Court Opinion

ID: 6233640
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:27:33.65556+00
Date Added: 2024-06-11T08:57:57.938316
License: Public Domain

The opinion of the court was delivered,
by Agnew, J.
H. C. Pavitt confessed judgment on the 1st of May 1867, executions were issued on the 1st and 2d of May, his personal property levied and sold on the 10th of May, an auditor appointed on the 5th of June to make distribution of the proceeds of sale, and his report filed on the 12th of July 1867, and laid over on the objection of creditors in bankruptcy. Under the Act of Congress of March 2d 1867, establishing a uniform system of bankruptcy throughout the United States, no petition in bankruptcy could be filed in the District Court of the United States until the 1st day of June 1867. A petition having been filed by creditors of H. C. Pavitt, he was, on the 6th of August 1867, after a trial by jury participated in by some of the execution-creditors, declared a bankrupt. The precise time of the appointment of John M. Rohrer as his assignee in bankruptcy does not appear in the record, but on the 24th of October 1867, he appeared in the Common Pleas of'Armstrong county, the auditor’s report and distribution being still pending, and filed exceptions, and also filed his petition setting forth the facts in relation to the confession of judgments and subsequent proceedings, and the proceedings in bankruptcy, and the finding of the judgments invalid, and prayed for an order of payment of the money to him as the assignee for distribution in bankruptcy. Afterwards, the court still having the auditor’s report under consideration, the assignee *502fearing that the Court of Common Pleas might not consider the decree in bankruptcy sufficient evidence of the fraud of the execution-creditors on the bankrupt law, presented a second petition on the 19th of January 1869, setting forth specially all the facts and the questions to be decided, and prayed an issue to try them. The court overruled the application and refused the issues on the 22d of January 1869, the auditor’s report still remaining undetermined, and finally confirmed i.t on the 17th of March 1869, thereby ordering the money to be paid to the execution-creditors, to whom the proceeds of the sale were awarded. This was clearly an error. It was the duty of the court to allow the assignee a hearing, and to award the issues. The notice to creditors and other claimants required to be given by the auditor under the 74th rule, and the demand of the issue before the auditor under the 75th rule of the Court of Common Pleas, could not apply to the assignee in bankruptcy, who was not appointed until after the decree of the 6th of August, declaring Pavitt a bankrupt under a petition which could not be presented to the District Court of the United States until the 1st of June. When appointed, the rights of the assignee in bankruptcy ran back by force of the Act of Congress to the time the judgments were confessed in fraud of the law, and he could rightfully ask the state court to be permitted to come in at any time before a final decree to claim the fund against creditors who are postponed by operation of the law, and to have a trial of the facts. That the claim is. not too late in such a case as this, is decided in numerous cases: Trimble’s Appeal, 6 Watts 133; Reigart’s Appeal, 7 W. & S. 267; Brown’s Appeal, 2 Barr 463; Seip’s Appeal, 2 Casey 176; Ross’s Estate, 9 Barr 17; Souder’s Appeal, 7 P. F. Smith 503.
The assignee was undoubtedly a proper party to demand the proceeds of the sheriff’s sale. The property was levied and sold under execution before the proceedings in bankruptcy began, and was rightfully converted and brought into court for distribution. The assignee could not follow the property, but must resort to the state court to lay in his claim as the rightful owner of the fund, as against those creditors whom the bankrupt law postponed. Under the 35th and 39th sections of the Bankrupt Act of March 2d 1867, a debtor commits an act of bankruptcy, and his preference is void, who voluntarily confesses judgment with intent to procure his property to be attached and seized in execution, and thus to prefer a creditor who accepts the judgment, having at the same time a reasonable cause to believe that the debtor is insolvent, and that the confession is made with an intent to defeat the provisions of the bankrupt law. If proceedings be commenced within the time limited and the debtor is declared a bankrupt, the assignee is authorized to recover back the money or property, and the creditor, having reasonable cause to believe that a fraud on *503the act was intended, or that the debtor was insolvent, is not permitted to prove his debt. This being the right of the assignee in bankruptcy and the position of the preferred creditors, it was unnecessary that their judgments should be opened. The Act of Congress, which is in this respect the supreme law, operates directly on the rights of those creditors, making void their preference and postponing their claims to the proceeds of sale, and letting the assignee, as the owner of the fund, in upon it. He claims, not upon an adverse title, but under and through the bankrupt by virtue of the Act of Congress. His claim is adverse to the creditors only in the sense that they are postponed and he supersedes them, and he comes in upon the fund and not the property, as we have seen, because of the rightful jurisdiction of the state court at the time to seize and sell the property. Eohrer, the assignee, is therefore a party aggriéved in this ease, and entitled to appeal. He represents the general creditors: Bletz v. Haldeman, 2 Casey 403.
The decree of the Court of Common Pleas is therefore reversed, and the record ordered to be remitted with a procedendo.
*504h