Manning v. Evans

• Decision Date: 08 August 1907
• Docket Number: 116.
• Citation: 156 F. 106
• Parties: MANNING v. EVANS.
• Court: U.S. District Court — District of New Jersey

156 F. 106

MANNING v. EVANS.

No. 116.

United States District Court, D. New Jersey.

August 8, 1907

John S Applegate & Son, for complainant.

Wesley B. Stout and Charles Harvey, for defendant.

LANNING District Judge.

The complainant is trustee of the estate of William F. Patterson bankrupt. By his bill of complaint he seeks a decree setting aside certain conveyances of lands by Patterson to the defendant, George W. Evans. The pleadings and proofs establish these facts:

On December 28, 1904, Patterson was indebted to the defendant in the sum of $1,130.08 for cash loaned, and the sum of $2,600 on promissory notes, making in all the sum of $3,730.08. On these sums interest had accrued to the amount of $347. Patterson was also indebted to the defendant in the sum of $800, secured by mortgage on a parcel of real estate in Monmouth county, N.J., on which interest had accrued to the amount of $140. For some months the defendant had been endeavoring, without success, to get a settlement by Patterson. On the date above mentioned, Patterson proposed to convey to the defendant the parcel of land covered by the mortgage of $800 at a valuation of $1,800, which, after deducting the mortgage debt of $800, the interest of $140 accrued thereon, and taxes amounting to $34, left the valuation of the equity at $826. On December 30, 1904, Patterson proposed to convey to the defendant four other parcels of incumbered real estate, the equities in which were respectively valued at the sums of $21.05, $1,256, $1,065, and $100. The aggregate valuations of the equities in the five parcels was therefore $3,268.05, or $462.03 less than Patterson's principal indebtedness to the defendant on the promissory notes and for cash loaned. There is no dispute concerning the amount of Patterson's indebtedness, and none concerning the fairness of the valuations of the equities in the real estate. The defendant accepted from Patterson deeds of conveyance for the five parcels and had them duly recorded on December 29 and 31 1904. At the time of these conveyances, Patterson was also indebted to the Second National Bank of Red Bank, N.J., on eight promissory notes.

A petition to have Patterson adjudged an involuntary bankrupt was filed against him on March 31, 1905, by the Second National Bank of Red Bank, George K. Hopping, and David C. Bennett. The claims of these petitioners were based by their petition solely upon the eight promissory notes above referred to. The petition showed that Hopping was liable as indorser on five, and that Bennett was so liable on one, of the eight notes, and that the Second National Bank had recovered judgments on all the notes not only against Patterson as maker, but against all the indorsers, including Hopping and Bennett. There was no averment that Hopping or Bennett had paid to the Second National Bank any part of the judgments thus recovered against them, or that they had in any way whatever become creditors of Patterson, or that the bankrupt's creditors were less than 12 in number. On April 15, 1905, Patterson filed a general demurrer to the petition, alleging it to be insufficient. On June 9th, the demurrer was withdrawn, and a plea interposed alleging that Patterson's creditors were more than 12 in number, and that the petition had in fact been filed by but one creditor. On June 27th, the petitioners filed a replication to the plea. On July 3d, before any hearing upon the plea, two other creditors entered appearance and joined in the original petition. On July 10th Patterson consented that he be adjudicated a bankrupt, and adjudication was that day made. On August 11th, the bankrupt filed a schedule of his assets and liabilities showing that his creditors were more than 12 in number, and on August 15th the complainant was appointed trustee.

This statement shows that, as the pleadings stood up to July 3, 1905, this court was without power to adjudge Patterson a bankrupt. Hopping and Bennett were not shown by the petition filed on March 31st to be creditors of Patterson. They were simply contingently liable upon notes which they had indorsed for Patterson. The petition therefore had been filed by but one creditor. More than three months were allowed to intervene before any other creditor availed himself of the privilege contained in section 59f of the bankruptcy act to enter his appearance and join in the original petition. Act July 1, 1898, c. 541, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3445). Until at least three creditors having provable claims amounting in the aggregate in excess of the value of securities held by them to $500 or more had joined in a petition to have Patterson adjudged a bankrupt, the court was without authority so to adjudge him. The contention of the defendant in the present case therefore is that the bankruptcy proceedings must be considered as having been commenced on July 3, 1905, more than four months after the date of recording the conveyances to him, and too late to effect the preferences he thus received.

In the Romanow Case (D.C.) 92 F. 510, Judge Lowell said:

'The respondents further object that Breitstein's appearance was entered more than four months after the act of bankruptcy complained of, but this seems immaterial. Section 3b provides that the petition may be filed within four months of the act of bankruptcy. The petition was filed January 29th, and that remains the date of its filing, though some petitioners have joined in it subsequently thereto. For instance, the date of bankruptcy is defined by section 1, subd. 10, to be the date when the petition was filed. If an adjudication is made in this case, the date of bankruptcy will be January 29th, though the adjudication be made upon the petition of one or more creditors who joined therein in the month of February.'

In the Stein Case, 105 F. 749, 45 C.C.A. 29, Judge Wallace, speaking for the Circuit Court of Appeals of the Second Circuit, after referring to section 59f of the bankruptcy act, which authorizes creditors other than original petitioners 'at any time' to enter their appearance and join in the petition, said:

'It is urged that to permit other creditors to procure an adjudication who have not sought to do so until after four months have elapsed since the act of bankruptcy would enable them to overhaul conveyances and sales as fraudulent or preferential which could not be done otherwise, and might work injustice to those whose titles had by lapse of time become safe. Nothing in the bankrupt act indicates a solicitude for the protection of fraudulent vendees, and, if creditors whose preferences may be disturbed have any equities to urge against an adjudication, they are authorized by section 59 to intervene and present them. And, even if imaginable cases of hardship may arise, the plain language of the act, authorizing creditors 'at any time' to join in the original petition, cannot be disregarded.'

In each of the above cases, however, the petition appeared, on its face, to be free from defects.

In the Bedingfield Case (D.C.) 96 F....