In re Southern Arizona Smelting Co.

• Decision Date: 20 March 1916
• Docket Number: 2697.
• Citation: 231 F. 87
• Parties: In re SOUTHERN ARIZONA SMELTING CO. [1] v. FREEMAN. MARTIN
• Court: U.S. Court of Appeals — Ninth Circuit

231 F. 87

In re SOUTHERN ARIZONA SMELTING CO. ^[1]

MARTIN v. FREEMAN.

No. 2697.

United States Court of Appeals, Ninth Circuit.

March 20, 1916

Francis M. Hartman and Edwin F. Jones, both of Tucson, Ariz., for petitioner.

Ellinwood & Ross, of Bisbee, Ariz., and Selim M. Franklin, of Tucson Ariz., for respondent.

Before GILBERT, MORROW, and HUNT, Circuit Judges.

HUNT Circuit Judge.

John H Martin, as trustee in bankruptcy of the Imperial Copper Company, a corporation, bankrupt, asks review of an order of the District Court for the District of Arizona made in the matter of the Southern Arizona Smelting Company, a corporation, bankrupt.

The Imperial Copper Company was adjudged a bankrupt upon an involuntary petition on July 25, 1911. Upon August 21, 1911 M. P. Freeman was elected trustee in bankruptcy of the Imperial Copper Company; but about July 2, 1914, he resigned and Martin, the petitioner herein, was elected to succeed him. When the Imperial Copper Company was adjudged a bankrupt, it was a creditor of the Southern Arizona Smelting Company in the sum of $28,887.71. On January 23, 1912, Freeman, as trustee of the copper company, brought action in the territorial court in Arizona against the Southern Arizona Smelting Company to recover upon this debt. About June 17, 1914, upon application of certain creditors of the copper company, the District Court directed that the trustee should cause an attachment to issue in the action then pending before it, and that a levy should be made upon the property of the smelting company. Thereafter, on September 29, 1914, and within four months of the date of the levy of the attachment referred to, the Southern Arizona Smelting Company filed its voluntary petition in bankruptcy in the United States District Court for the District of Arizona, and upon the same day was adjudicated a bankrupt; and on October 31, 1914, M. P. Freeman was elected as trustee in bankruptcy of the smelting company. Thereafter, about March 18, 1915, Freeman as trustee in bankruptcy of the smelting company petitioned the United States District Court for an order to show cause, directed against Martin as trustee of the Imperial Copper Company, why the attachment lien heretofore referred to should not be held to be null and void, and why injunction should not issue enjoining Martin as trustee from further prosecuting such attachment proceeding, and alleging in the petition, among other things, that at the time of the levy of the writ of attachment the Southern Arizona Smelting Company was, and at all times since had been, insolvent. Martin, as trustee in bankruptcy of the Imperial Copper Company, answered the petition of Freeman and denied that the Arizona Smelting Company was insolvent at the time of the levy of the attachment or at the time of the filing of the voluntary petition in bankruptcy by the smelting company, or at any time, and alleged, among other things, that at the time of the levy of the writ of attachment and of the filing of the voluntary petition in bankruptcy and at all times the smelting company was solvent with ample property to pay its debts; that many of the alleged debts due by the Arizona Smelting Company were not legal and could not be proved or allowed in the bankruptcy proceedings. He prayed that the court would hear evidence upon the question of the insolvency of the Arizona Smelting Company at the time of the levy of the attachment and of the filing of the petition in voluntary bankruptcy. The court ruled that the attachment was null, and that the property affected thereby should be released, and restrained Martin as trustee of the Imperial Copper Company, bankrupt, from prosecuting the action to recover the debt in the state court.

The substance of the assignments of error is: That the court ought not to have held that the adjudication of bankruptcy of the Arizona Smelting Company upon the voluntary petition filed by it within four months of the levy of the writ of attachment dissolved the attachment lien without regard to the question of solvency or insolvency at the time of the levy of the attachment or at the time the adjudication in bankruptcy was made.

Petitioner, through his counsel, concedes that if an involuntary petition in bankruptcy had been filed against the Arizona Smelting Company within four months from the time of the levy of the writ of attachment, and that if the attaching creditor, the trustee of the Imperial Copper Company, had not appeared in the bankruptcy proceedings and resisted the adjudication, such adjudication would have been res adjudicata against petitioner as to the insolvency of the smelting company. But he asks the court to distinguish between the consequences of such a concession and those to follow in this case, because, here, the bankruptcy adjudication was had upon a voluntary petition, without notice to petitioner or other creditors.

Section 1 of the Bankruptcy Act of 1898 explicitly gives us the definitions of words and phrases used in the act which control. Among them are these:

'(1) 'A person against whom a petition has been filed' shall include a person who has filed a voluntary petition; * * * (4) 'bankrupt' shall include a person against whom an involuntary petition * * * has been filed, or who has filed a voluntary petition, or who has been adjudged a bankrupt; (19) 'persons' shall include corporations, except where otherwise specified.'

Section 3, providing what shall constitute acts of bankruptcy, includes as an act having:

'(5) Admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt on that ground.'

The act of bankruptcy upon which voluntary bankruptcy is based is the written admission contained in the petition...