5 F. Cas. 1057 | E.D. Va. | 1875
Before the amendment of June, 1S74, there was substantially but one inquiry in adjudicating upon involuntary petitions in bankruptcy. It j was. whether an act, or acts, of bankruptcy ! had been committed. The trial of that fact might be by jury, if seasonably demanded by the debtor defendant The law in that respect remains as before. But the amendment of June, 1S74, superadds another inquiry. It gives jurisdiction in involuntary bankruptcy only in cases where a fourth in number and a third in value of the creditors unite in the petition. Accordingly, there are .substantially two charges in this petition: .First. That certain acts of bankruptcy have been committed'; and. second. That a fourth .in number and a third in interest of the creditors have united in the petition. The debt- or was called upon to answer these charges on the 2Dth day of March. He declined, though personally present on that day, to formally appear and defend. The court, therefore, had nothing to do as to the first •charge, but to take it for confessed that the nets of bankruptcy charged in the petition were committed, and treat that part of the petition as adjudicated. But the amendment of June, 1S74 [IS Stat ISO], now also requires that the court shall be “satisfied” that the number of creditors which has been stated shall have united in the petition; and provides that if the bankrupt deny the allegation of the petition in this respect, his denial shall be in writing; and he shall be required at once to file a schedule of all his creditors, and of the amounts due them. Then, if it appear to the court that the number having signed the petition is short of what is requisite, ten days are to be given the petitioners in which to add the proper number. I therefore inquired the debtor, Mayo, when called upon to testify as a witness, to put his denial in writing, under oath, and at once to file a list of his creditors and the amounts due them.
As to the point insisted upon by counsel, that the creditors who have received a confession of judgment giving them a preference, should not be heard to make the objection of insufficiency in the number of petitioning creditors; it is true that they are not yet regularly in court, and will not be until either they shall have proved their claim, or a bill in chancery shall have been filed to set aside their judgment; still, not only they, but any one may suggest at the return day of the order on the debtor to show cause, that the number of petitioners is not sufficient; and, either upon such suggestion, or ex mero motu, in order to be “satisfied” on that point, the court will call upon the debtor for a list of his creditors, and take any other evidence it can avail itself of on that subject. I accordingly did, at the suggestion of M. E. McDowell & Co., call upon Mayo for such a statement. The demand for a jury was not made by the debtor defendant, Mayo, on the retara day of the order on him to show cause. He was present on that day, though he did not enter a formal appearance. The return of the marshal on the order was that he had been served with a copy of it on the 20th of March. When such service has been made, and the debtor is present, the terms of section 5025 of the Revised Statutes do not authorize an “adjourned day” for the hearing of the petition; and, therefore, the terms of section 502G require that the demand in writing for a jury shall be made on the return day, and do not give that right on any other day. I therefore denied the demand for a jury in writing on the 30th, which the law expressly required to be made on the 2i)th of March.
The single question now left in this case is, whether the debt of twenty-four thousand seven hundred and sixty-three dollars, for which the confession of judgment given on the 23d day of January, 1S75, for the purpose of preferring M. E. McDowell & Co., is provable in whole, or for a moiety, and to be computed as to the whole or only as to half, in this preliminary proceeding. Before the amended bankrupt act of the 22d of June, 1S74. if the claim of a creditor were doubted by the judge or disputed, especially a claim for which a creditor had accepted a prefer-
It is not necessary for me in determining the question now before the court, to pass upon the question of “actual fraud.” There is a distinction between fraud upon the bankrupt act, and “actual fraud.” Taking a preference from an insolvent, knowing him to be an insolvent, is a fraud upon the act; though it may be honest in a merely moral point of view. But if a confession of judgment were taken in this ease for twenty-four thousand dollars when the amount really due was only sixteen thousand dollars, then there would have been “actual fraud.” I canfiot at this stage of the case try the question of “actual fraud” in the meaning of the clause of the 39th section, running in these words: “And such person, if a creditor, shall not. in cases of actual fraud, be allowed to prove for more than a moiety of his debt.” That question must be tried and determined at a future period, under a plenary proceeding in chancery; and I expressly disclaim passing now upon the question of “actual fraud.” But, for the purpose of determining the jurisdiction of the court, I am obliged to deal with the confession of judgment at once, so far as to decide whether or not it was a fraud upon the bankrupt act. Upon the evi