16 Blatchf. 112 | U.S. Circuit Court for the District of Southern New York | 1879
The record shows, that, at the first meeting of creditors in regard to the composition, on April 24th, 1878, it was stated, by the counsel for the debtors, that Mr. Greig was prevented, by sickness, from attending the meeting, and that Mr. Greig’s physician was in attendance to testify to facts in support of such statement. The physician was then examined and was cross-examined by five counsel for various creditors, and, among them, by the counsel for Brigg, Entz & Co., the creditors who bring this petition of review. During such examination, Mr. Greig appeared. The meeting was then adjourned to April 25th, 1878, at 9.30 a. m. On that day, between 9.30 and 10 a. m., Mr. Greig appeared, but he retired before 10 a. m., and before the opening of the meeting, and was not present at its opening, A resolution was then moved that Mr. Greig be excused from further attendance at such meeting and at any adjournment thereof, and from submitting himseir to any examination at such meeting. -The counsel for Brigg, Entz; & Co. objected to the resolution. The vote in its favor was 40 creditors, representing $75,-613.75, out of a total of 46 creditors, representing $94,487.30. The resolution was declared to be passed. Mr. Wilson, the other debtor, was then examined, and, among others, by the counsel for Brigg, Entz & Co. The resolution of composition was-then presented to -be voted on, and the counsel for Brigg, Entz & Co. objected to the taking of a vote on it, because Mr.-Greig was not present to answer inquiries. The objection was overruled by the register. The resolution of com-. position was then put to vote, and was passed by 34 creditors out of 36 whose claims exceeded $50 each, and who were represented or assembled at the meeting, and .by an aggregate indebtedness, including claims under $50 each, of $75,613.75. Two creditors, representing $13,376.27, voted in the negative. It was then agreed that the counsel for Brigg, Entz & Co. might raise, on the final hearing, any objections which he could raise on the application for the second meeting.
At the second meeting, held on the 8th of May, 1878, the counsel for Brigg, Entz & Co. presented the following objections to the confirmation of the resolution of composition: (1) That, although Mr. Greig was present at the first meeting, he did not answer any inquiries made of him, and it did not appear that he was prevented from being at such meeting by reason of any satisfactory cause, and the. resolution passed, purporting to excuse him from further attendance at the first meeting, was without authority of law, under the circumstances above set forth; (2) that it appeared that the resolution of composition was not for the best interest of all concerned, and that the resolution could not proceed without great injustice and undue delay to the creditors. On the 8th of May Mr. Brigg and Mr. Entz were examined by their counsel and Mr. Wilson was examined. On the 9th and 10th of May Mr. Wilson was further examined, and a witness was examined. On the 11th of May Mr. Wilson and Mr. Greig were examined by counsel for creditors other than Brigg, Entz & Co. On the 13th of May Mr. Wilson and a. witness were examined. On the 29th of May Mr. Wilson was further examined. On the 13th of June Mr. Brigg was further examined. The record shows that the counsel for Brigg, Entz & Co. was present on the 8th of May, but it does not show that he was afterwards present except on the 13th of June.
In regard to Mr. Greig it is contended, that, even though the debtor might be excused from attending, when absent, he could not be •excused from answering, when present. The provision of the statute is, that “the debtor,
The views of this court, expressed by Chief Justice Waite, in Re Wronkow [Case No. 18,105], are applicable to the objection above considered. In that case, one objection taken in this court to the resolution of composition was, that one of the bankrupts was, at the first meeting of creditors, excused from attendance, without sufficient cause. This court said: “The law itself does not make it obligatory upon the bankrupt to be present except at the first meeting. He is to be present unless prevented by sickness or other cause satisfactory to. the meeting. Of the sufficiency of the cause the creditors themselves are to decide in the first instance, and their decision should not be disturbed by the court, except for good cause shown. It must in some form appear that wrong -has been done to the minority creditors, by reason of the vote which was given. After the district court has affirmed the action of the majority, this court, in the exercise of its supervisory jurisdiction, ought not to interfere except in a very clear ease. While the rights of the minority creditors should be carefully watched and protected against all unreasonable acts of the majority, the judgment of the requisite majority should always be allowed to prevail, unless obtained without sufficient consideration, or by some unfairness or undue influence. In this case, the excuse presented for one of the debtors was his absence in California, where he resided. This was fairly submitted to the meeting. It seems to have been fairly considered. The meeting .was well attended. All the objections made were fully .presented and duly deliberated upon. The result was a vote In favor of the sufficiency of the excuse.” In that case, the objecting creditors did not attend the first meeting. Here, they were present at it and took part in the proceedings In reference to excusing Mr. Greig. The objection is overruled.
The composition was 35 per cent, in money, without interest, payable in 5 instalments, of 7 per cent each, in 3, 6, 9, 12 -and 15 months respectively, to be evidenced by the promissory notes of -the debtors. The resolution contained the following provision: “The injunction heretofore granted in these proceedings, restraining the debtors from disposing of their property, shall be vacated and annulled.” The proceedings in bankruptcy were not to be discontinued until the entire 35 per cent, had been paid. By the 8th clause of the resolution it was provided, that one Jones be appointed custodian and special receiver of the property of the debtors, by the bankruptcy court, but subject to the restric: tion, that he should not take any of said property into his custody or possession, until the debtors should have defaulted in the payment of one or more of the composition notes. Security in $10,000, to be given by Jones, was provided for.
