Court Opinion

ID: 6641091
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:45:17.492357+00
Date Added: 2024-06-11T15:59:14.603880
License: Public Domain

MR. JUSTICE! HO'LLOWAY,
after making the foregoing statement, delivered the opinion of the court.
The plaintiff must recover, if at all, by virtue' of Section 60b or Section 67f of the Bankruptcy Act of 1898 (Act July 1, 1898, c. 541, 30 Stat..562, 565 [U. S. Comp. St. 1901, pp. 3445, 34501] ) ; and the complaint must be tested by the provisions of those sections, which are as follows:
“Sec. 60b. If a bankrupt shall have given a preference within four months before the filing of a petition, or after the.filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.
“See. 67f. That all levies, judgments, attachments, or other liens, obtained through legal proceedings, against a person who is insolvent, at any time within four months prior to the filing *385of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, -x- * *>>
Under the terms of Section 60b, above, not every preference is voidable at the election of the trustee, but only such as shall have been given within four months before the filing of the petition in bankruptcy, or after its filing and before adjudication, and wherein the person receiving the preference, or to be benefited thereby, shall have had reasonable cause to believe that it was intended to give such preference. In order, then, that- the trustee shall prevail, he must show, first, that the preference was given within four months before the filing of the petition; and, second, that the Montana Brewing Company had reasonable cause to believe that Peterson, in suffering judgments to be recovered against him in August, 1899, intended thereby to give appellant a preference, within the meaning of the Bankruptcy Act; and the burden of proof is upon the trustee to sustain both of these propositions. (Levor v. Seiter, 8 Am. Bankr. R. 459, 74 N. Y. Supp. 499.) If these facts must be proved in order to entitle the trustee to recover, the facts must be alleged in his complaint, in order to admit the proof; and, in the absence of the allegation that the Montana Brewing Company liad reasonable cause to believe a preference was intended, the complaint fails to state a cause of action under Section 60b.
Section 67f provides that certain liens including judgment liens obtained through legal proceedings against an insolvent within four months prior to the filing of the petition in bankruptcy, shall, in case he is adjudged a bankrupt, be void, and the property affected shall be discharged from the same, and shall pass to the trustee for the benefit of the bankrupt estate. It is not the judgment'which becomes void, but the lien of the judgment becomes ineffective to longer hold the property, and it passes to the trustee. Such *386is tbe manifest meaning of tbe section, wben considered as a, whole. In fact, tbe subject-matter of tbe section is liens, not judgments. (In re Pease, 4 Am. Bankr. R. 547.)
Tbe complaint alleges that prior to tbe filing of tbe petition in bankruptcy tbe property of Peterson bad been sold under execution, bad gone into tbe bands of innocent third parties, and tbe money bad been paid to tbe judgment creditor in satisfaction of its judgments. When tbe petition in bankruptcy was filed, then, there was no property of tbe bankrupt estate subject to a judgment lien which could be released from tbe same, or which could pass to tbe trustee for tbe benefit of tbe bankrupt estate. The judgment bad been satisfied, and tbe matter entirely closed, before any bankruptcy proceedings were initiated, and tbe provisions of Section 67f therefore have no application whatever to tbe facts of this case. In Levor v. Better, above, the same state of facts was presented as in tbe case at bar; and tbe Supreme Court of New York held that tbe trustee could not recover under Section 60b, for failure to- prove that tbe judgment creditor of tbe bankrupt bad reasonable cause to believe that tbe bankrupt, by suffering judgment to be taken against him, intended thereby to give a preference, and further held that, as tbe money bad been paid over to tbe judgment creditor before tbe bankruptcy proceedings were instituted, tbe provisions of Section 67f did not apply.
There is nothing in tbe views herein expressed which conflicts with tbe decisions in In re Kenney (D. C.), 95 Fed, 427, or In re Blair (D. C.), 102 Fed. 987.
We have, therefore, a case which does not fall within tbe provisions of Section 67f, and a complaint which does not state facts sufficient to constitute a cause of action under tbe provisions of Section 60b.
A motion to dismiss this appeal has been interposed upon tbe ground that tbe appellant has violated Bule VII of tbe rules' of this court in incorporating in tbe transcript the formal parts of tbe pleadings, writs, and other papers, wben no* question arises in respect to tbe same, and in incorporating in tbe tran*387script exhibits used in the trial court, when no question of any character is predicated upon them. There are other grounds of the motion which it is not necessary to consider. • In so far as Subdivision 5 of Bule VII has been violated by incorporating in the transcript mere formal parts of papers, the appellant will not be permitted to recover as part of his costs the expense of printing that portion of the transcript thus encumbered. At least, one-third of the expense of printing the transcript was unnecessarily incurred. The motion to dismiss the appeal is denied.
Rehearing denied, July 14, 1903.
The judgment is reversed. The appellant will recover only two-thirds the expense of printing the transcript in this ease, together with such other costs as by law he is entitled to recover.