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George S. Jones and Smith, Hammond & Smith, for plaintiff.
SPEER, District Judge. The findings of the court upon the issues presented by the pleadings and proof are as follows:
The Stewart-Taylor Company upon proper involuntary proceedings had been adjudged bankrupt. E. P. Johnston, the complainant above mentioned, had been elected its trustee, and was thereupon authorized by the court to institute a suitable proceeding in equity against the Forsyth Mercantile Company to recover certain assets of the bankrupt, which it was prima facie made to appear had been collusively and fraudulently conveyed for the benefit of the defendant company and to the injury of creditors. This had been accomplished by a certain sale and transfer by the bankrupt of the entire stock of merchandise. The ground of this proceeding was that the transfer was made by the bankrupt to the defendant with the intent to hinder, delay, and defraud the creditors of the bankrupt, in violation of the bankruptcy act. A demurrer was interposed to the proceeding brought by the trustee, and after full hearing it was overruled. Answers were thereupon filed by the Forsyth Mercantile Company and the bankrupt. The cause, being then at issue, was referred to Alexander Proudfit, Esq., referee in bankruptcy, as special master, “to proceed with the hearing of the testimony, and to report to the court his findings of law and fact thereon.” No objection was made to the reference, and it was ratified by the action of the parties. It was, however, not intended by the court to commit the final determination of the cause to the master, and, his report coming in, exceptions thereto were filed. The full case has been heard by the court upon the pleadings, the proofs, the master's report, and the exceptions. * From the entire record the court has reached its conclusion.
It appears, as found by the master, that the Stewart-Taylor Company on June 21, 1903, the date of the beginning of the transaction complained of, was insolvent. Its indebtedness approximated $10,034. Its assets consisted of its stock of goods, which at market cost on that date appeared by inventory to be worth $5,034.52, besides a few notes and accounts of insignificant amount. It further appears that A. M. Taylor, one of the bankrupt concern, through the president and the secretary and treasurer of the defendant company, consummated the transfer complained of. This was done at night behind closed doors, and under circumstances which must have put the defendant on notice that it was done out of the ordinary course of business. We find, therefore, that the Forsyth Mercantile Company was not a purchaser in good faith of the property. It was bound by the action of its officers, and participated in the transaction to defraud the creditors of the bankrupt. It appears from the evidence that it was fully aware of the insolvent condition of the Stewart-Taylor Company. It is further shown that the sale was made in a quick and unusual manner, with the evident disposition to consummate it before its interruption by legal proceedings could be accomplished. This was all done only two days before the proceedings in bankruptcy were filed.
We further find that the amount paid by the defendant company for the property was 70 per cent of the invoice cost of the dry goods and notions, 75 per cent. of the invoice cost of the shoes, and 50 per cent. of such cost of the millinery. This aggregated $3,444.10. In addition to this, there was a shipment of shoes at the depot, not yet taken out, which passed under the transfer, making a total of values of $3,584.05. This appears to be a fair valuation of the goods and merchandise thus conveyed by the bankrupt to the defendant company. We find that the bulk sale, thus secretively and injuriously conducted, and evidenced by bill of sale executed on the very date of the bankruptcy proceedings, was intended to delay, hinder, and defraud the creditors. . With the proceeds of this sale in part, the bankrupt proceeded to settle the claims of certain banks against it, and the master recommends that the Forsyth Mercantile Company, which was the purchaser fraudulently, as we have seen, should be subrogated to the claims of such banks against the bankrupt itself. Upon this subject it will suffice to say that the banks are not parties to this litigation, there are no suitable averments or prayers, and no decree at this time can be made to affect this issue. Upon a general review of the record it appears, therefore, that the bill of sale of such assets, set forth in the pleadings, should be delivered up and canceled, and the delivery of the goods and merchandise therein made should be decreed to be null and void, and that the complainant, viz., E. P. Johnston, trustee, is entitled to recover the value of the assets of the bankrupt, which were thus unlawfully transferred to the Forsyth Mercantile Company.
