In re Sievers

• Decision Date: 03 January 1899
• Citation: 91 F. 366
• Parties: In re SIEVERS.
• Court: U.S. District Court — Eastern District of Missouri

91 F. 366

In re SIEVERS.

United States District Court, E.D. Missouri, Eastern Division.

January 3, 1899

Fisse &amp Kortjohn, for petitioners.

Chester H. Krum, for assignee.

ADAMS District Judge.

On the 19th day of December, 1898, the Adam Roth Grocery Company and other creditors of Charles F. Sievers, whose claims exceed the sum of $500, filed their petition in this court to secure an adjudication of bankruptcy against him. The act of bankruptcy charged by them against the debtor is that he did on the 6th day of December, 1898, make a general assignment for the benefit of his creditors, under the provisions of the laws of the state of Missouri, to Henry B. Davis, as assignee. On the 21st day of December, 1898, the debtor appeared, and filed an answer to the petition, in which he admitted the alleged act of bankruptcy, and confessed the prayer thereof. On the 23d day of December, 1898, the petitioning creditors filed a petition herein, setting forth the facts aforesaid, and also 'that the assets of the said Charles F. Sievers consist of a certain piece of real estate situate on the southwest corner of Kings Highway and Old Manchester Road, in the city of St. Louis, together with a stock of groceries, wines, and liquors, horses and wagons open accounts, and other similar personal property; and that according to the affidavit of said Charles F. Sievers, filed with the said deed of assignment, the value of all the said property is about $5,000. That the said Henry B. Davis, the assignee named in the said deed of assignment, has taken charge of the said assets, and is now in possession of the same, and that he has had appraisers appointed to appraise the said property, and, as your petitioners are informed, is proceeding to sell the said property. That a considerable portion of the property in the hands of said Henry B. Davis consists of perishable goods, and that the same should be sold as speedily as may be, under the direction of this court. ' And thereupon said petitioning creditors prayed the court to appoint a receiver to take charge of the assets so assigned, and that the said Davis be retained and enjoined from interfering with or disposing of the same, and from proceeding any further in the matter of said assignment made to him. On the filing of said petition, an order was duly made and served on the said Henry B. Davis, requiring him to appear in this court and show cause, on the 27th day of December, 1898, why the prayer of said petition should not be granted. On the return day of said order Davis appeared by his attorney, and for his return states, in substance and effect, that such assignment had been made to him, as alleged; that he had qualified as assignee, as required by the laws of the state of Missouri, and was proceeding to administer the trust imposed upon him by the deed; and claims a right so to do, notwithstanding the proceedings in bankruptcy heretofore detailed. The argument of his counsel in support of such return consists of two main propositions: First. That, although the making of a general assignment is made an act of bankruptcy, there is no provision of the bankrupt act annulling or avoiding such assignments, and no power conferred upon the court or any trustee to take possession of and administer the assets so assigned. Second. That any action challenging the respondent's right to hold the assigned property must be brought in the courts of the state which have exclusive jurisdiction thereof. The discussion on the first of these questions took a wide range, comparing and distinguishing between deeds of assignment, as recognized in the state of Missouri and at common law, and insolvency proceedings, as recognized in Massachusetts and some other states. It is contended, on the one hand, that proceedings under the assignment law of Missouri, with its detailed provisions, giving the courts of the state jurisdiction over the administration of the estate assigned, so assimilate such assignments to insolvency proceedings that the power to make such assignments was superseded by the exercise of the constitutional grant of power to congress to 'establish uniform laws on the subject of bankruptcy throughout the United States. ' Authorities supporting this view have been called to my attention. On the other hand, it is contended that there is a fundamental difference between the two methods of administering estates, and that laws permitting voluntary assignments by deed of the debtor, like those of Missouri, are not superseded by the exercise of such power conferred upon congress by the constitution, and my attention is called to certain cases decided by the supreme court of the United States to that effect. It is also argued, pro and con, that nothing is found in the act of July 1, 1898, entitled 'An act to establish a uniform system of bankruptcy throughout the United States,' pronouncing deeds of general assignment void, or giving to the trustee to be chosen by the creditors power to recover property so assigned by the debtor before the institution of proceedings in bankruptcy.

