135 F. 1000 | 8th Cir. | 1905
after stating the case as above, delivered the opinion of the court.
The course of this proceeding in bankruptcy in the court below has been tedious, tortuous, and confusing, and 27 alleged errors are presented for our consideration. It is, however, necessary to consider but one question, and that is, was the petition of the cordage company properly dismissed? The grounds relied upon in this, court to sustain this dismissal are (1) that the petition was not filed in duplicate; (2) that it was not duly verified; (3) that it contained no averment that the defendant was not a wage-earner, or a person chiefly engaged in farming; (4) that it contained no averment that the alleged bankrupt had only twelve creditors; and (5) that some of the creditors who sought to join in the petition of the cordage company on April 6, 1903, were parties to the petition of January 30,1902, who failed to amend their verifications.
The first reason for the dismissal of the petition is untenable,, because it is not founded in fact. The cordage company, in its petition for review, avers, and the demurrer of the respondent admits, that the original petition of the cordage company was filed in duplicate. Moreover, the bankruptcy act shows that the only purpose of filing in duplicate is to furnish one copy for the clerk and one for service on the bankrupt. Act July 1, 1898, c. 541. § 59c, 30 Stat. 561, 562 [U. S. Comp! St. 1901, p. 3445]. There-are decisions in In re Stevenson (D. C.) 94 Fed. 110, 115, and in In re Dupree (D. C.) 97 Fed. 28, that, when the duplicate is not filed within four months of the alleged act of bankruptcy, its absence is not waived by the general appearance of the respondent, and. that the petition should be dismissed for want of jurisdiction. But the alleged bankrupt appeared and answered in the case in hand within four months of the alleged acts of bankruptcy, and without objection on the ground that the petition was not filed in duplicate. The copy for service on the bankrupt is for his benefit. V The only object of requiring its filing is to give him a copy of the petition,, in order to enable him to answer it. The right to it is a personal privilege, which he may demand and secure or may renounce and waive. As the only benefit of the privilege is to enable him more speedily and conveniently to answer the petition, an answer without a demand of the privilege is a waiver of it. It estops the bankrupt. from thereafter insisting upon it, because it leads the petitioner to proceed and to incur expense in reliance upon the renunciation of the privilege which has become functus officio by the answer. For a like reason the second ground for the dismissal of the petition— the defect in its verification—was waived by the repeated answers-of the alleged bankrupt. Leidigh Carriage Co. v. Stengel, 95 Fed. 637, 37 C. C. A. 210; Roche v. Fox, Fed. Cas. No. 11,974; In re Vastbinder ,(D. C.) 126 Fed. 417, 418.
The fact that the petition contained no averment that the alleged bankrupt was not a wage-earner or farmer was remediable by
But it is earnestly and persistently contended that the want of the averment that all of the creditors of Smith were less than twelve in number in the original petition of the cordage company was fatal to the jurisdiction of the court, and could not be cured by amendment. There are, however, several answers to this proposition, which appear to us to be conclusive. In the first place, the uniform practice of the federal courts, founded on the public policy of the nation evidenced by acts of Congress and the rules of the Supreme Court, is to permit amendments in all judicial proceedings where they are necessary to enable parties to reach the merits of the controversy they attempt to present, and where the allowance of such amendments will work no injustice to any one. The act of September 24, 1789, c. 20, § 32, 1 Stat. 91 [U. S. Comp. St. 1901, p. 696, § 954], which has remained in force for more than a century, and has inspired this practice, provides that no proceedings in civil causes in any court of the United States “shall be abated, arrested, quashed or reversed for any defect or want of form; but such court shall proceed and give judgment according as the right of the cause and matter in law shall appear to it, without regarding any such defect, or want of form, except those which, in cases of demurrer, the party demurring specially sets down together with his demurrer, as the cause thereof; and such court shall amend every such defect and want of form, other than those which the party demurring so expresses; and may at any time permit either of the parties to amend any defect in the process or pleadings, upon such conditions as it shall, in its discretion and by its rules, prescribe.” The rule in bankruptcy declares that “the court may allow amendments to the petition and schedules on application of the petitioner.” Neither the act of Congress nor the rule in bankruptcy excepts jurisdictional averments from the power of the court to permit amendments, and the established rule is that jurisdictional as well as other averments may be inserted or reformed by amendment. Whalen v. Gordon, 37 C. C. A. 70, 73, 95 Fed. 305, 308; Bowden v. Burnham, 8 C. C. A. 248, 59 Fed. 752; Carnegie, Phipps & Co. v. Hulbert, 16 C. C. A. 498, 70 Fed. 209.
