Court Opinion

ID: 8896253
Source: CourtListenerOpinion
Date Created: 2022-11-27 00:03:56.198964+00
Date Added: 2024-06-11T17:07:30.508581
License: Public Domain

SNEED, Circuit Judge
(concurring):
I agree that the interests created in “SW 8” are interests in real property and that the deeds creating such interests are not void under the law of Wash,-ington. I am also prepared to acknowledge that there exists no adequate challenge to the sufficiency of the allegation of insolvency in the petition.
I do wish, however, to register my strong doubt that the Debtor-Petitioners can demonstrate the insolvency of the mortgagors and their inability to pay their debts as they mature by reference only to the mortgaged property. For the purposes of Chapter XII a “debtor” is defined as a “person, other than a corporation as defined in this title, who could become bankrupt under section 22 of this title, ...” 11 U.S.C. § 806(6). The petition required to be filed by a “debtor” must state “that the debtor is insolvent or unable to pay his debts as they mature, . . . ” 11 U.S.C. § 823. The Bankruptcy Act provides that “a. person shall be deemed insolvent within the provisions of this title whenever the aggregate of his property, . , shall not at a fair valuation be sufficient in amount to pay his debts;” 11 U.S.C. § 1(19). These provisions have led a commentator to observe: “If, a Chapter XII petition is filed jointly in behalf of a partnership and of one or more general partners, the petition should allege insolvency or inability to pay debts with respect to each petitioner.” (emphasis added) 9 Collier on Bankruptcy, 848 (14th ed. 1972). This observation and the authorities upon which it is based strongly suggest that as a minimum the Debtor-Petitioners must allege the insolvency or inability to pay debts with respect to each Debtor-Petitioner and that such insolvency shall be determined by reference to the aggregate of the property (not just the mortgaged property) of each such Debtor-Petitioner. It is also clear that it would not be illogical to insist that the insolvency of each co-tenant be alleged if his interest is to be subjected to a Chapter XII arrangement.
These doubts incline me toward believing that Chapter XII is a singularly unsuitable device for adjusting the competing interests which are present under the facts of this case. However, counsel did not address themselves to these problems nor have they been ventilated in proceedings before the Referee or district court. For this reason I join in the decision to reverse and remand.