In re Nido y Mayo

HamiltoN, Judge,

delivered the following opinion:

The petitioners, J. Maria Freiría, J. M. Perez y Company, Virella Alvarez & Company, A. Freiría & Company, M. De-fendini & Company, and Crescioni Figuedo & Company, brought suit against the present bankrupt in the municipal court of Guayama, and on August 26, 1912, obtained judgments aggregating $873.27. On September 12, 1913, the defendant filed his petition in this court, and was on the same day adjudicated a bankrupt. Petitioners filed claims and on October 9 amended their claims by striking out everything referring to attachment, and inserting in lieu a claim of priority under judgment, under tbe provisions of sections 1824 — 5 of tbe Porto Pican Revised Civil Code, amended by § 15 of Law No* 37 of 1910. Tbe referee denied tbe claim of priority, and thereupon, on motion of tbe attorney of petitioners', the case was certified to tbe district court for review.

This brings up tbe consideration of bankruptcy act, § 67, subdivisions c and f, as to a preference by legal proceedings within four months of bankruptcy. It is conceded that the preference by attachment originally claimed violates the law, and tbe claim is that tbe local law gives a priority to -judgments, and under the bankruptcy law, § 64r-b (5), tbe local law should be enforced. This provision is: “(5) Debts owing to any person, who, by tbe laws of tbe states or tbe United States, is entitled to priority.”

Does tbe amendment, by which tbe claim of priority is made under tbe judgment, and not under the attachment, establish a priority ? The object of tbe bankrupt law is equality among creditors, and for this purpose tbe bankrupt may not suffer a judgment to be entered against him within four months before tbe filing -of tbe petition in bankruptcy if be is insolvent. Tbe judgment operate as a preference, and tbe beneficiary knew of tbe insolvency.

It seems that tbe bankrupt was confessedly insolvent at tbe time of tbe judgments, and it would seem that if the present contention is sustained there would be a preference due to a judgment within four months within tbe bankruptcy act, § 67c. Tbe fact that this is allowed by a local statute does not help matters. There could be no preference of any kind, at any time, unless it was allowed by tbe local law. It is such preferences, otherwise legal, that the bankrupt law is designed to prevent. See Fritze Lundt & Co. v. Esperanza Central Sugar Co. 5 Porto Rico Fed. Rep. 1.

It follows, therefore, that the action of the referee in denying preference due to these judgments was correct, and a review must be denied.