In re McGraw
Decision Date | 03 December 1918 |
Citation | 254 F. 442 |
Parties | In re McGRAW. |
Court | U.S. District Court — Northern District of West Virginia |
[Copyrighted Material Omitted]
A. W Burdett, of Grafton, W. Va., for petitioners.
John L Hechmer, of Grafton, W. Va., for alleged bankrupt.
Three creditors have filed an original and an amended and supplemental petition herein, seeking to have the defendant, McGraw, adjudged a bankrupt. He has appeared and moved the dismissal of these petitions, filing in writing a number of grounds in support thereof, material ones of which are: (1) That, as to the amended and supplemental petition, it cannot be considered properly in court, not having been filed upon written application made to the court, with notice thereof given to the defendant, in which application excuse is given for such amendment; and (2) that the acts of bankruptcy, charged in both the original and amended petitions, either (a) are not supported by sufficient allegations of fact, or (b) the facts as alleged in both petitions show, on their face, that the acts of bankruptcy charged are not so in law and fact.
Involuntary proceedings in bankruptcy, being, in theory, prosecuted against the will of defendant, necessarily vary greatly from voluntary ones, as regards the allegations of their pleadings; therefore it has been settled by numerous precedents: (1) That the essential facts necessary to give the bankruptcy court jurisdiction in such cases must appear affirmatively and distinctly; (2) that general averments of legal conclusions are not sufficient; (3) nor are averments of the acts of bankruptcy in the language of the statute, unaccompanied by a statement of facts affirmatively and distinctly showing them to exist; (4) such statement should state the specific facts relied on, with time, place, and circumstances, so that the alleged bankrupt may be distinctly apprised of what he is required to answer; and (6) it must be based upon something more than hearsay, rumors, or suspicion. In re Plotke, 104 F. 964, 44 C.C.A. 282; Clark v. Henne & Meyer, 127 F. 288, 62 C.C.A. 172; In re Rosenblatt & Co., 193 F. 638, 113 C.C.A. 506; In re Bellah (D.C.) 116 F. 69; In re Mero (D.C.) 128 F. 630; In re Blumberg (D.C.) 133 F. 845; In re Pure Milk Co. (D.C.) 154 F. 682; In re Hallin (D.C.) 199 F. 806; In re Farthing (D.C.) 202 F. 557; In re Truitt (D.C.) 203 F. 550; In re Deer Creek Water Co. (D.C.) 205 F. 205.
Preliminary to applying these rules to the charges of the petitions presented here, it is pertinent to call attention to the fact that the bankruptcy court is always limited in assuming jurisdiction, where adjudication is opposed, to a condition where the acts of bankruptcy have been committed within 4 months of the filing of the petition for adjudication; and, further, that the only acts warranting such adjudication, as provided by the statute, are: (1) A conveyance, transfer, concealment, or removal of any part of his property, made or suffered to be made by the debtor, with intent to hinder, delay, or defraud his creditors, or any of them; (2) by transfer, when insolvent, by the debtor of any portion of his property to one or more of his creditors, with intent to prefer such creditor over his other creditors; (3) by suffering, while insolvent, any creditor to obtain a preference through legal proceedings, and not having, at least 5 days before a sale or final disposition of any property affected by such preference, vacated or discharged such preference; (4) by making a general assignment for benefit of creditors, or, being insolvent, applying for the appointment of a receiver or trustee for his property, or, by reason of such insolvency, the appointment and putting in charge of such receiver or trustee his property, under the laws of a state or territory of the United States; and (5) by reason of written admission of inability to pay his debts and willingness to be adjudged bankrupt on that ground. The original petition in this matter was filed on June 30, 1917, and the amended and supplemental one on November 19, 1917. In the original, the acts of bankruptcy charged, in the order therein stated, are: (a) A transfer within four months of a large amount of property to certain creditors with a design to give them preference over other creditors, based on the second one of the acts defined by the statute; (b) suffering certain creditors to obtain preferences through legal proceedings, the third act set forth in the statute; and (c) transferring, concealing, etc., a large portion of property, with intent to defraud, the first act of bankruptcy set forth in the statute.
In support of these charges the material facts set forth are:
The construction of section 3, subdivision a3, of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 546 (Comp. St. 1916, Sec. 9587)), setting forth as an act of bankruptcy the suffering or permitting, while insolvent, any creditor to obtain a preference through legal proceedings, and not having, at least five days before a sale or final disposition of any property affected by such preference, vacated or discharged such preference, gave rise to contradictory decisions in the federal courts of the country. The conflict arose over this question: If an insolvent debtor suffered or permitted one of his creditors to secure a lien upon his real estate, by judgment or other legal proceeding, which lien was allowed to remain undischarged and unvacated until the lapse of 4 months was about to render it unassailable in bankruptcy, was this an act of bankruptcy? Such cases as In re Tupper (D.C.) 163 F. 766, and Folger v. Putnam, 194 F. 793, 114 C.C.A. 513, held it to be so. Such cases as In re Vasbinder (D.C.) 126 F. 417; In re Windt (D.C.) 177 F. 584, and In re Truitt (D.C.) 203 F. 550, held it not to be so. The question was finally certified to the Supreme Court, and there decided in Citizens' Bank v. Ravenna Bank, 234 U.S. 360, 34 Sup.Ct. 806, 58 L.Ed. 1352, that:
This finally settles the matter. The rendering of a judgment, therefore, can only constitute an act of bankruptcy when (a) the debtor is insolvent, (b) has within 4 months of the filing of the bankruptcy petition suffered and permitted it to be obtained, (c) upon which execution has issued, (d) been levied upon his property, (e) such property advertised for sale, and (f) he has failed, at least 5 days before the date fixed for sale, to discharge or vacate the same; and all these prerequisites must occur within 4 months of the filing of the petition.
In this case, this disposes of the alleged acts of bankruptcy based upon the rendition of the Jarvis and Bartlett judgments. It is not alleged that any executions have issued upon these judgments, been levied upon McGraw's property, with sale thereof advertised, and a failure to vacate and discharge 5 days before such sale.
Another fatal objection might, too, be set forth to the sufficiency of the allegations as to these judgments being suffered to be rendered within 4 months, or at least to one of them. Counsel apparently have assumed that the four months period within which they could be assailed runs from the date when they are recorded in the lien docket in the county court clerk's office. This is clearly wrong. The date from which the four months period begins to run is that of the day when the judgment is entered of record by the court having jurisdiction of the action.
Under the laws of West Virginia a term of a circuit court may run over a number of days or weeks. If it does, judgments rendered upon different days of such term against the same debtor, as regards their priority between themselves, are presumed to relate back to the first day of the term, and as liens are equal in priority, provided the cases were matured for trial...
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