discussed together. Nothing is found in the Bankruptcy Act prescribing the form of the petition to be filed by creditors in involuntary bankruptcy, nor the degree of definiteness and particularity with which the alleged debts, or claims of the petitioning creditors shall be set out. Section 30 of the act provides that:

'All necessary rules, forms and orders as to procedure, and for carrying this act into effect shall be prescribed, and may be amended, from time to time, by the Supreme Court of the United States. ' Collier, Bankruptcy (9th Ed.) 571.

It is uniformly held by the federal courts:

'That the general orders promulgated by the Supreme Court, in accordance with this section, are binding on courts of bankruptcy. ' Id. 572; In re Scott (D.C.) 99 F. 404, 3 Am.Bankr.Rep. 625.

Of course, this is subject to the limitation that the rules and forms prescribed are in harmony with the language of the statute-- if the two conflict, the court would be controlled by the statute. Burke v. Guarantee Title & Trust Co., 134 F. 562, 67 C.C.A. 486. Referring to the power conferred upon the court by section 30 of the statute, Mr. Justice Peckham, in Orcutt v. Green, 204 U.S. 96, 27 Sup.Ct. 195, 51 L.Ed. 390, says: 'There is nothing in that provision inconsistent with, or opposed to, anything in the bankruptcy law upon the subject, and we must therefore take the statute and the order and read them together, the order being simply somewhat of an amplification of the law with respect to procedure.'

At the October term, 1898, the Supreme Court, pursuant to the power conferred by the act, promulgated 'General Orders and Forms in Bankruptcy' (172 U.S. 666 (Appendix), 18 S.Ct. x), of which order-- No. 38-- is in the following language:

'The several forms annexed to these general orders shall be observed and used, with such alterations as may be necessary to suit the circumstances of any particular case.'

Pursuant to this order, 'form No. 3' prescribes the essential averments of a creditor's petition in involuntary proceedings in bankruptcy. 172 U.S. 681, 18 S.Ct. xix. That portion of this form material to the question presented upon the petition and demurrer is:

'That the nature and amount of your petitioner's claims are as follows. * * * '

Mr. Loveland says that, to comply with this form--

'the petition must set forth and describe the claim or claims of the petitioning creditor or creditors sufficiently to show that they are provable claims and amount, in the aggregate, to $500 or over. Ordinarily, where the debt is founded upon a written instrument, as a note, bond, contract, etc., the paper is annexed to the petition as an exhibit, and proper reference to it is made in that part of the petition which is designed to describe the debt or claim. Where several claims or debts are stated in the petition, each debt should be set forth in a separate paragraph with sufficient particularity to show that it is a provable claim. ' Loveland, Bankruptcy (4th Ed.) 414.

The demurrer challenges the allegations of the petition in this respect, for that the 'nature' of the petitioners' alleged debts is not set forth with sufficient particularity to enable the respondent to answer the same intelligently. It must be conceded that there is but little authority upon the question raised by the demurrer. The industry of counsel and my own investigation discover but few decided cases in which it is discussed. Resort must, therefore, be had to general principles of pleading and the 'reason of the thing.' In Re White (D.C.) 135 F. 199, there was a demurrer to the petition, for that it failed to set out particularly the nature of the debt. Judge Holland said:

'Thus far the petitioners have followed the form prescribed by general order 37 (38) of the Supreme Court prescribing the forms in bankruptcy; but in stating their claims, while the amount is given, the nature of the claim is not set forth, and, in that, it is defective, which, however, can be amended so as to meet the requirements of the act.'

The reporter does not set out the language used in describing the nature of the claims, further than that they were 'provable claims.' In Re Brett (D.C.) 130 F. 981, the allegation is:

'That Whitehead is the owner and holder of a promissory note for $100 dated January 15, 1904, made by the alleged bankrupt and payable in three months after its date to Whitehead's order at the...