Слике страница
PDF
ePub

the latter, an assignment for the benefit of creditors, though voidable at the instance of a trustee in bankruptcy subsequently appointed, is not void ab initio. Though it constitutes an act of bankruptcy under the federal statute, and though it was made for the very purpose of giving preferences and otherwise evading the provisions of that law, it is not a mere nullity, in any such sense as to leave the title to the property in the assignor as if no assignment had been made. If no proceedings are instituted in a court of bankruptcy, within the time limited, for the adjudication of the assignor as a bankrupt, and for the purpose of securing the administration of the property in such court, the assignment will be valid, at least for the purpose of securing an equal distribution of the estate among the creditors; that is, it will be valid as at common law, though not as an attempt to invoke the state insolvency law. Packing Co. v. Brown, 76 Minn. 465, 79 N. W. 522; Binder v. McDonald, 106 Wis. 332, 82 N. W. 156; Patty-Joiner & Eubank Co. v. Cummins, 93 Tex. 598, 57 S. W. 566; Boese v. King, 108 U. S. 379, 2 Sup. Ct. 765, 27 L. Ed. 760; In re Romanow (D. C.) 92 Fed. 510; Ostrander v. Meunch, 2 McCrary, 267, 12 Fed. 562; Wald v. Wehl, 18 Blatchf. 495, 6 Fed. 163; Barnes v. Rettew, 8 Phila. 133, Fed. Cas. No. 1,019; Sparhawk v. Drexel, 12 N. B. R. 450, Fed. Cas. No. 13,204; Seaman v. Stoughton, 3 Barb. Ch. 344: Strong v. Carrier, 17 Conn. 319: Cook v. Rogers, 31 Mich. 391; Bostwick v. Burnett, 74 N. Y. 317; Maltbie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 364; Atkins v. Spear, 8 Metc. (Mass.) 490; Sadler v. Immel, 15 Nev. 265; Thrasher v. Bentley, 59 N. Y. 649; Williams v. Pitts, 55 How. Prac. 331.

Nevertheless, a general assignment by an insolvent debtor, though made for the equal and common benefit of all his creditors, without preferences, and without any actual fraudulent intent, either as to creditors or as to the evasion of the bankruptcy law, is an act of bankruptcy, upon which the assignor may be adjudged bankrupt, if proceedings are begun within four months thereafter, and if the other requisites as to jurisdiction are found to exist. Boese v. King, 108 U. S. 379, 2 Sup. Ct. 765, 27 L. Ed. 760; Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; Perry v. Langley, 1 N. B. R. 559, Fed. Cas. No. 11,006; In re Pierce, 3 N. B. R. 258, Fed. Cas. No. 11,141; In re Smith, 4 Ben. 1, Fed. Cas. No. 12.974; Barnes v. Rettew, 8 Phila. 133, Fed. Cas. No. 1,019; In re Burt, 1 Dill. 439, Fed. Cas. No. 2,210; In re Chamberlain, 3 N. B. R. 710, Fed. Cas. No. 2.574; In re Croft. 8 Biss. 188, Fed. Cas. No. 3.404; In re Kasson, 18 N. B. R. 379, Fed. Cas. No. 7,617; In re Romanow (D. C.) 92 Fed. 510; In re Randall, Deady, 557, Fed. Cas. No. 11,551; In re Sievers (D. C.) 91 Fed. 366; Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325. Moreover, the complete jurisdiction of the court of bankruptcy over the estate of the bankrupt is not affected by the fact that an assignment for the benefit of creditors under the state law had been made prior to the adjudication. The trustee in bankruptcy takes title to the whole of the estate, including that assigned; the assignment is voidable at his instance; and he may recover the property, or its proceeds, from the assignee. Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325; In re Gutwillig, 34 C. C. A. 377, 92 Fed. 337; In re Sievers (D. C.) 91 Fed. 366; In re Gutwillig (D. C.) 90 Fed. 475; In re Smith (D. C.) 92 Fed. 135; In re Troth (C. C.) 1 Fed. 405; Pool v. McDonald, 15 N. B. R. 560, Fed. Cas. No. 11,268; Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; In re Temple, 4 Sawy. 92, Fed. Cas. No. 13.825; Macdonald v. Moore, S Ben. 579, Fed. Cas. No. 8,763; Boese v. Locke, 17 Hun, 270. The assignment, however, will be saved by the lapse of four months without the institution of bankruptcy proceedings. That is to say, if the debtor is adjudged bankrupt, and a trustee appointed, but not until more than four months from the making of the assignment, the trustee will not have the right to set aside the assignment, nor will he be entitled to the possession and administration of the estate as against the voluntary assignee. In such a case, the trustee in bankruptcy (saving questions of fraud) will take only such rights as the bankrupt had and could himself claim at the time of the bankruptcy. Mayer v. Hellman, 91 U. S. 496. 23 L. Ed. 377; In re Arledge, 1 N. B. R. 644, Fed. Cas. No. 533; In re Kimball, 16 N. B. R. 188, Fed. Cas. No. 7,770. In a late case, however, it is held that, where a general assignment was

