Scheuer v. Smith & Montgomery Book & Stationery Co.
| Decision Date | 17 December 1901 |
| Docket Number | 1,106. |
| Citation | 112 F. 407 |
| Parties | SCHEUER et al. v. SMITH & MONTGOMERY BOOK & STATIONERY CO. |
| Court | U.S. Court of Appeals — Fifth Circuit |
John W Tomlinson, for appellants.
R. H Thach and John H. Miller, for appellee.
This is a case in bankruptcy, the petition having been filed by the appellants, creditors, to adjudge the appellee, the Smith & Montgomery Book & Stationery Company, a business corporation under the laws of Alabama, a bankrupt; alleging in the petition, and in an amended petition, the following acts as a bankruptcy alleged to have been committed by appellee: (1) The said bankrupt suffered or permitted, while insolvent, certain creditors to obtain preferences through legal proceedings; (2) that said bankrupt made payments, while insolvent, to certain creditors named, with intention to prefer such creditors; (3) while insolvent, the filing of a petition for the appointment of a receiver in the state court, 'in order to protect and preserve the property of said company from the attacks of creditors,' which operated to hinder, delay, and defraud creditors.
Appellee filed an answer to said petition, (1) setting forth while not specifically denying insolvency, that it had not while insolvent committed any of the acts of bankruptcy alleged; and (2) setting up the affirmative defense 'that the chancery court of Jefferson county, Alabama, having taken jurisdiction of the dissolution proceedings, and having appointed a receiver for the purpose of winding up the estate of the defendant therein, the bankruptcy court has no jurisdiction in said matter, and will not interfere with the jurisdiction and possession of the property, which is now in the hands of the state chancery court. ' Exceptions were filed by petitioners to said answer. Among the grounds stated for said exceptions were that said answers do not state what payments were made to preferred creditors, said answers do not deny that it was insolvent, and that the appointment of said receiver and said chancery court proceedings are no bar to this petition.
The facts of the case developed on the hearing and proven are that appellee, on the 21st day of June, 1901, being insolvent, entered into an agreement with four of its creditors, Raphael Tuck, Sons & Co., Houghton, Mifflin & Co., C. F. Rumph & Sons, and Favor, Ruhl & Co., whereby said creditors were permitted to and did take judgments in the city court of Birmingham, Ala., for their respective debts, the same having the force and effect of liens, it being provided in said agreement that said judgments might be paid in four equal payments, the first due July 1, 1901, and one payment every 30 days thereafter, until the other three payments were made; that appellee made all the payments on said judgments, as provided in said agreement, up to the time of the receivership hereinafter stated; that on September 3, 1901, a petition was filed in the chancery court for Jefferson county, Ala., to dissolve the Smith & Montgomery Book & Stationery Company, and for the appointment of a receiver until a decree of dissolution could be had, said petition, among other things, alleging 'that, in order to protect and preserve the property of said company from the attacks of creditors of the Smith & Montgomery Book & Stationery Company, * * * it is necessary that a receiver be appointed,' etc.; that on the 4th day of September, 1901, the president of said corporation filed an affidavit in said chancery court, urging substantially the same reasons for the appointment of a receiver; that on the 4th of September, 1901, John H. Miller was appointed receiver by decree of said chancery court, and took possession of the assets of said Smith & Montgomery Book & Stationery Company; that on September 5, 1901, the petitioners in this case filed their petition to adjudge said appellee a bankrupt; and that on September 28, 1901, after an answer was filed in said state chancery court proceedings admitting a willingness therefor, a decree was rendered dissolving said Smith & Montgomery Book & Stationery Company.
The trial judge 'found, upon the facts, that said Smith & Montgomery Book & Stationery Company was insolvent, within the meaning of the said bankruptcy act, but that said company had not committed any one of the three acts of bankruptcy alleged; that the proceedings in the chancery court were not a transfer made with the purpose to hinder and delay creditors, within the meaning of the bankruptcy act; that the judgments rendered, described in the petition, were not judgments suffered, and did not constitute an act of bankruptcy, and that the payments afterwards made to said creditors were not made with intent to prefer said creditors, and thereupon an order or decree was entered upon said cause, refusing to adjudge said respondent, the Smith & Montgomery Book & Stationery Company, a bankrupt, and dismissing the petition., The finding of the court and the decree rendered thereon were excepted to by the petitioning creditors, who have sued out this appeal.
BEFORE PARDEE, McCORMICK, and SHELBY, Circuit Judges.
PARDEE Circuit Judge (after stating the facts as above.)
The case shows that the Smith & Montgomery Book & Stationery Company, while insolvent and within four months preceding the filing of the petition to adjudge the said company a bankrupt, suffered and permitted certain of its creditors to obtain judgments through legal proceedings, which judgments, until vacated or discharged, constitute unlawful preferences, within the intent and meaning of the bankruptcy act, and that it took no proceedings to vacate or discharge the illegal preferences thus obtained, except so far as to pay some installments of the judgments as agreed. The case further shows that, before the installments of the preference judgments aforesaid were paid, the stockholders of the insolvent corporation brought a suit in the state chancery court, asserting their wish that the corporation should be dissolved, and in their petition made the following statements:
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