Gleason v. Smith, Perkins & Co.

FANNING, District Judge (after stating the facts). In clause 10 oí section 1 of the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 8419], it is declared that the “commencement of proceedings” in bankruptcy shall mean “the date when the petition was filed": and in Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405, it was held that the filing of a petition in bankruptcy "is a caveat to all the world, and, in effect, an attachment and injunction." We find nothing in the record of this case, the substance of which is contained in the statement preceding this opinion, to take the case out from the operation of the general rule. It is true that the petition filed in the involuntary proceedings was defective, but the defect was discovered within four days after the petition was filed, and procedings for obtaining leave to amend it so as to cure the defect were immediately instituted and brought to a hearing before the District Court at the earliest possible day. The power of the. court to grant the amendment is undoubted. In the Bellah Case (D. C.) 116 Fed. 69 (an involuntary case), it was held that general order No. XI (89 Fed. vii, 82 C. C. A. xiv), which relates to amendments of petitions, was not intended to abrogate or restrict the general power of amendment vested in the court. The existence of such power in the court was also recognized in Beach v. Macon Grocery Co., 120 Fed. 736, 57 C. C. A. 150, in the Brett Case (D. C.) 130 Fed. 981, in the White Case (D. C.) 135 Fed. 200, and in the Plymouth Cordage Company Case, 135 Fed. 1000, 68 C. C. A. 434. The Sears Case, 117 Fed. 294, 54 C. C. A. 532, is not an opposing authority, in that case an involuntary petition was filed October 10, 1901, in the Western District of New York. On October 23, 1901, another involuntary petition against, the same party was filed in the Southern District of New York. The District Court for the Western District allowed the petition filed there to he amended by inserting in it an act of bankruptcy charged in the petition filed in the Southern District, hut being later than the act charged in the petition tiled in the Western District. The Circuit Court of Appeals for the Second Circuit held this to he error because of die peculiar provisions of general order No. VI (89 Fed. v. 32 C. C. A. ix), which allowed the earlier petition to be amended “by inserting an allegation of an act of bankruptcy committed at an earlier day than that first alleged, if such earlier act is charged in either of the other petitions." The court said: “Kxoept for that provision, such mi amendment would have been permissible, and its allowance a reasonable exercise of judicial discretion; but the provision. by implication, limits tlie power of amendment to the single case in whieh an earlier act of bankruptcy is sought to be incorporated into the petition.” Nor is the objection that by reason of the failure to serve the subpoena before, its return day the involuntary proceedings came to an end a valid one. It is the practice of bankruptcy courts to issue alias subpoenas when for any reason it has been impossible to serve the original subpoenas. Furthermore, clause a of section 18 of the bankruptcy act does not require the subpoena to be served within 15 days from the date of its issue, as the petitioner here insists, but that it shall [898] be made returnable within that time; and clause f of section 59 (30 Stat. 561 [U. S. Comp. St. 1901, p. 3445]), gives to creditors, other than the original petitioners, the right at any time to enter their appearance and join in the petition, and clause g of the same section declares that no voluntary or involuntary petition shall be dismissed for want of prosecution until after notice to the creditors. Manifestly, the mere failure to serve the subpoena within 15 days after its issue did not, and under the law could not, put an end to the proceedings. This was expressly held by the Circuit Court of Appeals of the Second Circuit in the Stein Case, 105 Fed. 749, 45 C. C. A. 29. Neither do we think there is any merit in the objection that the involuntary proceedings have been invalidated by the adjudication of bankruptcy in the voluntary proceedings. The involuntary proceedings were commenced in good faith. The attorney of Walter Sherwood Service knew of the institution of these proceedings before he filed the petition in voluntary bankruptcy. We cannot escape the conviction that he knew, before he filed the petition in the voluntary proceedings, that the person intended to be described as a bankrupt in the involuntary proceedings was none other than Walter Sherwood Service. He does not deny such knowledge. To give validity to the voluntary proceedings means that Minnie S. Gleason, a daughter of Walter Sherwood Service, shall be a creditor preferred over the three creditors who filed the petition in the involuntary proceedings and over the other general creditors of Walter Sherwood Service. -In view of the power of the court to allow amendments, of tne prompt application of the creditors in the involuntary proceedings to secure an amendment when their attorney had discovered the error in naming the alleged bankrupt as William S. Service instead of Walter Sherwood Service, and of the knowledge which Walter Sherwood Service’s attorney had of the pendency of. the involuntary proceedings when he filed the petition in voluntary bankruptcy, we think the proceedings in voluntary bankruptcy cannot stand,- and that the District Court had the power to make, and did properly make, the order of September 26, 1905, now under review. The conclusion therefore is that the order should be affirmed} with costs against the petitioner, Minnie S. Gleason.