made more than four months before the assignor was adjudged bankrupt, while the accounts of the assignee will not be reviewed in the bankruptcy proceedings, he will be required to account for the property of the bankrupt remaining in his hands at the commencement of the bankruptcy proceedings. In re Carver (D. C.) 113 Fed. 138.

6. Rights of Trustee in Bankruptcy as Against Assignee for Creditors.

While, as above stated, a general assignment for the benefit of creditors, if made without fraudulent intent, is only voidable in the first instance, yet if proceedings in bankruptcy against the assignor are begun within four months thereafter, the adjudication of bankruptcy will of itself, and without the necessity of bringing an action for that purpose, avoid the assignment, deprive the state courts of jurisdiction to proceed further under the assignment, and render the assigned estate subject to the administration and control of the court of bankruptcy. In re Sievers (D. C.) 91 Fed. 366; In re Gutwillig, 34 C. C. A. 377, 92 Fed. 337. In that contingency, there is no such concurrent jurisdiction, or prior right of possession, in the state court as will prevent the bankruptcy court from assuming exclusive jurisdiction of the estate of the bankrupt. In re Smith (D. C.) 92 Fed. 135. Any further proceedings had in a state court upon such an assignment, in accordance with the state law, would be coram non judice and void. In re Curtis (D. C.) 91 Fed. 737. It follows, of course, that the assignee will have no title to the property which he could defend as against the claim of the trustee in bankruptcy. The assignee "is a mere naked bailee for the creditors, without a shred of title or lawful authority to the possession of the bankrupt's estate." In re Smith (D. C.) 92 Fed. 135. Nor could he base a claim to retain the property on the ground of his accountability to the state court having jurisdiction over the assignment. If the assignee is cited to account in a state court, he may, in bar of the proceeding, show that the whole estate has been compulsorily taken from him by the court of bankruptcy. Burkholder v. Stump, 8 Phila. 172, 4 N. B. R. 597, Fed. Cas. No. 2,165. What is true of a voluntary assignee is also true of a receiver appointed by the state court in insolvency. Proceedings in bankruptcy oust the jurisdiction of the state court, and the bankruptcy court's receiver is entitled to the possession of the property. In re Lengert Wagon Co. (D. C.) 110 Fed. 927.

In order to obtain possession of the assets, it may be necessary for the court of bankruptcy to take some action before the appointment of a trustee; and it is held that, immediately upon an adjudication in bankruptcy (or even upon the filing of a petition and before the hearing thereon) the hankruptcy court has authority to enjoin the voluntary assignee from disposing of the property confided to him, or from proceeding any further with the administration of the assigned estate. Carriage Co. v. Stengel, 37 C. C. A. 210, 95 Fed. 637; Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325; In re Gutwillig, 34 C. C. A. 377, 92 Fed. 337; In re Sievers (D. C.) 91 Fed. 366; In re Skoll, 16 N. B. R. 175, Fed. Cas. No. 12,926. Or, under the same circumstances, the court of bankruptcy has jurisdiction to appoint a receiver to take charge of the assigned estate pending the adjudication in bankruptcy. In re Etheridge Furniture Co. (D. C.) 92 Fed. 329.