The petition of review sets forth, as reasons why the composition was not for the best interest of the creditors: (1) That it was in deferred payments, and wholly unsecured, and provided for the return of all the property to the debtors on the delivery of the notes, without any security, either that the composition would be paid, or that the debtors would not dispose of all the property before the maturity of any of the notes; (2) that the debtors were not proper custodians of their assets, because they had fraudulently contracted their debt to Brigg, Entz & Co.; (3). that the delivery of the property to the debtors placed the composition at the risk of their future business, and compelled the creditors to give up the assets in hand and trust them to the debtors without security; (4) that, in addition to the dishonesty of Mr. Greig, it appeared that he was. mentally unfit to take charge of said property; (5) that the 8th paragraph of the resolution is in violation of the provision of the statute, and deprives the creditors of the right, in case of default in the payment of any of said instalments, to enforce their original claim, or to have re
The point of the objections is, that, the composition being unsecured and payable in instalments,- and the property being restored to the debtors, -to- be dealt with at their pleasure, the composition ought not to be confirmed. The' construction of our statute, and of the English statute, which is the same in this respect, has always been, that there is no inhibition against the confirmation of such a composition.. Ex parte Burrell, 1 Ch. Div. 537, 552; In re Reiman [Case No. 11,673]; In re Van Auken- [Id. 16,828]; Ex parte Hamlin [Id. 5,993J. The question is, whether the composition is “for the best interest of all concerned.” It may be, although it is unsecured and is payable.in instalments, and the property of the debtors is left free to be managed and disposed, of by them.
The objection to the composition, taken on the record in the district court, was, that the composition was “not for the best interest of all concerned,” and that it “could not proceed without great injustice and undue delay to the creditors.” This general objection is, ih the petition of review, formulated under these-heads: (1) Deferred payments; (2). unsecured; (3) property left in the control of the debtors; (4) the debtors not proper custodians of the property, because they had fraudulently contracted their debt to Brigg, Entz & Co.; (5) mental unfitness of Mr. Greig to take charge of the property. This is the substance of the first four objections stated in the petition of review. The questions involved in them were all questions of policy and expediency, and were all fairly before the creditors. It must be presumed that they considered the objections and yet voted in favor of the composition, by the requisite vote. The register and the district judge approved of the composition, and of its terms. The district judge, in his decision,—Hudson v. Adams [Case No. 6,832],—considered all the questions in detail, except those relating to the debt to Brigg, Entz & Co., and to the mental unfitness of Mr. Greig, and arrived at the conclusion that the composition was for the best interests of all concerned. In regard to the review of such a decision, it was said, in Re. Wronkow, before cited: “It is next insisted that the compromise is not for the best interest of all concerned. The requisite majority of the creditors, at- the first meeting, thought it was. The same thing occurred at the second meeting, called specially to consider that very question. The register coincided in the opinion of the creditors, and so reported. The district court, upon full argument, has decided in the «same way. This court ought not to interfere under such circumstances, unless specific errors in the action of the creditors, or the court below can be pointed out, which, if sustained, would change the judgment Mere general questions of expediency must ordinarily be considered as settled, when the requisite majority of the creditors, the register, and the district court all agree. Nothing short of fraud or gross error in judgment should call into exercise the jurisdiction of this court in such a case. That does not appear here. This court is simply called upon to decide, upon the whole case, that the creditors and the district court have come to'-a -wrong conclusion as to what is for the best interest of all concerned.” These views are the law of this court and cover the present case.
The question as to the contracting of the debt to Brigg, Entz & Go., and the question as to the mental fitness of Mr. Greig, were questions arising out of the evidence taken before the register. They were points which either were, or were not, urged before the district judge, under the general objection filed with the register. If they were urged, they were questions of expediency, and were passed upon. If they were not urged, they might have been, and must, on this review, be regarded as having been waived in the district court, -so that," because not passed upon by the district court, they cannot be passed upon by this court, in review.
As matter of fact, however, I am, -on consideration of the evidence, of opinion that the debt to Brigg, Entz & Go. was not fraudulently contracted.
As to Mr. Greig’s mental condition, the physician testified, on the 24th of April, that Mr. Greig -was not then in a fit mental condition to be examined; that the probabilities of a change of his condition were good, if he had a proper amount of rest; that he was not then fit to carry on business; but -that freedom from business anxieties, rest and proper treatment, would be very improving, with a fair prospect, in time, of a restoration of his capacity to attend to business. Seventeen days after that Mr. Greig was examined. No creditor, after that, took any objection as to the mental condition of Mr. Greig, although adjourned meetings were held on seven different days after the 11th of May, and the proceedings were not closed before the register until August 6th.
The entire 8th paragraph of the resolution is in these words: “And, for the purpose of better securing the payment of the several instalments of composition, according to the tenor of the preceding resolutions, we do hereby further resolve, that James W. Jones, of the city of New York, be appointed custodian and special receiver of all the property and estate of the debtors, shown in the statement of debts and assets filed by them at the meeting of creditors at which these resolutions are passed, together with the increase and the profits and the avails thereof; and
The provisions of the 8th paragraph are not of the substance of the composition. They request certain action to be taken by the court in case of default The court is not compelled to comply with the request It is still free to enforce the composition,'or proceed with-the bankruptcy, in like manner as if the 8th paragraph were not part of the resolution. These were the views of the district court, and they are approved. The prayer of the petition of review, for the reversal of the order of August 20th, 1878, is denied, with costs.