In re McGraw

254 F. 442, 1918 U.S. Dist. LEXIS 753
CourtDistrict Court, N.D. West Virginia
DecidedDecember 3, 1918
StatusPublished
Cited by13 cases

This text of 254 F. 442 (In re McGraw) is published on Counsel Stack Legal Research, covering District Court, N.D. West Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re McGraw, 254 F. 442, 1918 U.S. Dist. LEXIS 753 (N.D.W. Va. 1918).

Opinion

DAYTON, District Judge.

Three creditors have filed an original and an amended and supplemental petition herein, seeking to have the defendant, McGraw, adjudged a bankrupt. He has appeared and moved the dismissal of these petitions, filing in writing a number of grounds in support thereof, material ones of which are: (1) That, as to the amended and supplemental petition, it cannot be considered properly in court, not having been filed upon written application made to the court, with notice thereof given to the defendant, in which application excuse is given for such amendment; and (2) that the acts of bankruptcy, charged in both the original and amended petitions, either (a) are not supported by sufficient allegations of fact, or (b) the facts as alleged in both petitions show, on their face, that the acts of bankruptcy charged are not so in law and fact.

[1-5] Involuntary proceedings in bankruptcy, being, in theory, prosecuted against the will of defendant, necessarily vary greatly from voluntary ones, as regards the allegations of their pleadings; therefore it has been settled by numerous precedents: (1) That the essential facts necessary to give the bankruptcy court jurisdiction in such cases must appear affirmatively and distinctly; (2) that general averments of legal conclusions are not sufficient; (3) nor are aver-ments of the acts of bankruptcy in the language of the statute, unaccompanied by a statement of facts affirmatively and distinctly showing them to exist; (4) such statement should state the specific facts relied on, with time, place, and circumstances, so that the alleged bankrupt may be distinctly apprised of what he is required to answer; and (6) it must be based upon something more than hearsay, rumors, or suspicion. In re Plotke, 104 Fed. 964, 44 C. C. A. 282; Clark v. Henne & Meyer, 127 Fed. 288, 62 C. C. A. 172; In re Rosenblatt & Co., 193 Fed. 638, 113 C. C. A. 506; In re Bellah (D. C.) 116 Fed. 69; In re Mero (D. C.) 128 Fed. 630; In re Blumberg (D. C.) 133 Fed. 845; In re Pure Milk Co. (D. C.) 154 Fed. 682; In re Hallin (D. C.) 199 Fed. 806; In re Farthing (D. C.) 202 Fed. 557; In re Truitt (D. C.) 203 Fed. 550; In re Deer Creek Water Co. (D. C.) 205 Fed. 20.

_ [6-8] Preliminary to applying these rules to- the charges of the petitions presented here, it is pertinent to call attention to the fact that the bankruptcy court is always limited in assuming jurisdiction, where adjudication is opposed, to a condition where the acts of bankruptcy have been committed within 4 months of the filing of the petition for adjudication; and, further, that the only acts warranting such adjudication, as provided by the statute, are: (1) A conveyance, trans[445]*445fer, concealment, or removal of any part of his properly, made or suffered to be made by the debtor, with intent to hinder, delay, or defraud his creditors, or any of them; (2) by transfer, when insolvent, by the debtor of any portion of his property to one or more of his creditors, with intent to prefer such creditor over his other creditors; (3) by suffering, while insolvent, any creditor to obtain a preference through legal proceedings, and not having, at least 5 days before a sale or final disposition of any property affected by such preference, vacated or discharged such preference; (4) by making a general assignment for benefit of creditors, or, being insolvent, applying for the appointment of a receiver or trustee for his property, or, by reason of such insolvency, the appointment and putting in charge of such receiver or trustee his property, under the laws of a state or territory of the United States; and (5) by reason of written admission of inability to pay his debts and willingness to be adjudged bankrupt on that ground. The original petition in this matter was filed on June 30, 1917, and the amended and supplemental one on November 19, 1917. In the original, the acts of bankruptcy charged, in the order therein stated, are: (a) A transfer within four months of a large amount of property to certain creditors with a design to give them preference over other creditors, based on the second one of the acts defined by the statute; (b) suffering certain creditors to obtain preferences through legal proceedings, the third act set forth in the statute ; and (c) transferring, concealing, etc., a large portion of property, with intent to defraud, the first act of bankruptcy set forth in the statute.

In support of these charges the material facts set forth are:

(a) That at the January term of the circuit court of Taylor county, which term adjourned on March 8, 1917, the alleged bankrupt procured, suffered, and permitted one Anna Jarvis to obtain by default against him a judgment for the sum of $6,390, with interest from January 22, 1917, and $15.65 costs, and that such judgment was, on the 20th day of April, 1917, recorded in the lien docket of the county, remains in full force, has not been vacated or discharged, and creates a preference.

(b) That at the same January term, 1917, of said court, he suffered Fred W. Bartlett to obtain a judgment by default against him, for $2,743.31, with interest from December 5, 1916, and costs, which judgment was duly recorded in the judgment lien docket on March 16, 1917;, that the same constitutes a lien against his real estate, has not * been vacated or discharged, and created a preference.

(c) That he has received a large amount of dividends, the amount unknown to petitioners, within 4 months of the filing of the petition, from the Grafton Coal & Coke Company, a corporation which amounts he has concealed and refused to pay to his creditors.

(d) “That he has other large income which has, within four months of the date of this petition, the amounts of which are unknown to petitioners, from royalties on coal leased by him, been paid to other parties unknown to petitioners, which has been procured, suffered, and permitted to be so paid by the said McGraw, and to parties unknown [446]*446to petitioners, with the intent to hinder, delay, and defraud his creditors.”

The construction of section 3, subdivision a3, of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 546 [Comp. St. 1916, § 9587]), setting forth as an act of bankruptcy the suffering or permitting, while insolvent, any creditor to obtain a preference through legal proceedings, and not having, at least five days before a sale or final disposition of any property affected by such preference, vacated or discharged such preference, gave rise to contradictory decisions in the federal courts of the country. The conflict arose over this question: If an insolvent debtor suffered or permitted one of his creditors to secure a lien upon his real estate, by judgment or other legal proceeding, which lien was allowed to remain undischarged and unvacated until the lapse of 4 months was about to render it unassailable in bankruptcy, was this an act of bankruptcy ? Such cases as In re Tupper (D. C.) 163 Fed. 766, and Folger v. Putnam, 194 Fed. 793, 114 C. C. A. 513, held it to be so. Such cases as In re Vasbinder (D. C.) 126 Fed. 417; In re Windt (D. C.) 177. Fed. 584, and In re Truitt (D. C.) 203 Fed. 550, held it not to be so. The question was finally certified to the Supreme Court, and there decided in Citizens’ Bank v. Ravenna Bank, 234 U. S. 360, 34 Sup. Ct. 806, 58 L. Ed. 1352, that:

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Bluebook (online)
254 F. 442, 1918 U.S. Dist. LEXIS 753, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mcgraw-wvnd-1918.