The trustee in bankruptcy, upon his appointment and qualification, is entitled to take the property from the possession of the assignee. It has been suggested that a proper remedy for him is to apply to the state court for an order on the assignee to surrender the estate to him; and, if denied, to appeal to the higher court of the state, and ultimately to the supreme court of the United States. Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320. If the estate is in the possession of a receiver appointed by a state court, as distinguished from an assignee for the benefit of creditors, it is undoubtedly the proper procedure (as stated in the principal case) for the trustee or receiver in bankruptcy to apply to the state court in the first instance. See In re Lengert Wagon Co. (D. C.) 110 Fed. 927, and other cases cited in the opinion, supra. But this course is not necessary if the person having possession of the property is merely an assignee selected by the debtor him51 C.C.A.-2

self, and not having the status of an officer of the state court. As against such a custodian, the trustee in bankruptcy is entitled to recover the assigned estate or its proceeds. Davis v. Bohle, 34 C. C. A. 372, 92 Fed. 325. And this may be accomplished by a summary proceeding. That is, it is not necessary for the trustee to bring a separate, independent, and plenary action against the assignee; but he may file a petition in the court of bankruptcy, as a part of the proceedings in bankruptcy, and obtain an order on the assignee to show cause why he should not be required to surrender and turn over the assigned estate to the trustee in bankruptcy. The rights of the trustee being established to the satisfaction of the bankruptcy court, it may forthwith order the assignee to yield up the property as demanded. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814; In re Smith (D. C.) 92 Fed. 135. But this cannot be done on a merely ex parte hearing; that is, without process or notice to the assignee. He must at least have the opportunity to be heard. Smith v. Belford, 45 C. C. A. 526, 106 Fed. 658. So also, where an assignee in insolvency, who holds the property under a general assignment which is in itself an act of bankruptcy, makes a sale of the property before a trustee in bankruptcy is appointed, but after and with knowledge of the petition in bankruptcy, his purchaser will have no title superior to the bankrupt's estate; but his equities in respect to the goods or to the money he has paid for them may depend on many circumstances, and can be settled in the court of bankruptcy, which may, if necessary, bring in the assignee. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814. But where an assignee, appointed in insolvency proceedings under a state law, has taken charge of the debtor's property, sold it, and distributed the proceeds to creditors, acting in all respects in entire good faith and in conformity to the state law and the orders of the state court, and afterwards proceedings in bankruptcy are had and a trustee in bankruptcy appointed for the same debtor, the assignee is not to be held personally liable to the trustee for the value of the property or its proceeds. In such case, the trustee in bankruptcy "must seek his remedy against those who have received payments from the defendant in contravention of the bankruptcy act." Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; Jones v. Kinney, 5 Ben. 259, Fed. Cas. No. 7,473.

Under the former bankruptcy law, it was held that an assignee for the benefit of creditors, who was compelled to turn over the property in his charge to a trustee in bankruptcy, appointed after the assignment but before the complete execution of the trust thereunder, should be allowed to retain so much of the estate as would cover costs and expenses properly and necessarily incurred by him in the administration of his trust, and also a reasonable compensation for his services as assignee up to the time of his accounting to the trustee in bankruptcy. Catlin v. Foster, 1 Sawy. 37. Fed. Cas. No. 2,519; Burkholder v. Stump, 8 Phila. 172. Fed. Cas. No. 2,165; In re Lains, 16 N. B. R. 168, Fed. Cas. No. 7,989; Jackson v. McCulloch, 1 Woods, 433, Fed. Cas. No. 7,140; Wald v. Wehl, 18 Blatchf. 495, 6 Fed. 163. Compare In re Stubbs, 4 N. B. R. 376, Fed. Cas. No. 13,557. But the assignee, in such case, was held not entitled to any priority in respect to his claim for compensation, his demands ranking with those of other simple creditors. In re Lains, 16 N. B. R. 168, Fed. Cas. No. 7,989. It was also considered that he would be entitled to an allowance for the fees of his attorney for services properly and necessarily rendered to him in regard to the property, in so far as such services benefited and helped to preserve the estate, and were not hostile to the proceedings in bankruptcy; but no allowance could be made for the services of counsel in opposing the proceedings in bankruptcy or endeavoring to retain possession of the property. Platt v. Archer, 13 Blatchf. 351, Fed. Cas. No. 11,214; Clark v. Marx, 6 Ben. 275, Fed. Cas. No. 2,830. See In re Cohn, 6 N. B. R. 379, Fed. Cas. No. 2,966. In the case, however, of an assignment which was fraudulent and void, it was held that the assignee should not be reimbursed for his expenses incurred under the assignment, nor was he entitled to compensation for his services as assignee; but for such services and disbursements as benefited the general body of creditors, either by reason of the preservation of the fund to their use. by advantageous collection of assets, or by con

version of property into money, he should be allowed what was reasonable and just. Hunker v. Bing (D. C.) 9 Fed. 277.

