Mattoon Nat. Bank of Mattoon v. First Nat. Bank of Mattoon

102 F. 728 | 7th Cir. | 1900

BUNN, District Judge,

upon the above statement of facts, delivered the opinion of the court.

There are two reasons why we think it was error to adjudge Taylor to be a bankrupt in an involuntary proceeding against him, upon the pleadings, without further issue being joined and proofs taken: One is that the answer avers that Taylor was not insolvent, as is required by the bankrupt law, and the other that the court overruled the special demurrer to the petition, and because the fact was after-wards set up in the answer that he was a person engaged chiefly in farming and in the tillage of the soil, which allegations in the answer, if no exception to them liad been sustained, on a submission of the case upon the pleadings, without evidence taken, should have been taken as true. The case was chiefly argued and submitted upon the latter question, and that is the only one, therefore, which we care to consider. We think the court erred in holding that the alleged bankrupt being a farmer, and therefore not coming within the provisions of the law governing involuntary bankruptcy, was a personal privilege, which could only he set up by the bankrupt in person. The question was jurisdictional, rather than personal. The law (Bankr. Act 1898, § 4) provides that any natural person, except a wage earner or a person engaged chiefly in farming or the tillage of the soil, may be adjudged an involuntary bankrupt upon default or an impartial trial. The alleged bankrupt did not appear or answer, but the appellant, who had obtained a lien upon this property, appeared and set up the fact in an answer. There was nothing in the petition to bring the alleged bankrupt within the terms of the statute. It did not allege what the defendant’s business or occupation was, and there was no allegation to show that be did not come within the excepted classes, which, under the law, are too' important to be wholly ignored. Farmers and wage earners constitute a large majority of the people. These are excepted from that portion of the clause relating to involuntary bankruptcy, and the petition should either have shown what the business of the defendant was, or that he did not come within the excepted classes. The answer set up this fact, the allegations of which when the case was submitted on the pleadings, without proofs taken, must and would have been taken as true, had not the court sustained the exceptions of the petitioners to the appellant’s answer. The answer was a good and valid answer to the petition, and the exceptions to it should not have been sustained by the court. The statute (subchapter C, § 59f) expressly provides that creditors other than the original petitioners may file an answer and be heard in opposition to the prayer of the petition. If they can appear in the case and file an answer, then it follows that they can set up any facts which go to defeat the proceeding. If the answer made by the appellant was true, then it was not a case for involuntary bankruptcy, and should have been dismissed. If Taylor was simply a farmer, or chiefly a farmer, and engaged in the tilling of the soil, there was no authority or jurisdiction under the law to force him into bankruptcy. The appellant might gain a rightful preference by obtaining judgments, as it did, and issuing executions, which, in the hands of the sheriff, became a lien upon the defendant’s property. This being the case, and the appellant being the real party in interest, it would be very strange if it could not set up the only plea which could avail to protect .its property rights so legally acquired. If the facts'alleged in the answer were true, it had a vested right, which could not be taken away by the default of the defendant in the bankruptcy proceeding to appear and answer, nor without due process of law and a hearing in court. These the appellant has not had. If the petitioning creditors wished to contest the question raised by the answer, there should have been a replication put in, denying the allegations, and a trial had before an adjudication was made. Simpson v. Ready, 12 Mees. & W. 740; Vavasour v. Ormrod, 6 Barn. & C. 430; Potter, Dwar. St. 119; Grant Co. v. Dawson, 151 U. S. 586, 14 Sup. Ct. 458, 38 L. Ed. 279; Carriage Co. v. Stengel, 2 Am. Bankr. R. 383, 37 C. C. A. 210, 95 Fed. 637; Sturges v. Crowninshield, 4 Wheat. 122, 4 L. Ed. 529; Geo. M. West Co. v. Lea Bros. & Co., 2 Am. Bankr. R. 463, 19 Sup. Ct. 836, 43 L. Ed. 1098.

There was a suggestion made on the argument that the defendant’s not appearing made the case one of voluntary bankruptcy. But the two proceedings are quite distinct, under the law, and cannot be confounded in such a way.. The statute provides just what the proceedings shall be in each class of cases. To become a voluntary bankrupt, the proposed bankrupt must file his personal petition in writing to become such, accompanied by schedules of his debts and assets. Involuntary bankruptcy is a proceeding by the creditors adverse to the bankrupt. ' By making default in such a proceeding, the defendant does not become a petitioner in his own behalf, under the clauses for voluntary bankruptcy,, and lie cannot by making default affect interests in property attaching before the proceedings in bankruptcy are begun. The judgment of the district court is reversed, and the cause remanded for further proceedings according to law.