It is further found that E. P. Johnston, as trustee in bankruptcy of the estate of Stewart-Taylor Company, bankrupt, should be decreed to be vested with the title of said property as trustee, and the same, so far as any of it may now be held by the Forsyth Mercantile Company, should be adjudged and decreed as held in trust for said E. P. Johnston as trustee, and for the purpose of his duties as such trustee, as regards the creditors who may be entitled to distribution thereof. We further find that decree should be taken directing the Forsyth Mercantile Company to account to E. P. Johnston as such trustee for all goods and merchandise purchased by it from the Stewart-Taylor Company under said fraudulent bill of sale and under the transaction which has been described; and, further, that, if the said Forsyth Mercantile Company shall be unable to return such goods and merchandise so fraudulently conveyed and transferred, Johnston as trustee shall recover of the Forsyth Mercantile Company the sum of $3,584.05, as a fair valuation thereof.
Complainant is further entitled to a decree to the effect that the costs and expenses of this cause in equity shall be taxed by the clerk of the court against the defendant; and, further, that the compensation of Alexander Proudfit, Esq., for his services as special master shall be fixed at the sum of
dollars, to be paid as part of the costs and expenses herein.
In re CRENSHAW.
(District Court, S. D. Alabama. August 1, 1907.)
BANKRUPTCY-EXAMINATION OF BANKRUPT-RIGHT PRIOR TO ADJUDICATION.
Bankruptcy Act July 1, 1898, § 21a, c. 541, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3430), providing for the examination of witnesses “concerning the acts, conduct, or property of a bankrupt whose estate is in process of administration under this act," does not authorize an order in involuntary proceedings in which there has been no adjudication requiring the alleged
bankrupt to appear and submit to an examination. In Bankruptcy. On motion for an order to examine the alleged bankrupt and other witnesses.
Stevens & Lyons, for petitioners.
TOULMIN, District Judge. There has been no adjudication of bankruptcy in this case and no receiver appointed in the meantime. Bankruptcy Act July 1, 1898, § 21a, c. 541, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3430], providing for such an order, authorizes the court, which is administering the estate, and "in the process of the administration,” to make such an order. The examination is in aid of the administration. Bankruptcy Act, $ 21. The decree of adjudication operates in rem and from the moment of adjudication the bankrupt's estate is in the custody of the court-in custodia legis—and from that time may be said to be in process of administration.
The case of Fixen & Co. (D. C.) 96 Fed. 748, is cited in support of this motion. As I understand that decision, it is, in substance, that the court had the power to appoint a receiver prior to an adjudication and the election of a trustee; that a receiver has authority to institute suits to recover property of the bankrupt if necessary to get possession of it; that a receiver was an “officer” in contemplation of the bankrupt act who was authorized by section 21 of the act to apply for an order to examine the bankrupt and others, as witnesses, pertaining to the bankrupt's property, etc., and that it was not necessary there should be a suit pending to authorize such examination.
These seem to have been the points raised and controverted in the case. While it is true the order for the examination was made before adjudication—some four days before—no question was raised as to its being premature, no suggestion as to its invalidity on that ground, and no reference to or notice taken of it by the court except the statement of it as a fact. We may find in some instances that the courts say there is nothing in the act which limits the examination of the bankrupt to any particular time or occasion, yet they uniformly say, when they make any expression on the subject, that an examination may be ordered at any time during the pendency of the bankrupt proceedings, while the bankrupt's estate is in process of administration. Can the bankruptcy court administer the estate of one who has not been adjudicated a bankrupt? In the case of an involuntary bankrupt proceeding, like the one under consideration, a petition is filed, and it may be said that the bankrupt proceedings are pending, non constat the alleged bankrupt may never be adjudicated a bankrupt. It appears clear to me that the court should not order an examination “concerning the acts, conduct, or property of a bankrupt” before the party concerning whose acts, property, etc., it is proposed to examine has been adjudged a “bankrupt." However, when we consider those sections of the bankruptcy act which pertain to the subject under consideration, and which should be construed together, with the forms which relate thereto, I think it manifest that both the act and forms imply that such examination is to be had subsequent to the adjudication. The sections of the act referred to are 21, 58, and 7, and Forms Nos. 28 and 30. Section 58 provides that creditors shall have at least 10 days' notice of all examinations of the bankrupt. In re Price (D. C.) 91 Fed. 635. How are the creditors to be known except as they appear in the list of creditors of the bankrupt, or make themselves known after due notice by publication under the order of the court?
The motion is denied.
In re BELL PIANO CO.
(District Court, S. D. New York. February 5, 1907.) BANKRUPTCY-DECLARATION OF DIVIDENDS-TIME FOR FINAL DIVIDEND.