Under the present statute, since any general assignment for creditors is in itself an act of bankruptcy and constructively fraudulent and in violation of the bankruptcy law, the cases show a tendency to hold that the assignee will not be entitled to any compensation from the estate for his services rendered prior to the filing of the petition in bankruptcy. Wilbur v. Watson (D. C.) 111 Fed. 493; Stearns v. Flick (D. C.) 103 Fed. 919. But compare In re Scholtz (D. C.) 106 Fed. S34. But he should receive an allowance for the actual and necessary expenses incurred in preserving the property while in his possession. In re Tatum (D. C.) 112 Fed. 50; In re Pauly, 1 Nat. Bankr. N. 405. But the latest ruling of the supreme court of the United States appears to unsettle this rule completely; for it is said that an assignee for the benefit of creditors has the right to have his claims for the amount paid to counsel or retained by him on account of commissions as assignee, before the bankruptcy of his assignor, adjudicated in the state court in the customary mode of proceeding; and the bankruptcy court has no jurisdiction to adjudicate finally on the merits of his claim, unless by his consent, and then only by a plenary suit. Trust Co. v. Comingor, 22 Sup. Ct. 293, 46 L. Ed. 7 Am. Bankr. R. 421.

7. Practical Effect of Suspension of State Insolvency Laws.

Although there is no dispute as to the general rule above stated, that state insolvency laws are superseded or suspended in their operation by the enactment of a national bankruptcy law, yet there is much uncertainty as to the practical working of this principle, especially where the validity of proceedings under the state law is questioned collaterally. If the bankruptcy law gives to the courts of the United States exclusive jurisdiction of all proceedings for winding up the estate of an insolvent debtor, and suspends the operation of all state laws having the same general character, it would seem that, such a federal statute being in existence, it is the right and duty of state courts to refuse to take jurisdiction of proceedings attempted to be instituted under the state law, and that when an insolvent files a petition in a state court seeking the benefit of that law, the court should dismiss the petition; and it has been so held. Van Nostrand v. Carr, 30 Md. 128, 2 N. B. R. 485. But not all of the state courts agree to this proposition. By some it is held that they will not be ousted of jurisdiction over an insolvency case unless proceedings in bankruptcy are instituted against the same debtor. But they concede that when such a conflict actually arises, then the state court must decline to proceed further with the action pending before it. In re McKee (Ky.) 1 Nat. Bankr. N. 139. On the same line, the federal courts hold that, in a case where proceedings are pending in the two courts under the two statutes, the federal court may stay the action in the state court, or, if an assignee has been appointed under the state law, he may be enjoined from taking possession of the property of the insolvent, or required to surrender it up to the trustee in bankruptcy. Ex parte Eames, 2 Story, 322, Fed. Cas. No. 4,237.

But the really difficult question arises when no proceedings under the bankruptcy act have been taken, so that there is no conflict between courts, but only the mere existence of the bankruptcy act stands in the way of proceedings under the state law. Here we have to inquire whether any validity can be predicated of the action of the state court under the state law, or of the title of the assignee thereunder, or of the title of a purchaser at a sale made by such assignee. Are these proceedings valid, void, or voidable; and if the latter, at whose instance may they be avoided? Some cases have gone so far as to hold that all proceedings under a state insolvency law, the bankruptcy act being in force, are absolutely null and void for all purposes. Martin v. Berry, 37 Cal. 208; Com. v. O'Hara (Pa.) 1 N. B. R. 86. Thus, they rule that a discharge granted to the insolvent under the state law, as the result of proceedings had while the national bankruptcy law was operative and would have been applicable to his case, is entirely inoperative, and constitutes no defense to an action subsequently brought against him by a domestic creditor. Shears v. Solhinger, 10 Abb. Prac. (N. S.) 287; Cassard v. Kroner (Md.) 4 N. B. R. 569. Decisions are to be found

