In re Bolognesi

LACOMBE, Circuit Judge. On February 11, 1914, A. Bolognesi & Co. made a general assignment for the benefit of creditors. Subsequently' and on or about the 12th day of March, 1914, a petition in bankruptcy was filed against A. Bolognesi & Co. by Paoli Bros, and others, alleging themselves fio be creditors. To this petition an answer was interposed, asserting that the petitioning parties were not qualified creditors, in that they claimed priority rights to trust funds and were .estopped by reason of their assent to and participation in the assignment proceedings. Various other creditors, subsequently and before the expiration of four’ months from the date of the insolvency, filed petitions and asked to be allowed to intervene, which requests were granted. On June 22, 1914, Valori and others, also creditors, filed petitions, and on the same day were allowed to intervene. This was more than four months after the date of the assignment, but the original petition of Paoli and his fellow creditors was still pending. The alleged bankrupts answered this last petition, setting up the same defense which was interposed to the Paoli petition, and also averring that no act of bankruptcy had been committed within four months next preceding the date of the Valori petition. Valori and those joining with him are qualified creditors in number and amount. On June 22, 1914, Judge Learned Eland referred the matter to a special master. From time to time, some before and some after that date, the creditors, other than Valori and his associates, withdrew from the case. When the special master’s report came before Judge Hough, he dismissed the petition in bankruptcy on the ground that: “Tbe application of all tbe qualified creditors to withdraw having been granted, the petition cannot be sustained on. the intervention of qualified creditors after the four months period.” [1,2] The original petition was undoubtedly valid on its face, and gave the court jurisdiction. N. Y. Tunnel Co., 166 Fed. 284, 92 C. C. A. 202. When that petition was filed a proceeding became pend [773] ing in the District Court, initiated in accordance with the statute, and in which creditors who had (not participated in its initiation were entitled to intervene. Bankruptcy Act, .§ 59f. We do not think that the mere circumstance that their intervention came so long after the act of bankruptcy that they could not then have originated a proceeding bars them from intervening in a pending proceeding; their adoption of the original petition related back to the date it was filed, because it was good and needed no amendment. Certainly the original proceeding cannot be held to be a void one, because facts may be shown in affirmative defense which may constitute an estoppel against the original petitioners taking advantage of the act of bankruptcy. [3, 4] No doubt any petitioner may be allowed to withdraw, in the court’s discretion. If the original petitioners so withdraw before others intervene, that ends the proceeding completely; there is nothing left to intervene in. But until they do withdraw there is a proceeding, in which others may intervene; and if others have done so, in the lifetime of the proceeding, subsequent withdrawal of the originators will leave the interveners free to proceed. In re Cronin (D. C.) 98 Fed. 584. If the opinion in Despres v. Galbraith, 32 Am. Bank. R. 170, 213 Fed. 190, in which the court seems to have held that the original petition was void, be construed to hold that intervention under a valid petition, four mouths after the act of bankruptcy and be - fore the original proceeding was dismissed, gives the interveners no right to proceed, we cannot concur. The case at bar is not within the principle of United States v. McCord, 233 U. S. 157, 34 Sup. Ct. 550, 58 L. Ed. 893, because here there was no “vice in the original suit.” The original petition was a valid one, under which bankruptcy could have been adjudicated, except for the interposition of an affirmative defense of estoppel. The order is reversed.