Brown v. Case

Lathrop, J. Section 67, cl. f, of the bankruptcy act of 1898, reads in part as follows: “ 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 of 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. . . . Provided, That nothing herein contained shall have the effect to destroy or impair the title obtained by such levy, judgment, attachment, or other lien, of a tona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry.” The defendant first contends that this section applies only to involuntary proceedings in bankruptcy, and so it has been asserted in three district courts of the United States, looking only to the language of the specific section, namely “ the filing [47] of a petition in bankruptcy against him.” In re De Lue, 91 Fed. Rep. 510. In re Easley, 93 Fed. Rep. 419. In re O’Connor, 95 Fed. Rep. 943. Section 1 of the act, however, declares: “ A person against whom a petition has been filed shall include a person who has filed a voluntary petition.” For this reason, and because it would be absurd to leave the effect of making proceedings valid or invalid at the option of the debtor, the great weight of authority is in favor of the view, with which we concur, that cl. f applies to a voluntary as well as to an involuntary petition in bankruptcy. In re Richards, 96 Fed. Rep. 935. In re Vaughan, 97 Fed. Rep. 560. In re Lesser, 100 Fed. Rep. 433. In re McCartney, 109 Fed. Rep. 621. Jones v. Stevens, 94 Maine, 582. See, as to the general intent of this section, In re Gutwillig, 92 Fed. Rep. 337, 339 ; In re Kenney, 105 Fed. Rep. 897, 898; In re Rhoads, 3 Am. Bank. Rep. 380. The remaining question is whether the defendant is a bona fide purchaser for value, without notice or reasonable cause for inquiry. As the judge found for the plaintiff, it must be presumed that he found against the defendant on this issue, and his finding is conclusive, if there was any evidence to support it. There clearly was such evidence. Eight days before the sale a copy of the general assignment for the benefit of creditors was handed to the defendant. Murphy, the debtor, was present at the sale, and publicly stated that he was insolvent, and the assignment was exhibited by the counsel for the assignee, who forbade the sale. As the petition in bankruptcy had not then been filed, all was done that could be done. Exceptions overruled.