going even much further than this. A case in Massachusetts rules that an assignee under the state law has no title or claim to the property of the debtor such as will enable him to maintain an action for its recovery against a third person, the existence of the bankruptcy law, which would be applicable to the debtor, being a full defense to such an action; and this although no proceedings under the federal statute are ever had against the insolvent. Griswold v. Pratt, 9 Metc. 16. And see Ketcham v. McNamara, 72 Conn. 709, 46 Atl. 146, 50 L. R. A. 641. Compare Shryock v. Basehore, 82 Pa. 159, 15 N. B. R. 283. Again, it is held that the invalidity of proceedings had under a state insolvency law, including the invalidity of the pretended title of the assignee under such law, by reason of the existence at the time of a national bankruptcy law, may be asserted, with effect, in a contest between attaching creditors and such assignee. Rowe v. Page, 54 N. H. 190; Shryock v. Basehore, supra. Compare Cook v. Rogers, 31 Mich. 391; Reed v. Taylor, 32 Iowa. 209, 7 Am. Rep. 180.

But all these positions are controverted by authorities of equal importance. Numerous cases hold that proceedings may be had, and jurisdiction exercised, under the state laws, until their authority is called in question by the bankruptcy courts; that judicial action taken, and titles accruing, under the insolvency laws are voidable at the most; and that they are not to be avoided unless proceedings in bankruptcy are instituted, and then only at the instance of the trustee in bankruptcy. Reed v. Taylor, 32 Iowa, 209, 7 Am. Rep. 180; Cook v. Rogers, 31 Mich. 391; Ebersole v. Adams, 10 Bush, 83; Maltbie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 364. In one of the cases it was said: "So far as the state insolvency laws may prevent or even impede the operation of the bankruptcy law, they must yield to it in order that it may accomplish its object of establishing a uniform system of bankruptcy throughout the United States; but while the state laws thus yield, they are not entirely abrogated. They exist and operate with full vigor until the bankruptcy law attaches upon the person and property of the bankrupt, and that is not until it is judicially ascertained that the petitioner is a person entitled to the benefit of the bankruptcy law by his being declared a bankrupt by a decree of the court. Before that time, upon a sound construction of the bankruptcy act, it does not necessarily come in conflict with the insolvency laws of the state." Ex parte Ziegenfuss, 24 N. C. 463. Notwithstanding the existence of a bankruptcy law which would be applicable to the case (it is held in another decision), the parties interested may, by consent, use the state law as a means of collecting and distributing the debtor's estate. Should proccedings in bankruptcy be instituted, and the federal court claim the administration of the estate, the state courts would yield; but in the absence of such a claim, the mere fact that a federal law is in existence, under which proceedings might be taken, is no objection to the jurisdiction of the state court. Maltbie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 364.

Finally, a case may arise where the debtor refuses to file his voluntary petition in bankruptcy, and yet refrains from committing any act of bankruptcy on which his creditors could proceed. Here there is no possibility of conflict between courts; and it is held that proceedings under the state law, even though compulsory in their nature, may be sustained, for the purpose of securing an equal distribution of the debtor's property among his creditors. Appeal of Geery, 43 Conn. 289, 21 Am. Rep. 653. In this connection it is important to remember that state insolvency laws, though suspended, are not annulled, by the bankruptcy law. For proper purposes and within a limited range, they may continue operative. Thus, for example, where the insolvency laws of a state give priority of payment out of insolvents' estates to a certain class of debts, the same debts will be entitled to priority of payment out of the estate of a bankrupt, under that clause of the statute which gives priority to "debts owing to any person who by the laws of the states is entitled to priority." Bankr.

*

Act 1898, § 64b; In re Worcester Co., 42 C. C. A. 637, 102 Fed. 808.

8. Pending Proceedings under State Laws.

The concluding sentence of the bankruptcy act of 1898 is as follows: "Proceedings commenced under state insolvency laws before the passage

« ПретходнаНастави »