Court Opinion

ID: 8773093
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:51:37.982881+00
Date Added: 2024-06-11T17:02:21.265942
License: Public Domain

COXE, Circuit Judge
(after stating the facts as above). The oiily question to be determined by this review is whether in ascertaining the value of the corporation’s assets the sum of $8,250 alleged to be Asch-*398enbach’s share in the surplus of the firm’s property which was transferred to the corporation, is to be deducted. In Du Vivier & Co. v. Gallice, 17 Am. Bankr. Rep. 557, 149 Fed. 118, 80 C. C. A. 556, we held that a corporation organized for the express purpose of taking over the assets of a partnership composed of the same persons to whom all its stock is issued is liable for the partnership debts, even though they were not expressly assumed. No one disputes that this is a correct exposition of .the 'law, the difficulty is that it has no application to the only question now before the court. The same observation may be made as to the rule laid down in Booth v. Bunce, 33 N. Y. 139, 88 Am. Dec. 372— namely, its lack of applicability.
There is no pretense of fraud in the present case. Indeed, the master finds specifically that the formation of the partnership between Aschenbach and Smith was-honest, fair and open. He says:
“It must be borne in mind that this is not a transfer by partners who have an individual interest in assets of the firm and have individual debts, and that by such transfer they are seeking to avoid the payment of their individual debts, thereby committing a fraud, but it was the transfer of a man believing himself to be solvent, who, instead of availing himself personally of the benefits of the consideration, uses the whole of the consideration in the payment of his individual debts so far as such consideration would go.”
The petitioning creditors are, of course, creditors of the corporation and they seek to have the property which is responsible for their debts reduced by the. sum of $8,250 for the benefit of the Aschenbach’s individual creditors. By what process of law this is to be done or how they will be benefited if it be done, is not manifest. It may result in an adjudication it is true, but the amount which is now applicable to the . debts of the petitioning creditors will be diminished to the detriment of the petitioners and all. corporation creditors and the amount stated will be given to Aschenbach’s individual creditors who make no complaint and have never attacked the partnership or the corporation as fraudulent or in any manner prejudicial to their rights. The position of the petitioning creditors seems extraordinary, if not inexplicable.
The principal issue referred to the special master arose upon the petition of the corporation .creditors and the answer of the alleged bankrupt. This issue was whether the Aschenbach Company was insolvent at the time of the filing of the petition against it. The petitioners seem to proceed upon the theory that the transfer of the property to the firm was fraudulent as to Aschenbach’s individual creditors and that the firm, never having title to this property, could not transfer it to the corporation and therefore the corporation is no more entitled to it than it would be to so much stolen property and is liable to refund it to these individual creditors. If the alleged bankrupt can be deprived of its property by such a process of reasoning it is easy to prove insolvency. But it will be observed that this result is reached in a proceeding to which the individual creditors are not parties and relates to transactions of which they have never complained and which have never been judicially declared illegal or void as between the parties.
The contention is also in direct conflict with the master’s finding that the previous transfers were entirely free from fraud. If the individual creditors had attacked the transfers and had obtained a decree in a *399plenary suit declaring- them fraudulent and void, there would be more substantial ground for the present contention. Why the corporation creditors are anxious to transfer to the individual creditors a fund which the latter have not asked for and which they are apparently willing to share with the former we are unable to comprehend, except by imputing to the corporation creditors a broad altruism not often met with in bankruptcy proceedings. We agree with the special master and the court in thinking that the corporation is solvent and free from fraud.
The order confirming the íeport of the special master and dismissing the petition is affirmed with costs.