Lackawanna Leather Co. v. La Porte Carriage Co.

211 F. 318 | 7th Cir. | 1914

BAKER, Circuit Judge

(after stating the facts as above). [1] Counsel for appellants urges with evident good faith that the decree must be reversed on account of appellee’s confession in its answer that it should be declared a bankrupt. This confession is said to be brought about by the wording of the answer to the effect that appellee denied that it should not be declared a bankrupt. But the argument overlooks the phrases that immediately follow the word “denies,” and couples the second negative with the original denial, while the second negative was evidently intended, from the context, to be an additional independent denial. At all events, after a hearing upon the petition and the answer without objection, there is no merit in the assignment.

[2, 3] Counsel challenges the sufficiency of the verification of appellee’s answer. But on examination of the record it appears that it is the appellants’ own petition, and not appellee’s answer, that is verified on information and belief. But if appellee’s answer had been only verified in the same way, appellants could not well call for a better verification than they gave. This matter, also, became utterly immaterial when the case was heard on these pleadings without objection.

[4] An insistence is made that the order of reference is insufficient to support any decree based upon a report under the reference, on the ground that the matter submitted to the special master was the issue formed by the petition and “the answer thereto.” The point is that since the appellee and a creditor had each filed an answer, appellants could not be required to pay any attention to this ambiguous order of reference. But as both answers were denials of the material allegations of the petition, only one issue was in fact presented, and a trial upon the petition and either answer would determine that issue.

[5] Objection is made to the master’s report because it does not set out the evidence in obedience to the order of reference, but only states that the witness “testified, in substance, as follows.” No request was made at any time that the testimony be returned verbatim. General Order 27 (89 Fed. xi, 32 C. C. A. xi) provides for the certification of “a summary of the evidence.”

[6] Against the testimony of the president of appellee given before the master it is claimed that the facts stated in the letter of the president should prevail. But this letter was never introduced before the master, and it only appeared in the ex parte application of appellants for the appointment of a receiver. There is, however, no contradiction between the testimony of Mr. Parlchurst and the statements in the letter. This letter is far from admitting any cause for an adjudication of bankruptcy. It merely admits that appellee’s floating indebtedness cannot be met promptly. The view presented is that too much capital is invested in plant in proportion to the working capital.

Counsel also insists that under section 3 of the Bankruptcy Act, relating to the burden of proof, appellee had the burden of establishing that no cause existed for an adjudication of bankruptcy. We shall not stop to analyze the various provisions of this section, because if the burden was upon' the appellee, that burden was fully met.

[7] Objection is also made to the proof of the “true cash value” of the property, when “fair valuation” is the test required by the statute. We are of the opinion that appellee assumed at least as heavy a burden as the statute required in this respect.

It is also' claimed that the proof is insufficient because the date with respect to solvency was given as November 7th instead of November 12th, when the petition was filed. But November 7th was the date of the alleged preference, and to constitute a preference it was necessary that appellee while insolvent should have made a transfer. So that, even if the presumption of a continuation of solvency from November 7th to November 12th could not be indulged, yet an adjudication of bankruptcy could not be rendered in the face of the proof that appellee had committed no act of bankruptcy.

[8] Appellants’ motion to have the matter resubmitted was without merit. It simply repeated the appellants’ original charge on information and belief that appellee was insolvent, but contained no .statement of any procurable evidence with which to combat that which had been offered by the appellee.

[9] The alternative of the motion, namely, that appellants be permitted to dismiss” the petition after 10 days’ notice to all creditors, was likewise without merit. Section 58a contemplates notice to other creditors when the petition is about to be dismissed for want of prose.cution or by consent of the parties already in court, and has no application to a dismissal of the petition on the merits after a hearing. Neustadter v. Chicago Dry Goods Co. (D. C.) 96 Fed. 830, 3 Am. Bankr. Rep. 96; Cummins Grocer Co. et al. v. Talley, 187 Fed. 507, 109 C. C. A. 273, 26 Am. Bankr. Rep. 484.

The decree is affirmed.