Concerning these different contentions, it appears to me that there is a substantial difference between a proceeding under a general insolvency statute and one under a statute permitting general assignments. The one administers upon the estate of an insolvent as a proceeding in the courts, derives its potency from the law, winds up the estate judicially, and discharges the debtor. Such is essentially a proceeding in bankruptcy and such is undoubtedly superseded by the act of congress in question. This conclusion is supported, not only by ample authority, but by necessary negative implication from the last clause of the act of July 1, 1898, which provides that 'proceedings commenced under state insolvent laws before the passage of this act shall not be affected by,' etc. The other derives its potency, not from the law, but from the contract or deed of the debtor, is administered under and according to the provisions of the deed, supplemented only by salutary legislative safeguards, and does not result in a discharge of the debtor from his obligations. This method of proceeding is not superseded by the act of congress in question. Mayer v. Hellman, 91 U.S. 496; Boese v. King, 108 U.S. 379, 2 Sup.Ct. 765; Reed v. McIntyre, 98 U.S. 507. It results from these views that, while proceedings under the insolvency laws, as such, are now void whether proceedings in bankruptcy follow or not, proceedings under the general assignment laws of states, like Missouri, or under the common-law deed of assignment, are not void or voidable, unless proceedings in bankruptcy are subsequently instituted; and whether such is the case when an adjudication in bankruptcy follows is now to be considered. The fourth subdivision of section 3 of the recent bankruptcy act makes 'a general assignment for the benefit of his creditors' an act of bankruptcy on the part of the debtor. The making of such assignment subjects the debtor to the pains and penalties of the act, when invoked by his creditors within four months after it is made. In other words, as to his creditors it is a wrongful act, and, at their option, the debtor may, because of its commission, be adjudged a bankrupt, his property, under the general scheme of the bankrupt act, taken from him, and administered by the trustee who is chosen by them, for the equal benefit of the creditors. It is argued that such act of the debtor is wrongful only to the extent that it affords his creditors the occasion to secure an adjudication of bankruptcy against him, but is not wrongful to the extent of annulling or avoiding the act itself, so as to bring the debtor's property, wrongfully assigned, into a court of bankruptcy for administration under the general scheme there prescribed; in other words, that the creditors, by reason of the wrongful act of the debtor in making the general assignment, secure the body of the bankrupt, but not his estate, if it was all conveyed, as is usually the case, to the assignee. This reduces the effect of the proceedings by the creditors to simply this: putting into motion an expensive proceeding which can result in no benefit to themselves, but only in the discharge of their debtor from his just debts and obligations to them. A construction of the bankrupt act which produces this result seems to me to be unreasonable and irrational, and ought not to be adopted if a different intent can fairly be imputed to congress. I believe that a construction which gives to the act a rational and consistent interpretation can and should be evolved from the fact itself that the act of making a general assignment is a wrongful act done to the creditors, and, like any other wrongful act, can be avoided by the parties wronged and injured thereby. The act cannot, in my opinion, be wrongful, and at the same time available to the debtor, or his assignee holding necessarily with knowledge of the wrong committed, to justify them in retaining the fruits of the wrongful act. It follows that the adjudication of bankruptcy at the instance of one's creditors, on the ground that the debtor has made a general assignment for the benefit of his creditors, avoids the assignment itself, and subjects the property assigned to the jurisdiction of this court, to be administered here by the creditors under and pursuant to the provisions of the act of congress which they have invoked. I do not think that this construction is at variance with the decisions of the supreme court of the United States already cited in construing the provisions of the bankrupt act of 1867. Under that act, the making of a general assignment to one's creditors...