The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1901-09-21
PREFERRED
CREDITORS
Have No Standing
in Bankruptcy
Cases.
COURT JUDGMENTS
ARE OF NO AVAIL
It Obtained Within Four Months
of Bankruptcy.-Estee Decides
interesting Question.

OF great Importance TO merchants ana
business men generally in the matter
of the bankruptcy of Lum Man Suk
yesterday. This was the case wherein
Grinbaum & Co. had obtained a judg-
ment for $1,000 against the bankrupt
in Judge Gears court and High Sheriff
Brown had levied upon the stock, and
was proceeding to sell under the eXecu-
ton, when restrained by Federal
Court order
The decision of Judge Estee in effect
invalidates the Circuit Court judgment,
holding that under the law no preferred
claims can be paid if within four
months of the fling of the petition in
bankruptcy. The decision in full is as
follows:
IN THE DISTRICT COURT OF THE
UNITED STATES IN AND FOR THE
DISTRICT OF HAWAII.
In the Matter of the Bankruptcy of
Lum Man Suk.
Wade Warren Thayer, Esq, trustee, in
propria persona, A. Wilder, Esq, ap-
pearing as attorney for Arthur NJ.
Brown. High Sheriff
OPINION OF THE COURT.
| The hearing in this matter was had
upon the petition of Wade Warren Thay
er, trustee of the above named bankrupt,
praying this Court for an order TO be
issued to Arthur NJ. Brown, as High
Sheriff of the Territory of Hawaii, re-
quiring him to show cause before this
| (snl,r+ yvbU he SbnnlH M deliver
said trustee a certain stock of merchan-
! disc in his possession belonging to said
bankrupt, situated>in a store at 1887 Nuu-
anu street in Honolulu, and which the
said High Sheriff held under and by vir-
tue of an execution issued in pursuance
| of certain judgments HBered on the
Bird day of July, 1901, in the District
Court of Honolulu, Territory of Hawaii.
in favor of NJ S. Grinbaum N& Co., and
against the said bankrupt, and a portion
of which said stock of merchandise the
said High Sheriff was about to sell at
public auction.
The facts, as shown on the hearing,
appeared to be these:
On the 18th day of July 1901, Lum Man
Suk filed in this Court, in due and regu-
lar form, petition praying to be adj
judged a bankrupt. and thereafter, on
the 18th day of July, 1901, an order was
Judging the said petitioner bankrupt.
1t further appears that prior thereto,
to wit: on the Bird day of July the Dis
trict Court of Honolulu, Island of Oahu,
rendered four judgments against the
said Lum Man Suk, doing business as
Chu Zip Company, in favor of Nj. 5.
Grnbaum & Co., Limited, and executions
issued out of said District Court to Ar
thur NJ Brown, the High Sheriff of Ho-
! y, hall
| of the stock of merchandise forming
part of the assets of said bankrupt and
was about to sell the same to satisfy
| said judgments when this order to show
cause was issued.
! The trustee of the bankrupt claims pos
session of these goods under the provi-
sions of Subdivision f of Section 81 of
| the Bankruptcy Act of 1855, the SAID
executions being issued upon judgments
rendered within four months prior to the
| filing of the petition in insolvency of the
bankrupt. and the order of adjudication
of bankruptcy, while the High Sheriff
claims that this is not case falling I'M
der the provisions of Subdivision Z or
Section 81, but is controlled by the pro-
visions of Subdivision C of said Section
l67.
There is no dispute as to the fact
that this Judgment was obtained against
IHS lHSOlNGHt WllHlD ulOillllS W lOi ~
the filing of the petition in bankruptcy,
and the adjudication thereon. The point
raised by the counsel for the High Sher-
if that Subdivision F applies only to in
voluntary proceedings in bankruptcy is
not a good one, in view Of the provisions
of Subdivision l of Section of the Bank
ruptcy Act, which provides that the
words
"a person against whom petition has
been filed shall include a person who
has filed voluntary petition"
On re Blair. Jos Fed. Rep, $50; In re
Lesser. 1OS Fed. Rep, 203; In Re Lesser
100 Fed. Rep. 403; In re Richards, 81
Fed. Rep, $685. C. c. Al
, There seems to be a difference of opin
, ion between some of the United States
Courts as to the construction to be giver
| to Subdivisions G and F of Section g.
: which subdivisions are hopelessly in con
flict; but I am clearly of opirion thai
> not only the weight of authority but thu
/ better reasoning sustains Subdivision f
where there is any question as to which
! shall prevail, and this would seem to bt
in accordance with the well known rule
of statutory construction.
AS was said by the Circuit Court o
Appeals in the case of In re Richards. S
D Fed. Rep, 939:
4 1.-The two subdivisions, and F, o.
Section 81 OF the Bankruptcy Act, relate
to the effect of an adjudication OF bank
j ruptcy upon existing liens upon thu
property of a bankrupt acquired through
legal proceedings are irreconcilable an'
antagonistic; and therefore in any cas-
of conflict between them the former mus
give way to the latter
The Court further saying:
IAN liens obtained through legal pro
ceedings against an insolvent debto
within four months prior to the fling o
petition in bankruptcy, by or agains
him are annulled by his adjudication a
a bankrupt irrespective of the question
whether the debtor suffered or permitte
the lien to be obtained and irrespectiv
, of any knowledge by the creditor of tn
debtors insolvency.
: See, also. st. Cyr vs. Daignalt io2 Fec
Rep. sa