Court Opinion

ID: 8865893
Source: CourtListenerOpinion
Date Created: 2022-11-26 18:05:18.118961+00
Date Added: 2024-06-11T17:05:59.817503
License: Public Domain

COXE, District Judge.
The Empire Metallic Bedstead Company is a manufacturing corpora lion organized under the laws of New York. In April last i lie directors made application, under the provisions of the New York Code of Civil Procedure, for its voluntary dissolution. A receiver was appointed by the state supreme court and duly qualified as required by law. A petition in involuntary bankruptcy was thereafter filed by certain creditors alleging, inter alia, that the proceedings in the state court constituted an act of bankruptcy. The corporal ion answered denying that it had committed an aid: of bankruptcy. The issue thus framed was referred to the referee who reports in favor of an adjudication. The matter now comes to the court for decision under the provisions of rule 8 of this court. The sole question 10 be determined is whether the application for a voluntary dissolution iu the slate court constitutes an act of bankruptcy. All order allega Hons of the petition were abandoned at the argument. It is not pretended that the 'Metallic Bedstead Company has committed any of the acts enumerated in sections of the act, bur it is asserted by the petitioners that the proceedings in the state court are equivalent to a general assignment for the benefit of creditors.” Even if equivalency be admitted a construction which adds a new act of bankruptcy to the law is beyond the power of the court. It is judicial legislation. A petition for a voluntary dissolution is not an assignment for the benefit of creditors. This must be conceded, and with the concession debate must cease. Were this otherwise the court might expand the list of «acts of bankruptcy indefinitely by demonstrating that acts not stated in tlie law and not within the legislative intent produce results similar to those which follow from the acts which are there stated. Acts which one court may regard as equivalents another court may decide to be wholly dissimilar. Thus will the practitioner embark upon a shoreless sea of speculation where judicial ingenuity will be substituted for tlie plain provisions of the statute. If this view of the law be correct further discussion is unnecessary.
Argument designed to prove the similarity of results and the inadequacy of the law is clearly beside the mark. When the court has ascertained wlmt the law actually provides its duty is done. The question is not what the law should be but what it is. Admitting, however, that the examination may be extended along the lines urged by the petitioners, the court is not prepared to accept their conclusions. It is thought that there is much to be said in favor of the *966proposition that the proceeding for a voluntary dissolution of a corporation is not the equivalent of a general assignment for the benefit of creditors and that the omission of the former as an act of bankruptcy was not the result of inadvertence, but was intentionally made. Those who practiced under the former act will remember that one of the principal accusations against it and the one which largely influenced its repeal was the fact that it permitted reckless, and, oftentimes, revengeful creditors to take the affairs even of a solvent corporation out of the hands of the state courts and plunge it into bankruptcy against the protests of those most deeply interested. May it not be that congress deliberately intended to leave the dissolution of these creatures of statute to the courts of the sovereign that created them? There are many provisions of the act which indicate that it was not the purpose of the lawmakers to interfere so long as the proceedings are free from fraud and are not manifestly antagonistic to the purposes of the act. A corporation cannot become a voluntary bankrupt. It is, therefore, compelled to seek relief in the state courts. Only a manufacturing corporation, or one engaged in similar pursuits, can be made an involuntary bankrupt. Section 4, els. a, b. A corporation may make an assignment for the benefit of creditors, and it must be assumed that the lawmakers had in mind the distinction between this act and the submission by the corporation of its affairs to the court in order that they may be wound up by an officer appointed by the court and under its supervision. One important difference between the two proceedings is that a general assignment usually implies insolvency; a voluntary dissolution does not. The latter course is frequently resorted to where a solvent corporation desires to go out of business. If the petitioners’ contention be accepted as the correct exegesis of the law a solvent as well as an insolvent corporation can be forced into bankruptcy. By applying for a dissolution it has made a general assignment and an adjudication must follow. The fact that the corporation is abundantly able to pay its creditors is no bar. This question is set at rest by the decision of the supreme court in the case of George M. West Co. v. Lea, 19 Sup. Ct. 836, reported below, 91 Fed. 237. This was the case of a corporation which had made a general assignment. A petition in bankruptcy was filed' and the corporation answered denying insolvency. The court say:
“Our conclusion, then, is that, as a deed of general assignment for the benefit of creditors is made by the bankruptcy act alone sufficient to justify an adjudication in involuntary bankruptcy against the debtor making such deed, without reference to his solvency at the time of the filing of the petition, that the denial of insolvency by way of defense to a petition based upon the making of a deed of general ássignment, is not warranted by the bankruptcy law; and, therefore, that the question certified must be answered in the negative.”
Thus a corporation which is not bankrupt and which has merely asked for permission to go into liquidation is forced into a position which may seriously impair the value of its property. The discussion might be pursued indefinitely and other dissimilarities pointed out, but it is unnecessary. The court is of the opinion first, that the provision of the law is too plain to admit of construction, and, second, *967that even if this were otherwise, the differences between the two proceedings in question are so marked that they cannot be regarded as equivalents. The petition is dismissed.