South Suburban Safeway Lines, Inc. v. Carcards, Inc.

• Decision Date: 23 June 1958
• Docket Number: Docket 24963.,No. 298,298
• Citation: 256 F.2d 934
• Parties: SOUTH SUBURBAN SAFEWAY LINES, INC., Poughkeepsie Transit Co., Inc., Empire Bus Corp. and John Mazzola, d/b/a Long Ridge and High Ridge Bus Lines, Petitioning Creditors-Appellants, v. CARCARDS, INC., Appellee.
• Court: U.S. Court of Appeals — Second Circuit

256 F.2d 934 (1958)

SOUTH SUBURBAN SAFEWAY LINES, INC., Poughkeepsie Transit Co., Inc., Empire Bus Corp. and John Mazzola, d/b/a Long Ridge and High Ridge Bus Lines, Petitioning Creditors-Appellants, v. CARCARDS, INC., Appellee.

No. 298, Docket 24963.

United States Court of Appeals Second Circuit.

Submitted March 27, 1958.

Decided June 23, 1958.

Jacob Rappaport, New York City, for appellants.

Jacob Frummer, Brooklyn, N. Y. (Nathan Permut, New York City, and I. Louis Kottler, Brooklyn, N. Y., on the brief), for appellee.

Before CLARK, Chief Judge, and HAND and LUMBARD, Circuit Judges.

LUMBARD, Circuit Judge.

This is an appeal from an order of Judge Herlands dismissing an involuntary petition in bankruptcy filed against Carcards, Inc. by the appealing petitioning-creditors. The petition was filed on November 7, 1957 and on November 12, 1957 the alleged bankrupt, by its verified answer, denied "each and every allegation in the * * * petition. * *" Thereafter, on November 19, 1957, Charles Schinitsky, Esq., was appointed Receiver, and as such took possession of all the alleged bankrupt's assets and property.

On November 22, 1957 the alleged bankrupt obtained an order to show cause asking for authorization to withdraw its answer and vacating the appointment of the receiver or in the alternative requiring the petitioners to post a $50,000 bond. Judge Herlands in a short memorandum granted the bankrupt's motion to withdraw its answer, vacated the appointment of the receiver and dismissed the involuntary petition in bankruptcy on the ground that it was "defective for vagueness." The instant appeal is from that decision and presents only two questions, viz. whether the petition is so vague as to be defective, and assuming it is defective, whether the District Court should have permitted amendment rather than dismissing the petition outright.

The petition alleges two acts of bankruptcy in the following language:

"* * * the said alleged bankrupt * * *

"A. With intent to hinder, delay and defraud its creditors, did convey, transfer, conceal, remove, or permit to be concealed or removed, or set over unto said divers persons, whose names are unknown to your petitioners, valuable property, consisting of contracts with bus lines for advertising of the value of $3,000.00.

"B. On or about October 30, 1957, while insolvent did transfer property and various moneys amounting in the aggregate to the value or sum of $5,000.00 to various creditors with intent thereby to prefer such creditors over other creditors of the same class, the names of the creditors receiving such preference being unknown to your petitioners."

The allegations of the petition closely follow the statutory language. It has long been held that such an allegation is improper as a reasonably higher degree of particularity is required in an involuntary petition in bankruptcy. In re Sig H. Rosenblatt & Co., 2 Cir., 1912, 193 F. 638; In re Gaynor Homes, 2 Cir., 1933, 65 F.2d 378; In re S. W. Straus & Co., 2 Cir., 1933, 67 F.2d 605; Matter of International Hatters Supply Co., Inc., D.C. S.D.N.Y.1942, 46 F.Supp. 909; In re Heltman-Thompson Co., D.C.W.D.Mich. 1949, 83 F.Supp. 156; 1 Collier on Bankruptcy 420 § 3.106.

The appellant argues, however, that under Rule 12(h) of the Federal Rules of Civil Procedure, 28 U.S.C.A.¹ such defects were waived by the alleged bankrupt by the filing of its answer. It is unnecessary for us to pass on this question as the district judge in a sound and reasonable exercise of his...