206 F. 518 | M.D. Penn. | 1912
A bill in equity was filed by the trustee in bankruptcy of the estate of William J. Greggs, to recover from James Eagen a preference. A creditors’ petition was filed on the 7th of December, 1911, wherein was contained:
“That the said W. J. Gregg (or Greggs) owes debts to tbe amount of $1,000, or over, is insolvent, and is neither a wage-earner nor a person principally engaged in farming or the tilling of the soil. That within four (4) months preceding the filing of this i>etition, the said W. J. Gregg (or Greggs), while insolvent, committed an act of bankruptcy, in that he conveyed and transferred Ms real estate to his wife with intent to hinder, delay, and defraud Ms creditors. Second. That he transferred, while insolvent, a portion of Ms property to one of Ms creditors, with intent to prefer such creditor over Ms other creditors.”
This petition with a subpoena, as provided by the Bankruptcy Act, as amended, was served personally upon the alleged bankrupt by Deputy Marshal H. J. Evans, and so returned by him, whereupon, in default of appearance and answer, he was December 28, 1911, duly adjudicated a bankrupt. After adjudication and the plaintiff’s election, on refusal to surrender certain property conveyed by the bankrupt to the defendant within two months of the filing of the creditors’ petition, the plaintiff brought this bill.
The hill contains the following allegations:
Third. “That prior to the loth day of September, 1911, said W. J. Greggs was the owner in fee of two certain lots of land, coal and other minerals being excepted and reserved, 'the same being situate in the borough of Wyoming, Luzerne county, in said district, said lots being Nos. 20 and 22 in the William 5. Shoemaker plot of lots in said borough, and being 104 feet in front and 144 feet along Eighth street to an alley, said 104 feet frontage being along Monument street, and being two corner lots, and all improved with a frame dwelling house; title to said two lots being vested in said William J. Greggs by deed of Ira li. Shoemaker et ux., on April 25, 1899, as will more fully appear by reference to the record of said deed in the recorder of deeds office in said county of Luzerne in Deed Book 385, at page 508,” etc.
Fourth. “That on said 15th day of September, 1911, said bankrupt, W. ,T. Greggs, then owing and being indebted to the creditors named in the schedules filed to No. 2,027 in Bankruptcy (creditors whose claims are unsecured, A — 8), executed and conveyed to Tillie A. Greggs, wife of said bankrupt (site, the said wife, .ioining in said deed of conveyance to herself), all of said two lots of land improved as aforesaid, situate in the borough of Wyoming, said, district, for the nominal consideration of one ($1.00) dollar, which said deed was recorded in Deed Book No. 479 at page 801 of said recorder’s office of Luzerne county.”
*520 Fifth. “That on the 13th day of October, 1911, said William J. Greggs, then owing all creditors whose claims are marked unsecured schedule A — 3, and without any notice to said creditors, in violation of the act of March 28, 1905 (P. L. 62), sold and transferred a large part of his property, consisting of a sausage mill and fixtures and machinery thereunto belonging, as well, also, as wagons and horses, to Edward Berkowitz, for the cash payment of $1,300, which moneys said William J. Greggs received from his said purchaser, and three days thereafter, viz., October 16, 1911, said W. J. Greggs, then owing all of the creditors whose claims are- marked unsecured in schedule A — 3, No. 2,027 in Bankruptcy, in conjunction with his wife, Tillie A. Greggs, who by virtue of her deed from her said husband was the apparent owner of record of said lots of land, sold and conveyed by deed in fee simple said two lots of land, previously conveyed, as aforesaid, to said wife, unto one James Eagen of the borough of Wyoming, said district, for the cash consideration of $2,000, subject nevertheless to the lien of a certain mortgage executed-by said Greggs, the bankrupt, to one Andrew J. Grouse, for a debt of $2,0001 of record in Mortgage Book No. 171, page 492, etc., of said recorder’s office of Luzerne county, which deed to him, the said James Eagen, was duly recorded October 16, 1911, by the bankrupt, William J. Greggs, as recorded in Deed Book No. 472, at page 530, etc., of said recorder’s office of said Luzerne county. That on the 16th day of October, 1911, said 'William J. Greggs was indebted to said James Eagen on a promissory bank note payable three months after date at the First National Bank of Wyoming, Pa., for the amount or sum of $500, which said note was paid at said bank on October 18, 1911, and was marked by indorsement as follows ‘James Eagen.’ ”
Sixth. “That by the transfer it was intended to create, and did actually create, a ‘preference’ within the meaning of the Bankruptcy Act of 1S98, he, die said James Eagen, receiving from him, the said William J. Greggs, the sum of five hundred ($500.00) dollars, which said note was paid at said bank on October 18, 1911 (and marked by indorsement, as aforesaid, as follows : ‘James Eagen’), to liquidate and pay said note held by said Eagen against" said Greggs, at the time of said conveyance by the bankrupt, William J. Greggs, to James Eagen, or about the time of said conveyance receiving said moneys to liquidate said debt; aiid at the time of said transfer, he, the said James Eagen, had reasonable cause to believe that by said conveyance a imeference would be given him, the said James Eagen, over the other numerous creditors of WiL-liam J. Greggs, bankrupt.”
