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Blue Falley Creamery Co. v. Stone

November 7, 1935

BLUE FALLEY CREAMERY CO. ET AL.
v.
STONE; SAME V. STEINER



Appeal from the District Court of the United States for the District of New Jersey; Guy L. Fake, Judge

Author: Thompson

Before BUFFINGTON and THOMPSON, Circuit Judges, and FORMAN, District Judge.

THOMPSON, Circuit Judge.

On April 28, 1934, the Court of Chancery of New Jersey appointed Peter Stone, receiver of the R.M.C. Meat Specialist, and Joseph Steiner, receiver of the Drive-to-Department Stores, both New Jersey corporations. A little less than four months thereafter, on August 7, 1934, involuntary petitions in bankruptcy were filed against the corporations and their receivers by the appellants herein.

In the case of Peter Stone, receiver (No. 5724), on the twentieth day of August, 1934, the District Court issued an order directing the petitioning creditors to show cause on August 27, 1934, why the petition in bankruptcy should not be dismissed upon the ground that the petitioning creditors participated in the proceedings pending in the Court of Chancery of New Jersey, wherein the alleged bankrupt is the defendant corporation, and for other divers reasons appearing on the face of the said petition.

In the case of Joseph Steiner, receiver (No. 5725), notice was given that on August 27, 1934, a motion would be made before the same court for an order "dismissing the petition on the ground that the same is vague, general and does not specifically set forth a cause of action."

On August 27, 1934, in the case of Peter Stone, receiver (No. 5724), an order was entered dismissing the petition and reciting as cause therefor that it was "* * * defective upon its face; that it is vague, not specific, and uses the words of the statute and fails to set forth any act of bankruptcy."

In the case of Joseph Steiner, receiver (No. 5725), the court on September 4, 1934, ordered the petition in bankruptcy dismissed for exactly the same reason.

It is apparently conceded that both of these estates were nearly terminated in the New Jersey Court of Chancery.

The petitioners in the bankruptcy actions had filed their claims with the receivers in chancery. It was argued that by so doing they were estopped from becoming petitioners in the bankruptcy proceedings.

We have here pleadings addressed to the petitions in bankruptcy which amount to or are simply motions to dismiss. Under such circumstances only such defects as appear upon the face of the petition may be considered by the court. Other issues must be raised by answer to the petition. The disqualification of the petitioners should be so raised, and the mere fact that a creditor had filed a claim in a receivership proceeding does not disqualify him as a petitioner in a bankruptcy proceeding.

The court recites in its order that the petition is vague, not specific, uses the words of the statute, and fails to set forth any act of bankruptcy. The petitions in each case set out several acts of alleged bankruptcy, one of which is in language similar to the following: "c. While insolvent, a receiver has been put in charge of its property under the laws of the State of New Jersey concerning corporations, which receiver was appointed by decree of the Court of Chancery, and the said R.M.C. Meat Specialists admitted its insolvency and consented to the appointment of a receiver and to a decree adjudging it insolvent."

Two affidavits were filed in the case of Peter Stone, receiver (No. 5724), in which it is denied that any decree was entered in the chancery proceedings adjudicating the defendant company to be insolvent, but that the receiver was appointed under a decree indicating that "the business of the defendant company was conducted at a loss and that it could not be conducted with safety to the public and advantage to creditors and stockholders." The appellants say that they had never seen the affidavits which were made part of the transcript of record until presented for inclusion in the record. It seems that the court permitted the filing of the affidavits nune pro tunc, but the time of filing the affidavits seems rather immaterial in view of all of the other circumstances.

The bankruptcy law, as amended in 1926, provides what shall constitute an act of bankruptcy. 11 U.S.C.A. ยง 21 (a) (5) is as follows: "Made a general assignment for the benefit of his creditors; or, while insolvent, a receiver or a ...


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