Case ID: f-cas_6/html/0966-01.html
Source: Caselaw Access Project
Author: {"author": "WELKER, District Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Case Wo. 3,480.
    CUNNINGHAM v. CADY.
    [13 N. B. R. (1876) 525; 8 Chi. Leg. News, 165; 4 Am. Law. Rec. 510.]
    District Court, N. D. Ohio.
    Bankruptcy — Fraudulent Conveyance — Intent —Proof op Claim — Practice—Depositions.
    1. A deposition to an act of bankruptcy consisting of a fraudulent conveyance, must allege or show the fraudulent intent of the debtor in making the conveyance.
    2. A deposition to a proof of a claim in involuntary bankruptcy must show whether the claim is secured or unsecured.
    3. A petition will not be dismissed, because the depositions in support thereof are defective; but the petitioning creditor, on motion, will be allowed to file supplemental depositions.
    4. "When the depositions are defective, the order to show cause will be set aside, but a new order may be issued on supplemental depositions.
    [Petition by John Cunningham for an adjudication in bankruptcy against Alson Cady.]
    
      
       [Reprinted from 13 N. B. R. 525, by permission.]
    
   WELKER, District Judge.

On tbe 8th of January, 1S7G, John Cunningham filed in this court bis petition against said Cady, debtor, containing tbe necessary allegations required by tbe bankrupt act, and duly verified. Depositions were also presented in support of tbe allegations of the petition, and filed with tbe same. Thereupon an order to show cause was made against the-debtor, and served on him as required by the act The debtor, by bis counsel, now moves the court to dismiss tbe petition and proceedings for tbe following reasons: First. That the deposition in proof of tbe act of bankruptcy charged is insufficient in law. Second. That the deposition in proof of tbe petitioner’s claim against the debtor is also insufficient in law.

Tbe first insufficiency complained of is: that while tbe deposition sets forth tbe fact of a conveyance by tbe debtor of bis property to his father-in-law, it fails to show or allege that it was done with an intent of a fraudulent nature under tbe provisions of tbe bankrupt law. Tbe second insufficiency alleged is: that tbe deposition in support of tbe petitioner’s claim, fails to show whether tbe claim is secured or unsecured; or if secured, to what extent — wbetlier it is no.t wholly secured — so that tbe court can judge of the amount provable. ■

As to tbe act of bankruptcy, the deposition is defective in failing to allege or show fraudulent intent of tbe debtor in making the conveyance. But as to tbe second specification of tbe motion, tbe petitioning creditor insists that tbe proof is sufficient; that be need not prove that bis claim was not secured; that if be were so secured, tbe fact .should bave been pleaded in an answer and not by preliminary motion. There is some authority for bolding that, unless it appears that tbe claim is fully secured, it is still a provable claim under a proper interpretation of tbe bankrupt law. But without undertaking to determine that question, it is sufficient to say, that it is tbe better practice to set out in tbe deposition all tbe material facts concerning tbe claim; in other words, to “give a particular description of tbe debt,” as prescribed in tbe form given by tbe supreme court. It follows that, owing to tbe defects of tbe proofs, they must be amended before tbe debtor can be required to answer tbe petition; and that the order to show cause was improvidently issued. Tbe question now arises, whether tbe debtor’s motion to dismiss tbe petition, and tbe whole proceedings. on that account, shall be allowable. At tills stage of tbe matter, tbe petitioning creditor interposes bis motion for leave to file further and supplemental depositions in proof of bis debt, and of the act of bankruptcy in support of bis motion.

I think this motion should be allowed for the following reasons: The jurisdiction of the court over the subject-matter of the proceeding is acquired by the filing of a petition framed and verified in accordance with the provisions of the act, and the rights and liabilities of all the parties relate and are determined by the time at which the petition is filed. On- the filing of the petition, it is provided by the act that, “if it shall appear that sufficient grounds exist therefor,” an order to show cause- shall be entered against the debtor, etc. How the sufficient “grounds” shall be made to appear is not shown in the text of the statute; and in the absence of any other construction of this portion of the section, it would be naturally inferred that it would De by an inspection of the petition itself. But the supreme court has seen fit to require proofs of the truth of the principal allegations by separate depositions as a condition precedent to the order to show cause, and in fulfilment of the requirements of the language in question. No defect in the petition is complained of, but the defect is in a subsequent and incidental matter. That defect may be cured without prejudice to the regularity or the sufficiency of the petition, in the mode proposed by the motion of the petitioner, and thus the rights and liabilities created by the filing of the petition are preserved without any hardship upon the debtor. The petition, and the depositions in support thereof, are not so intimately connected with each other that, if the depositions are defective, the petition must necessarily be dismissed. It may be sustained while the proofs may not be held sufficient

The order to show cause is set aside at the cost of the petitioner, and he has leave to file supplemental proofs in support of his allegations as to his claim, and as to acts of bankruptcy, on the filing of which, if found sufficient, an alias order to show cause will be entered.