The respondent’s answer admits the facts contained in the third paragraph, without denying or affirming the fourth requires proof, disclaiming knowledge of the fifth, and denies the sixth. He furthermore declares said sale and conveyance to have been made bona fide, denying any knowledge on his part that either Greggs or his wife were insolvent at the time of such transfer; that he had no reason to believe that such sale was intended "as a preference; that in fact it was no preference, he having been but accommodation indorser for Greggs at the bank to which the note was paid by him without his intervention. .
The case having been referred to the referee as special master to take the testimony and make report thereof to court, together with his findings of fact and law, he reported the facts favorable to the defendant, primarily because it was not made to appear that Greggs was insolvent at the date of the transfers.
■ The learned master- says that undoubtedly W. J. Greggs was in financial difficulty at the time he disposed of his property to his wife, and later, when they jointly conveyed the same property to James Eagen, yet he holds that the evidence is not sufficient to hold such difficulties were sufficient to constitute insolvency.
Loveland’s Bankruptcy, 558, gathering the concensus of opinion, states the law with approval that:
“Tlie mere fact tlxat a debtor is adjudged a bankrupt raises no presumption of insolvency prior to the filing of the petition. But when the question of insolvency is adjudged in determining the act of bankruptcy in an involuntary proceeding, the fact of insolvency at the date the act was committed may be taken by the adjudication.”
The decree of this court put in evidence, adjudicating on the 28th of December, 1911, W. J. Greggs a bankrupt, conclusively established the fact at issue, as alleged in the petition, that Greggs was insolvent when he transferred his property to his wile, and afterwards to Eagen. Any other holding would lead to endless confusion in the administration of the law, and would in many cases nullify one of the principal purposes of the Bankruptcy Act, as was said in De Graff v. Lang, 92 App. Div. 564, 87 N. Y. Supp. 78. And it matters not •that Eagen was actually without notice of these proceedings. An adjudication being an adjudication in rem, all persons interested in the res are regarded as parties to the bankruptcy proceedings. Among such parties are, not only the trustee, but all creditors, including lien-ors. Chapman v. Brewer, 114 U. S. 169, 5 Sup. Ct. 799, 29 L. Ed. 83; Carter v. Hobbs (D. C.) 1 Am. Bankr. Rep. 215, 92 Fed. 594; In re Ulfelder Clothing Co. (D. C.) 3 Am. Bankr. Rep. 425, 98 Fed. 409.
I cannot excuse «the conduct of Eagen because of the advice of counsel, representing as well .the bankrupt. The facts necessary «to disclose the bankrupt’s true financial situation were within his own reach, and I cannot be made to. believe that he, having lived 'across. the street in a small town, knowing the bankrupt for many years, and a director of the bank in which he was indorsér and kept his accounts, was ignorant of them. If he was, he remained so willingly, and the law will not let him profit. - ,
The defendant, James Eagen, will be required to execute and deliver a deed of conveyance for the property transferred to him by the bankrupt, and surrender his deed to the plaintiff. A formal decree may be accordingly drawn.