In re Joliet Iron & Steel Co.
In re Joliet Iron & Steel Co.
Opinion of the Court
I must confess that the question raised is not entirely free from doubt in my own mind. But there are some provisions of the law that are exceedingly clear. The 39th section of the original bankrupt act of March 2d, 1867 L14 Stat, 536], is substantially and practically repealed, and a new section enacted in place of it. The new section enumerates the acts which shall constitute acts of bankruptcy, and for which a party may be forced into involuntary or compulsory bankruptcy, and proceeds as follows: “And-, subject to the conditions hereinafter prescribed shall be adjudged a bankrupt on the petition of one or more of his creditors, who shall constitute one-fourth thereof, at least, in number, and the aggregate of whose debts provable under this act amounts to at least one-third of the debts so provable.” Now this must be done on the petition of that number of creditors. It is manifest, then, that from the time this becomes a law no person can be adjudged a bankrupt unless the requisite number of creditors join in the petition, because it must be upon their petition; and it is very clear to me, that the practice as indicated by the whole tenor of this law, in respect to cases hereafter commenced, is that the petition must affirmatively show that the requisite number of creditors in number and amount have united in the petition. I do not think, as has been argued, that this allegation as to the number of creditors must necessarily be so positive that the party could be prosecuted for perjury upon it. It may be stated (and I shall so hold, until some higher court lays down the contrary), upon the information and belief of petitioning creditors, that they do constitute one-fourth in number and one-third in amount of the aggregate creditors, because we all know that creditors are very liable to be imposed upon by debtors as to the extent of their (the debtors’) indebtedness. Cases have been developed, and, indeed, occur almost daily in practice, in which debtors have represented to their creditors that they owed a very small amount of debts, but in which, when the facts came to be developed, their entire indebtedness largely exceeded the amount stated. Creditors, of course, in preparing petitions in the first instance, speak according to the light they possess at that time. I think, therefore, it will be a sufficient compliance with the provisions of the law that they state on their information and belief that they do constitute one-fourth in number and one-third in amount of the creditors of the debtor named. Then the law provides that if the debtor wishes to traverse this allegation he can do so by a statement made in writing, that the requisite number of creditors have not joined in the petition, .whereupon the court shall require the debtor forthwith to file a schedule of his creditors with the court, which, of course, must be, so far as he is concerned, conclusive; and if the creditors succeed, within the time limited by statute, in obtaining the consent of the requisite number of the creditors mentioned in the schedule filed by the debtor himself, the proceedings can go on; otherwise the proceedings must lapse, So that I see no difficulty in administering the law under the amendment, in respect to cases commenced hereafter.
The only question that has given me trouble has been how to apply the law to cases already pending which had been commenced since 1st December last. Taking all the points together, it appears to me that it has become necessary, since the passing of the amendatory act. that the creditors who wish-
Further, I derive some support in this view of the case from the clause of the act which reads: “And if it shall appear that such number and amount have not so petitioned, the court shall grant reasonable time, not exceeding, in cases heretofore commenced, twenty days, and in cases hereafter commenced, ten days, within which other creditors may join in such petition.” Here is a difference of ten days given in favor of creditors who have already initiated proceedings, in the time granted within which to obtain the consent of the requisite number of creditors to the continuance of the proceedings. It seems to me that this clause was placed there on purpose to enable a creditor who has already instituted proceedings to take the initial step to amend his petition, and seek the co-operation of such number of creditors as was necessary to give the court jurisdiction. It cannot be supposed from the whole language of the statute, taken together, that congress intended to legislate this class of cases out of court entirely. The court cannot put that construction on the law. The only question is, did congress intend that where a petition had been filed since 1st December, 1873, by a single creditor, representing perhaps not over two hundred and fifty dollars, he should be allowed to proceed and prosecute that case to a conclusion, unless the debtor himself should come in and object and file a statement of the names of his creditors, and amounts of their respective debts, together with their residences, so that the creditor could obtain their assent? Taken with the clauses I have read, I do not think that can be construed to be the inténtion of the act; but it seems to me that the debtor is entitled, first, to an allegation placed upon the record that the requisite number of creditors do desire an adjudication. He may then deny that allegation and show that the requisite number of creditors do not desire his adjudication in bankruptcy. And when he has made that statement, the petitioning creditor has the right to take twenty days in which to obtain the assent of the requisite number. The reason for making a distinction between the time allowed in cases already petitioned, and in cases hereafter brought is manifestly this: Where creditors bring a case after the law was passed they are supposed to act in the light of what has already transpired, and have some information upon the extent of
Now, it becomes a matter of inquiry for the court to ascertain, and adjudge upon, whether the requisite number of creditors have joined; and the reason of that is very obvious. By other provisions in this same amendment to the law, a bankrupt who is forced into bankruptcy under the compulsory clauses of the act is discharged without reference to the amount of dividend which he pays, while a bankrupt who goes into voluntary bankruptcy must pay a dividend at the rate of thirty per cent. It is to guard against collusive proceedings on the compulsory side of the docket that this provision is made, and it is made the duty of the court to inquire and investigate whether the requisite number of creditors had joined in the proceedings, and whether the proceedings are in good faith. The naked allegation in the petition also would seem to necessitate such action, and the court be satisfied as to the good faith of the debtor, and that he is not acting in collusion with his creditors in regard to the number who signed the petition for adjudication. The amendment must be made by a sworn petition to the court, and must be joined in by the requisite creditors in number and amount.
Reference
- Full Case Name
- In re JOLIET IRON & STEEL CO.
- Status
- Published