96 F. 812 | N.D.N.Y. | 1899
This is a proceeding in involuntary bankruptcy, tbe petition having been filed November 1, 1898. An amended petition was filed December 2, 1898, and, the alleged bankrupt having answered, the issues were referred to the referee to ascertain and report: the facts. The matter now comes before the court upon the petitioners’ motion to confirm the referee’s report and upon exceptions filed by tbe alleged bankrupt.
Two acts of bankruptcy are alleged in tbe petition: First. That the alleged bankrupt permitted certain creditors to obtain judgments against it on the 17th day of October, 1898, levy upon its property and sell the same at public auction. Second. That the alleged bankrupt held title to its real estate under a land contract from the Oneida County Savings Bank and on the 31st day of October, .1898, it “suffered the contract to be forfeited to the Oneida County Savings Bank when thi' company w~as insolvent with a view * ⅜ ⅞ of cheating, hindering, delaying and defrauding creditors of the said Rome Planing Mill and to give and secure to them a preference as against all the creditors of the Borne Planing Mill, contrary to an act,” etc.
Whether the petition alleges an act of bankruptcy under section 3, subd. 2, may, perhaps, be doubted, but the point is not mooted in the brief submitted for the alleged bankrupt.
There has, I think, been some misapprehension regarding the law
“Transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors.”
In order to succeed under this subdivision the petitioners must prove: First. A transfer of the debtor’s property to a creditor. Second. The debtor’s intent to prefer such creditor. Third. The insolvency of the debtor at the date of the transfer. The burden of proof is upon the petitioners except in the contingency provided for in paragraph d of section 3, where a presumption of insolvency is raised against a debtor who refuses to produce his books ahd papers and submit to an examination. In the present case the debtor has complied with the requirements of the law in this regard and no presumption of insolvency exists.
The meaning of the word “transferred” is defined in section 1,, subd. 25, of the act as follows:
“ ‘Transfer’ shall include the sale and every other and different mode of disposing of or parting with property, or the possession' of property, absolutely or conditionally, as a payment, pledge, mortgage, gift or security.”
The intent which it is necessary to estabiish is that of the debtor. It is not important that the intent of the creditor to whom the preference is given should be shown; whether or not he had reasonable cause to believe that a preference was intended is immaterial. The debtor’s intent to give a preference may be presumed from a transfer, while insolvent, of a large portion of his property to a single creditor. When this is proved the burden is upon him to show that he was ignorant of his insolvency and had reason to believe that he could pay his debts in full. Toof v. Martin, 13 Wall. 40. The debtor’s insolvency must be shown at the date of the transfer. The provisions of paragraph c (section 3) relate only to subdivision 1 of paragraph a. It is not a defense, therefore, to a petition alleging acts of bankruptcy under subdivisions 2, 3, 4, and 5, to prove solvency at the date of filing the petition. George M. West Co. v. Lea, 174 U. S. 590, 19 Sup. Ct. 836.
“Insolvency” is defined in section 1, subd. 15, as follows:
“A person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, with intent to defraud, hinder or delay his creditors, shall, not, at a fair valuation, be sufficient in amount to pay his debts.”
Section 3, subd. 3, provides that an act of bankruptcy by a person shall consist of his having—
“Suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having, at least five days before a sale or-final disposition of any property affected by such preference vacated or discharged such preference.”
In order to succeed under this subdivision the petitioners must prove: First. That a preference was obtained by a creditor through legal proceedings. Second. That the debtor suffered or permitted ihe preference and did not vacate or discharge the preference at.
The referee finds that the Rome Planing-Mill Company was insolvent November 1, 1898, when the petition was filed. He also finds that the company's real estate “had been taken by said Oneida County Havings Bank, under its contract, and surrendered by tbe alleged bankrupt, and not available as assets of the corporation for the payment of its debts.” As a conclusion of law be finds that the company while insolvent permitted certain of its creditors to obtain a preference through legal proceedings. I am constrained to hold that the facts found by the referee are insufficient to support an
Should the petitioners desire to rely upon the alleged act of bankruptcy under subdivision 2 it will, of course, be necessary for them to prove and for the referee to find: First. That there was a transfer of the real' estate to a creditor. Second. Insolvency at the time of the transfer. Third. Intent to prefer such creditor over the debtor’s other creditors.
It is not at all surprising that there should have been some misunderstanding as to the law. This was one of the first involuntary petitions filed in this district. At that time there was a wide diversity of opinion as to the true construction of paragraphs a and c of section 3.' It was not until the spring of the present year that the discussion was set at rest by the decision of the supreme court in the Lea Case, supra. Reference ordered.