In re Adams
In re Adams
Opinion of the Court
A statement of the various proceedings heretofore had in this case will be necessary in order to intelligently consider the questions now pending. An involuntary petition in bankruptcy was filed in this court against Jay L. Adams, April 25, 1878, on which he was adjudged a bankrupt on the eleventh of June following. An application for his discharge was made on the tenth of May, 1879, notice of which was duly given to all his creditors. Eight of these, to-wit, the American Exchange National Bank, Importers’ & Traders’ National Bank, Mercantile National Bank, and the Irving National Bank, all of the city of New York, the Hudson County National Bank of Jersey City, the Dolphin Manufacturing Company of Paterson, Alonzo. Follett, and George A. Alden & Co., appeared and filed specifications against a discharge; but none,of them followed up their specifications with any evidence, and on the fifteenth of November, 1881, the discharge was duly granted. Under the provisions of section 5120 of the Revised Statutes, several of the creditors, within two years after the date of the discharge, made application to the court by petition to annul the same, as follows: The North River Bank of the city of New York, on October 31, 1883; John W. Candler, Albert A. Cobb, George C. Barrett, and Nathan A. Frye, formerly trading as Candler, Cobb & Co., on November 3, 1883; the Importers’ & Traders’ National Bank of New York, on November 7, 1883; John E. Borne & Co., on November 10, 1883; and the Irving National Bank, on November 14, 1883.
All the petitions alleged, generally, want of jurisdiction in the cdurt to grant the discharge; and also specified certain fraudulent acts of the bankrupt which authorized the creditors to have the discharge vacated and set aside under the provisions of section 5110 of the Revised Statutes. The bankrupt put in a demurrer to the allegations of the want of jurisdiction in the court, and answered to the specifications of fraudulent acts. The demurrer was overruled, and a reference ordered to a commissioner to take the proofs.
Pending the reference, the assignee also filed a petition, setting forth
To this petition the several creditors who had before petitioned the court to set aside the discharge and the adjudication in bankruptcy
Several matters are thus presented for consideration:
1. Has this court jurisdiction over the bankrutpcy proceedings begun against Jay L. Adams individually? Whatever -would have been the course if such an inquiry had been instituted when the proceedings were commenced, I am clearly of the opinion that it is now too late to allow these petitioning creditors to raise the question here. I have examined the record of the bankruptcy proceedings in the case of John I. Adams & Co. in the district court of the United States for the district of Louisiana. It indicates great irregularity. The original petition for adjudication was a voluntary one, and purports to have been signed by all the members of the copartnership, to-wit, John I. Adams, William H. Renaud, Edward C. Adams, and Jay L. Adams; but the name of the last-mentioned member of the firm was not signed by himself, or, as it seems, with his knowledge and consent. It was annexed to the petition by John I. Adams, who claimed authority for so doing. The schedules at the end of the petition, marked “A,” contained a statement of all the debts of the partnership, and the names and places of residence of their creditors. The Schedule B was an inventory of the estate of the firm. The remaining schedules, respectively marked “0,” “D,” “E,” “F,” “G,” and “H,” contained a statement of the individual debts and individual, estate of the partners, John I. Adams, William H. Renaud, and Edward C. Adams. Without electing an assignee, a petition was at once filed for a meeting of creditors to consider an offer for composition, and an express statement was made therein that the individual assets and the individual debts of Jay L. Adams were not included in the schedules. The evident design of the proceeding was to secure for themselves, from their partnership and private creditors, a release, by composition, from their partnership and private debts. They were successful in this, so far as the action of the court was concerned. It approved of a resolution, signed by the requisite number of the creditors, to grant to them a release on the payment of 50 cents on the dollar for all their indebtedness, partnership and individual; they being allowed to retain the possession and exercise control of all the property. Nothing further appears to have been done, except that the court, some years afterwards, upon the application of the assignee of Jay L. Adams, appointed by this court in the bankruptcy proceedings here, dismissed all the proceedings there as to him. Whether a composition obtained under such circumstances would operate as a discharge, if the creditors of the partnership of John I. Adams & Go'., and of the three individual members of the firm, should prosecute for the residue of their claims, it is unnecessary for me to determine. But the individual assets of Jay L. Adams were not in that court, nor were his individual debts in any manner paid or satisfied by the composition, and I can perceive no good reason why such irregular proceedings should be allowed to interfere, at this late day, with the ju
2. Have the petitioning creditors made out a caseto warrant the court in ánnulling the discharge heretofore granted to the bankrupt? Section 5120 of the Revised Statutes prescribes the manner of annulling a discharge by a creditor who takes steps to contest its validity at any time within two years after it has been granted, on the ground that it was fraudulently obtained. The application to the court shall be in writing, and shall specify which in particular, of the several acts mentioned in section 5110, it is intended to prove against the bankrupt, and shah set forth the grounds of avoidance. In his proofs the creditor is limited to the particular acts specified, and no allegation will he considered outside of the acts named in the said section. On the hearing, the court must be satisfied of two things: (1) That the fraudulent acts had been committed by the bankrupt before the date of the discharge,- and (2) that- the creditor had no knowledge of the same while the application for discharge was pending. After a careful consideration of the evidence to sustáin the fraudulent acts alleged in the petitions, I am satisfied that the proofs in the case only go to such acts as were shown on the examination of the bankrupt previous to his discharge. All the creditors of the bankrupt are parties to the proceedings, and when an application is made for the bankrupt's discharge, and his examination takes place, the creditors must then oppose the discharge for the fraudulent acts discovered by Ids examination; and, if they abandon their opposition, they are afterwards estopped from attempts to annul the discharge, except upon grounds afterwards discovered, and not known or found out on the examination. I am of the opinion that the discharge ought not to be annulled upon the caso presented.
3. What creditors arc permitted to participate in the distribution of the assets? This is an individual proceeding against Jay L. Adams, and his individual creditors have the first lien upon the fund. The partnership creditors agreed to the composition, and have partaken of the fruits. However irregular those proceedings, they will not be allowed in these proceedings for the distribution of the private estate of the bankrupt, as against his individual creditors, to impeach their validity. It appears, however, that, as to several creditors, the same debt is due from the partnership and front Jay L. Adams individually. Hovera! of them were proved on notes of the partnership for which JayL. Adams is liable as an indorser. In such cases, the creditor has two sources to look to for the payment of his debt, and has the right to proceed against botli parties until his debt is paid. These creditors are entitled, therefore, to share with the individual creditors of Jay L. Adams in the distribution of the fund in the assignee’s hands.
The petitions to vacate the discharge, and annul the proceedings in this court, must he dismissed, and the assignee will proceed with the distribution of the assets according to the views above expressed.
Reference
- Full Case Name
- In re Adams, Bankrupt
- Status
- Published