Where all the known assets of a bankrupt estate have been collected and reduced to money, a final dividend may be declared, under Bankr. Act July 1, 1898, c. 541, $ 65b, 30 Stat. 563 [U. S. Comp. St. 1901, p. 3448], as amended in 1903 (Act Feb. 5, 1903, c. 487, § 15, 32 Stat. 800 [U. S. Comp. St. Supp. 1905, p. 690]), at any time after the expiration of three months from the declaration of the first dividend; and any creditor who
has not then proved his claim is debarred from participating in the fund. In Bankruptcy. On review of referee's decision. Stern, Singer & Barr, for the Motion,
HOUGH, District Judge. In my opinion the decision in Re Stein (D. C.) 1 Am. Bankr. Rep. 662, 94 Fed. 124, states the true interpretation of the act, and the amendment of Act July 1, 1898, c. 541, § 65b, 30 Stat. 563 [U. S. Comp. St. 1901, p. 3448], by Act Feb. 5, 1903, c. 487, § 15, 32 Stat. 800 (U. S. Comp. St. Supp. 1905, p. 690], strengthens Judge Baker's opinion. To say that the final dividend shall not be declared within three months after the first dividend is declared does, in my judgment, hold by implication that a final dividend may be declared on the expiration of three months from the time of the first dividend. All creditors must have notice of the final meeting, and if the creditors who have not yet proved their claims do not then prove them they may then lawfully, as well as justly, be debarred from participation in the funds in hand when the final meeting is held.
The matter is remanded to the referee, with instructions to comply with the petition of the trustee.
HOPPER v. DENVER & R. G. R. CO. *
No. 2,414. 1. DEATH-STATUTES-CONSTRUCTION.
Mills' Ann. St. Colo. $ 1508, creates an action for death negligently caused by a public carrier, and declares that it shall forfeit for every person and passenger so injured or killed not more than $5,000, nor less than $3,000, which may be sued for and recovered: (1) By the husband or wife of deceased; or (2) if there be no husband or wife, or he or she fail to sue within a year after such death, then by the heir or heirs of the deceased, or, if the deceased be a "minor or unmarried," then by the father and mother, or, if either of them be dead, then by the survivor. Held that, if the deceased left a husband or wife, the sole right of action was in such survivor, save that as against children the right would be lost unless asserted within a year; if there was no surviving husband or wife, or the survivor failed to sue within a year, then the sole right would be in the children; and if there was neither surviving husband nor wife nor any children, then only would the right of action be in the father and mother, or the survivor; so that where an unmarried adult female is killed by the negligence of a carrier, and she leaves neither husband, child, nor mother, the right of action is in her surviving father.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 15, Death, $$ 35–46.] 2. SAME-PECUNIARY INJURY.
When decedent, an unmarried female 19 years of age at the time of her death, was two years old, her mother died, and she was taken by plaintiff, her father, to reside with her aunt, with whom she lived until she was 16, when she was sent by him to school to fit herself for teaching. She was sympathetic, ambitious, industrious, of good health, and fond of her father, who paid the expenses incident to her education, and desired to keep house for him, but he, being a farm laborer and traveling machinist, had not married again, and at the time of his daughter's death was 60 years of age. Held, that evidence of these facts, in the light of the natural influence or promptings of filial ties, was sufficient to sustain a finding that there was a reasonable expectation of substantial, though not large, pecuniary benefit to the father from a continuance of the life of the daughter.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 15, Death, $ 20.] 8. CARRIERS--INJURY TO PASSENGERS_DEATH-NEGLIGENCE-PRESUMPTION.
In an action for death of a passenger by the alleged negligence of a carrier's servants, evidence that plaintiff was a passenger, and that her death resulted from an accident to the train, was sufficient to establish a prima facie case of the carrier's negligence.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 9, Carriers, $$ 1307–1314.] In Error to the Circuit Court of the United States for the District of Colorado.
James H. Teller (J. H. McCorkle, on the brief), for plaintiff in error.
Henry A. Dubbs (Thomas H. Devine, J. W. Preston, Joel F. Vaile, C. W. Waterman, and E. N. Clark, on the brief), for defendant in error.
Before SANBORN and VAN DEVANTER, Circuit Judges, and PHILIPS, District Judge.
VAN DEVANTER, Circuit Judge. This was an action under a statute of Colorado by a father to recover damages of a railroad company for the death of his daughter, alleged to have been caused by
*Rehearing denied September 30, 1907. 155 F-18