Court Opinion

ID: 8786271
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:35:49.717151+00
Date Added: 2024-06-11T17:03:05.544695
License: Public Domain

WARD, Circuit Judge.
This is a petition to revise an order of the District Court denying the application of the petitioner, a judgment creditor, to vacate the adjudication in bankruptcy in a voluntary proceeding and an order staying him from proceeding upon his judgment in the state court until 12 months after adjudication or denial of discharge.
February 15, 1911, Switzer, the petitioner, recovered a judgment in the state court of New York against the Guanacevi Tunnel Company upon which an execution was issued and returned wholly unsatisfied. Thereupon he instituted proceedings supplementary to execution and examined Meloy, the president or acting president of the company, as a witness.
June 21st Meloy, by authority of the board of directors, filed a voluntary petition for adjudication of the Tunnel Company as a bankrupt in the United States District Court for the Southern District of New York. Adjudication followed on the same day, and further proceedings were referred to one of the referees. The bankrupt is a corporation of the state of Arizona, and all its property, real or personal, is in Mexico.
[1,2] The petitioner contends that the voluntary petition was filed without authority, because he alleges that the corporation is solvent (in the sense of the Bankrupt Law), and because only the majority of shareholders can, by the laws of Arizona, dissolve a corporation prior to the time fixed in the articles of incorporation. We will examine this contention, although we think it is one which a creditor has no standing to make in the case of a voluntary petition. The petition offers to surrender all the company’s assets for the benefit of its creditors, and does not ask for'the dissolution of the corporation. Only the state of Arizona,' which created the corporation, can dissolve it. There is nothing to show what authority is given to the directors by the charter and bylaws. In the absence of any restriction, by statute or by the charter and by-laws, the power of the board to make a general assignment of the property of a corporation which is unable to meet its current obligations for the benefit of creditors or to apply for a receivership is to be presumed. Vanderpoel v. Gorman, 140 N. Y. 563, 35 N. E. 932, 24 L. R. A. 548, 37 Am. St. Rep. 601; Rogers v. Pell, 154 N. Y. 518, 49 N. E. 75. The voluntary petition for adjudication as a bankrupt is tantamount to such proceedings. The petition charges that the corporation is unable to meet its current obligations, which is commercial *319insolvency. The Bankruptcy Act itself permits any person who owes debts to file a petition to be adjudicated. “Any qualified person may file a petition to be adjudged a voluntary bankrupt.” Section 59a.
[3, 4] It is next contended that the District Court for the Southern District of New York was without jurisdiction, because the company had not maintained its principal place of business in New York for the greater part of six months before the filing of the petition. Section 2 (1). This objection, being jurisdictional, may be made by a creditor. The majority of the court do not think this contention well founded. The charter of the company provides that its principal place of business shall be at Phoenix, Ariz., and that it may have such other offices, principal and branch, as may be established by the board of directors. The statement in the charter is not conclusive, the question being where, in point of fact, was the company’s principal place of business during the period fixed by the act. The petition asserts'that it was at No. 55 Liberty street, New York City. This formal statement of the board of directors, resulting in an adjudication, at least creates a prima facie case which leaves the burden of evidence to meet it upon the creditor who seeks to vacate the adjudication. The affidavits show that the Tunnel Company has never done any mining; that its activities have been principally connected with the sale of its stock and the payment of its running expenses; and that the only place in which the business has been conducted has been at 55 Liberty street, in this city. It is true that this had ceased to be the office of the company in the sense that the company paid the rent, and was, in point of fact, the office of Meloy, June 6, 1911, when the board of directors met there and authorized him to file the petition; but, while the company’s business was being transacted there, it may well be held to have been established by the board of directors within the meaning of the charter provision. The books were kept there, all meetings of the board were held there, and all moneys of the company were disbursed from there. No meetings were ever held at Phoenix except the technical ones required by the law of the state of Arizona. It is not necessary that the company should have actually transacted much, or even any, business at 55 Liberty street during the period fixed by the act. The question is, Where was its principal place of business? Its business was small and irregular, and it may have transacted little or none, but if it had any principal place of business at all, it was there. The petitioning creditor has not satisfied us to the contrary.
[5] A good deal is said about Meloy’s not being president or director of the company at the time the board, including him as a director, authorized him, as president, to file the petition. We will consider this, assuming that a creditor has standing to make the objection. It is true that Meloy had resigned before that time, and that acceptance was not necessary to the effectiveness of his resignation. Still, instead of insisting upon his resignation, he acquiesced in the refusal of the board to accept it and continued to act as director and president.
[S] The order refusing to'vacate the adjudication must be affirmed, and, the order staying the creditor’s proceedings in the state court upon his judgment, made after the adjudication, until 12 months thereafter *320or until a discharge, should have been denied, being discretionary, cannot be revised. There is ground for supposing that the bankruptcy proceedings were instituted, not for the distribution of the bankrupt’s estate, but to hold off all creditors, especially ->iie petitioner, and that there was and is no bona fide intention to press trie proceedings to a conclusion. It will be for the District Court to examine the situation, and, if nothing is done in pursuance of the adjudication, to vacate the stay.