In re Goldberg , 117 F. 692 ( 1902 )

RAY, District Judge

(after stating the facts as above). On the 7th day of August, 1902, Eli M. Woodard, William S. Banker, Wilber W. Chambers, and Simon Lavine filed in this court their petition to have Harry Daniel Goldberg adjudged a bankrupt. The alleged bankrupt left the district before the subpoena was served, and, his whereabouts being now unknown, service by publication will be necessary. On or about July 19, 1902, Jonathan Devi and Edward F. Cohn commenced an action in the supreme court of the state of New York against said Goldberg, in which a warrant of attachment was issued, under which the sheriff of Warren county seized certain of Goldberg’s property, and caused an inventory to be made. The appraisal fixed the value at $1,548. The plaintiffs claim $335.33 and interest from July 10, 1902. August I, 1902, the county judge of said county directed the sale of a portion of said property, marked “Perishable,” which was appraised at more than $500, and a sale was made August 8, 1902. One Albert Devi, son of the plaintiff Jonathan Levi, became the ostensible purchaser thereof for the sum of $50. It appears that no proper or sufficient notice of such sale was given; that only one bidder was. present,—he the son of one of the plaintiffs,—and that the only other persons present were the deputy sheriff making the sale and one of the attorneys for the plaintiffs; and that such property was purposely sacrificed. An application to set aside said sale has been made in the state court, and an order made restraining further proceedings by the plaintiffs, the purchaser, and said sheriff pending the decision of such motion. That Albert Levi is a bona fide purchaser or owner of the property cannot be maintained. The said action is founded on a claim from which a discharge in bankruptcy will be a release, and is still pending. The property so attached, or the major part of it, is in the possession of the sheriff, although Albert Levi says a large part of that sold as above stated has been delivered to the Delaware & Hudson Railroad Company to be transported to him, and is held subject to his orders. Henry S. Williams, one of the attorneys for said plaintiffs, says:

“It Is the intention of the plaintiffs in said action to retain possession of said goods, and have the sheriff refuse any demand which may he made upon him by a trustee in bankruptcy for possession of said property, and to oppose any legal action which may be brought by said trustee against them or the sheriff either for said goods or their value.”

The papers show that there are several creditors of said Goldberg. A purpose to defeat the bankrupt act is substantially confessed. The object of that law is to prevent forbidden preferences, secure a fair and equitable distribution of the proceeds of the property of the bankrupt among his creditors, and then discharge the debtor, if entitled to a discharge. This court will neither aid nor permit a violation of the spirit and intent of the law, but will take such action, within its power, as will carry it into full force and effect. It is evident from what has been done and is being done that the injunction demanded must be granted, 'if the law is to be sustained and made effective in this case, and the creditors protected. No court should permit such a sale as has been described to stand, and there is no reason why the plaintiffs shall be permitted to proceed and gain a preference or an advantage over the other creditors. The amount due the plaintiffs is conceded, and there is no pretense of any equity in favor of these particular creditors.

The plaintiffs raise two preliminary objections to the granting of the relief' asked: First, that the petition is made and verified by Walter A. Chambers as attorney for the petitioning creditors in this proceeding, and not by the creditors themselves; and, second, that it does not appear from the moving papers that this bankruptcy proceeding is pending in the district court for the Northern district of New York, and therefore jurisdiction is not shown.

This is an application to the court in a pending proceeding which is described in the moving papers as follows: “In the District Court of the United States for the Northern District of New York. In Bankruptcy. No. 1,141.” The petition then states that the petition in bankruptcy was filed August 7, 1902, and a writ of subpoena issued “herein.” This is a sufficient showing that the proceeding in bankruptcy is pending in the Northern district of New York, aside from the fact that this court will take judicial notice of its own proceedings and records in a particular case, so far as such an application as this is concerned.

The other preliminary objection is equally untenable. The papers show that the moving creditors live at a distance, and that the application is made by their attorney in their behalf and for their benefit. The petition states why it is made by the attorney and not by the moving creditors. It is presumed he is acting with authority. There is no rule or statute requiring the petition to be made in form by the moving parties, although that would be a better practice. It would have been better practice, perhaps, had the petition stated specifically that the petition in bankruptcy was filed “with- the clerk in said district,” or “with the clerk of the court in the Northern district of New York.” It is not pretended, however, that the plaintiffs have been misled, or that this proceeding in bankruptcy is not pending in the Northern district of New York. In such a proceeding as this the-substance, rather than the form, will be considered. Were this a statutory proceeding, and did the statute require the petition to be made and subscribed or verified by the moving party, a different question would be presented. Where a remedy is given by statute, and a line 'of procedure pointed out, that course must be substantially followed. No possible harm can come to any creditor from the granting of the injunction asked, except so far as it may deprive the plaintiffs in the attachment action of the benefit of their diligence. But the law itself is designed to do this. “Equality is equity,” and in the settlement and distribution of the estates of insolvent persons the creditor near at hand, and first cognizant of the pecuniary embarrassments of a failing debtor, should not be permitted to receive more than his just proportion of the property. If by the use of attachment proceedings one creditor is permitted to take and dispose of the property in the manner attempted in this case, the law is nullified. Until the question of bankruptcy is determined, further proceedings in the action should be stayed, and until 12 months thereafter in case Goldberg is adjudged a bankrupt. Clearly the alleged purchaser at the sale should not be permitted to take or remove the property, if lawfully he may be prevented, nor should the sheriff be permitted to sell.

It is claimed that such action- should proceed to judgment, and a sale of the property attached be permitted; the distribution of the proceeds only being enjoined. There is no reason or necessity for such a course. If Goldberg is adjudged a bankrupt, the trustee will take and dispose of the property. If not so adjudged, these attaching creditors will proceed with their action. The right to the injunction sought in this case is plain. In re Lesser, 3 Am. Bankr. R. 758, 40 C. C. A. 177, 99 Fed. 913; Bear v. Chase, 3 Am. Bankr. R. 748, 40 C. C. A. 182, 99 Fed. 920. Indeed, the áct itself suggests this as the proper remedy in such a case. Bankr. Act, § 11a; section 67Í; section 2 (15).

Injunction granted and preliminary objections overruled.

¶ 3. See Bankruptcy, vol. 6, Cent. Dig. §§ 156, 323.