233 F. 410 | 3rd Cir. | 1916
This is an appeal by the trustee from the allowance of a claim against the bankrupt estate of the Louis J. Bergdoll Motor Company. The facts that gave rise to the original controversy are fully stated by Judge Woolley in Bergdoll v. Harrigan (C. C. A. 3d) 217 Fed. 943, 133 C. C. A. 615, and need not be repeated. In order to explain the present dispute, it is enough to say briefly, that an involuntary petition was filed against the Motor Company on March 17, 1913, and that an order of adjudication was entered on April 11. In October the trustee was authorized to sue Erwin R. Berg-doll to recover a preference of more than $31,000, and accordingly he brought the suit soon afterward and recovered a verdict in the spring of 1914. We affirmed the judgment in 217 Fed. 943, 133 C. C. A. 615,
“Can a creditor of a bankrupt wbo lias received a merely voidable preference, and wbo lias in good faith retained such preference until deprived thereof by the judgment of a court upon a suit of the trustee, thereafter xjrovo the debt so voidably preferred?”
The ground of the decision is that, although the act declares in section 57 that “the claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences,” Congress intended that such claims should he allowed, whether the surrender be voluntary or involuntary. We are now asked to hold that, although this may be true when the creditor has been preferred in good faith, it is not true when the preference has been brought about by fraudulent conduct in which he himself has taken part. We suppose that, when this proposition speaks of “good faith,” it means a preferential payment honestly believed by the parties to be permitted, and that, when it speaks of “fraudulent conduct,” it means a knowing and deliberate violation of the act. For the purposes of this appeal we assume that the preference now in question was fraudulent; the referee and the District Court have united in so holding, and we accept their finding. But it should be observed that this finding refers to the preference only, and that the preference no longer exists. In the last analysis, we are asked to punish a creditor whose debt was lawfully contracted, for the reason that he was guilty of fraud after
“this would disregard the elementary rule that a penalty is not to be readily implied, and on the contrary that a person or corporation is not to be subjected to a penalty unless the words of a statute plainly impose it.”
As the Supreme Court has shown, the Bankruptcy Act of 1898 contains no language forfeiting the whole or any part of an otherwise valid claim on the ground that the creditor has afterward been guilty of fraud, and (this being so) the courts have no authority to enlarge the statute by adding such a provision.
But what we have said must not be understood to embrace a debt that in itself is founded on fraud. Obviously both a debt and a preference may arise out of the same fraudulent transaction, or the debt alone may be fraudulent irrespective of the preference. Such a situation would present no difficulty, for a fraudulent debt is almost a contradiction in terms; in the eye of the law, it is really no debt at all (at least, as against bona fide creditors), and is therefore incapable of proof.
The order of the District Court is affirmed.
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