Again, neither the fact of the existence of twelve creditors at the time of the filing of the petition by a single creditor nor the averment of that fact is indispensable to the jurisdiction of the court or to an adjudication of bankruptcy upon the petition under the bankruptcy law of 1898. It is only essential that there shall have been twelve creditors at the time of the filing of the petition, or that sufficient creditors shall have joined before the adjudication to make three in number whose claims amount in the aggregate to $500. The bankruptcy act provides that if all of the creditors are less than twelve in number, one creditor whose claim amounts to $500 may file a petition to adjudge his debtor a bankrupt. But it also provides that, if he avers that the creditors are less than
This conclusion has not been reached without a perusal and thoughtful consideration of the opinion of Judge Holland in In re Stein (D. C.) 130 Fed. 377, wherein he holds that a petition which does not show on its face that the claims of the petitioners do not amount in the aggregate to $500 or over fails to give the court jurisdiction, and that it has no power to allow an amendment whereby other creditors are joined who have claims sufficient to make up the requisite amount. The ruling in that case is not necessarily inconsistent with our conclusion in the case at bar, and neither the decision nor the reasoning which is presented to sustain it commend themselves to our judgment.
Finally, the necessity and utility of an insertion of such an averment in the petition of the cordage company had ceased when the motion to dismiss the petition was made and granted. On January 30, 1902, six creditors petitioned, appeared, and filed a petition to join with the cordage company. Their appearance and prayer to join made them co-petitioners with the cordage company. The fact has not escaped our attention that no order of the court was made that these petitioners should be permitted to join with the cordage-company. But no order was necessary. The law gave them permission to join, and when they had entered their appearance and signified their desire to join by a written petition, they became co-petitioners with the cordage company. Section 59f. From the time the petition of January 30, 1902, was filed until after the motion to dismiss the petition of the cordage company was made, there were in court at least four petitioners for the adjudication in bankruptcy. Hence, when the motion to dismiss the petition was filed, it was entirely immaterial whether the number of creditors was more or less than twelve. That motion was made on March 9, 1903. On March 23, 1903, the three petitioners other than the cordage company who had filed motions to withdraw from the petition in August, 1902, were allowed to do so. This order of allowance left the-cordage company the only remaining petitioner. On April 6, 1903, four creditors presented their petitions to the judge of the court, and requested that they be permitted to join with the cordage company and the cordage company filed a petition wherein it prayed that the hearing upon these petitions and that the motion to dismiss-be delayed for a reasonable time, and that all the creditors of the alleged bankrupt should be notified of the pendency of the petitions that they might have an opportunity to be heard. These pe
The contention that the failure to give this notice does not constitute prejudicial error, and the citation of In re Jemison Mercantile Co., 112 Fed. 966, 968, 972, 50 C. C. A. 641, have been considered. In the latter case, upon the motion of all the petitioners, a petition in bankruptcy was dismissed without notice to the creditors. Eleven months and 23 days after this dismissal other creditors appeared, and asked permission to. join in the dismissed petition and to prosecute the proceeding, and their application was denied. The court held that the dismissal of the petition without giving notice to the creditors was not void, and that the application was too late to be seriously considered. There is a wide difference between an order or judgment that is void and one which is erroneous and reversible upon appeal or petition for review. A dismissal of a petition without notice to creditors is not void because the bankruptcy court has jurisdiction of the subject-matter and of the parties, and its erroneous orders and judgments are as valid, in the absence of direct proceedings to review them, as those in which no error inheres. In the case of In re Jemison Mercantile Co. it was too late to review the order of dismissal 11 months after it had been made, and the court properly refused to disturb it. In the case at bar timely application to review the decree of the court below has been made. While that decree is not void, it is erroneous, because it was rendered without the notice to the creditors which the act of Congress requires, and the absence of that notice is fraught with probable consequences to the creditors too grave to be disregarded.
Nor is the absence of notice to creditors the only material error in this dismissal. There were creditors present who should have been permitted to join in the proceeding, and whose joinder would have furnished ample warrant for a denial of the motion to dismiss. At the time this petition was dismissed three creditors, at least two of whom held provable claims against the alleged bankrupt, had appeared in the court, presented proper petitions, and requested leave to join in the original petition. Two of them were sufficient to make the requisite number and amount to warrant a hearing and an adjudication in bankruptcy, and no sound reason is suggested why they should not have then been permitted to take the place of the three creditors whom the court had dismissed from the proceeding 11 days before. The suggestion that some of them had been parties to the petition of January 30, 1902, had failed to amend their verifications, and had retired from that petition under the order of the court, presents no tenable objection to their again becoming petitioners. The only amendment requisite to complete the petition of the cordage company was the insertion of an averment that the respondent, Smith, was not a wage-earner or a farm
The judgment of dismissal cannot be sustained. It must be vacated, and the case must be remanded to the court below, with directions to cause all the creditors of the alleged bankrupt to be notified of the pendency of the original petition and of the proposed dismissal of the proceedings under section 58a, to continue the hearing upon the motion for dismissal until ample time has been given to creditors after the receipt of notice to be heard upon the motion, to permit all creditors who desire to join in the petition to do so, and if before or during the hearing a sufficient number shall join, to proceed to an adjudication of the suit upon the merits, otherwise' to grant the motion for dismissal; and it is so ordered.