The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1898-12-31
IN BANKRUPTCY.
An important Decision by
Judge PurneII.

Tluuaily ana us surviving partner Ol
Guirkin and Company declared bank
rupt was exhibited to the District
Judge and it appearing to the satisfac-
tion of the said Judge there was neces-
sity therefor. special messenger was
appointed under Equity Rule Is to eX-
ecute the process in said proceeding. The
subpoena issued December LIST, and was
made returnable ON the same day. 1t
was executed on December 1st, in due
form.
1t further appearing that the
Referee for that division of
the District was interested and
disqualified, &C.. V. Sec. 80 a.
John w. Albertson, was appointed
Special Referee and upon his quali6ca-
ton as ordered the matter was referred
to him as Special Referee (Sec. 40
The petition alleged as Acts of Bank
ruptcy. that Defendant had made an
assignment with preferences amounting
to twenty mine thousand dollars on the
10th day of October. 1898; that defend
ants are indebted TO petitioners in the
amounts set out. aggregating over nine
thousand dollars. for which they have
no security. and defendant has failed
to pay such indebtedness-tha the as
signment hinders. delays and defeats
petitioners.
That there are other creditors not Sc
cured and the indebtedness of defend
ant amounts to over fifty thousand dol
lrs. which he is unable to pay. That
all the estate of the defendant Cobb has
been turned over to the trustees under
the ASSIGNMENT.
On the 18th day of December. defend
ant filed an answer admitting a mn
jority of debts set out in petition and
DENYING others. Assignment admitted
fraud denied--denies insolvency and
alleges solvencv: denies assignment was
to hinder and delay, denies other cred
itors and he is unable to pay debts.
Admits property turned over to trus-
tee. etc. (S) and alleges it is worth over
sixty thousand dollars On the same
day at 8 a. m petition was filed by
defendant for trial by jury of the is
she of insolvency and acts of Bankrupt
cy alleged. &C. w. S. 49,
There was q hearing December 10Th
I before the Special Referee and argu-
hlent by counsel. At an adjourned
injecting of creditors, Referee rendered his
deSision against defendant. but refused to
sigh an order adiudging him bank
rupt. when affidavits were fled verified
December ed. 1898. showing Referee is
debtor of defendant in these proceed
ings. and a petition filed asking for n
review thereof by the Judge.
Tile exceptions in the petition for re-
view. are. LIST. That the Special Ref
cree is disqualified under G. ;. Sec. 80 S.
S. G. 6. 3D. Because the Referee was
appointed before the answer and petition
for jury were filed and without the
knowledge. consent or approval of re-
spondent or their attorneys. 3D.. Because
the cause was not referred by the depu-
IL clerk of the court at Elizabeth City.
4th. The clerk has no power or author
ity to refer this cause. 9Th. That an
swer having been filed denying solvency,
Referee had no power to find as a fact
or decree as a matter of law that the
ASSIGNMENT referred to was an act of
bankruptcy.
1t is now December 9th. 1898. made
known TO the court for the first time
that the Special Referee appointed here
in was and is debtor of the respondent
and it is to say the least bad faith for
the respondent to have kept this knowl-
edge secret until after argument and the
rendition of an adverse decision by the
Special Referee. 1t taints with sus-
picion subsequent proceedings for liti-
SdHtS III tIti IOuHsIl w iiSAL thS Noh1t
or one of its officers with such punic
faith in the initial stages Of litigation.
The fact though now having been
brought to the attention of the court
must be considered. The Referee was
appointed by the Judge, the Referee of
the division being interested and the
deputy clerk at Elizabeth City being
a near relative of the respondent fSec.
43.)
Referees shall not act In cases in
which they are directly or Indirectly in
terested." Sec. 80 S. i. The meaning
of this subsection depends much upon
definition and construction. Interested
in what? The estate or the Bankrupt
proceeding? He cannot be interested in
the estate for he is debtor and not a
creditor. If he were a creditor he
would be interested, but he is a debtor
and there is no denial of the debt, he
can have no interest in either the es-
tate or the proceedings. The proceed
ings do not change his status. If re-
spondent is adjudged a Bankrupt the
debt must be paid and if the proceed
ings are dismissed, still he must pay. In
no event is the remedy on the debt
changed, or the debtors liability in
creased, decreased or affected. Moth
!. ing he can do or has left undone win af-
feet his liability or reduce his indebted
ness. If this were disqualification every
time man to whom a Referee owed
any debt in matter however trifiing,
filed petition or was proceeded against
the Referee would be disqualified and the
Bankruptcy Court would be constantly
appointing Special Referees to be re-
moved as soon as the Bankrupt, using
every device to hinder, delay and defeat
creditors, should find after many days
the Referee owed him a small debt.
The first ground of exception is there
fore overruled, and it is held that the
fact the Special Referee owes respond
ent debt is not such an Interest as is
contemplated in section 80, as a disqual-
ifcation to act as Referee. To be dis
qualified a Referee must be directly or
Indirectly interested in the proceedings
in bankruptcy or in the estate of the
Bankrupt. In the case at bar the Spe-.
cial Referee is not Interested, directly
: or Indirectly in either-he may not be
unbiased or absolutely impartial, he
may feel under obligations, or he may
illustrate that a loan oft loses both il
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