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that the balance, viz., $90 should be paid by the trustee of the estate to the bankrupt.
The claim of the mortgagee, therefore, to the extent of $418.89, less $40, making a total of $378.89, is allowed, and the balance of the mortgagee's claim under the chattel mortgage is disallowed.
An order may be entered accordingly.
In re MCKANE.
(District Court, E. D. New York. July 30, 1907.) 1. BANKRUPTCY-GROUNDS FOR REFUSING DISCHARGE-TRANSFER OF PROPERTY
WITH INTENT TO DEFRAUD CREDITORS.
A conveyance by a bankrupt of real estate in New York, which is re quired to be recorded by Rev. St. N. Y. pt. 2, c. 3, tit. 5, § 1, as amended by Laws 1896, c. 572, p. 652, may be made the basis of an objection to the bankrupt’s discharge, under Bankr. Act July 1, 1898, c. 541, 30 Stat. 550, $ 14b (4) [U. S. Comp. St. 1901, p. 3427], as amended by Act Feb. 5, 1903, c. 487, 32 Stat. 797 [U. S. Comp. St. Supp. 1905, p. 684], if made with intent to hinder, delay, or defraud his creditors, although made more than four months prior to his bankruptcy, if it was recorded within
that time. 2. SAME-FINDINGS OF FACT BY SPECIAL COMMISSIONER.
A finding by a special commissioner, to whom was referred a bankrupt's application for discharge and objections thereto, that a transfer of property by the bankrupt was not in fact made with intent to hinder, delay, or defraud creditors, should be followed, unless there is no evidence to
CHATFIELD, District Judge. The bankrupt, James McKane, has applied for a discharge, to which objections have been filed. The specifications of those objections have been referred to a special commissioner, to hear and report his opinion thereon. This special commissioner has reported his opinion to be “that the specifications have not been sustained and that the bankrupt's discharge should be granted.” The specifications alleged that the bankrupt was not entitled to a discharge, on the ground that at some time subsequent to the first day of the four months immediately preceding the filing of the petition, which was upon November 29, 1905, the bankrupt, with intent to hinder, delay, and defraud his creditors, transferred two pieces of real estate, and within the same period, transferred certain personal property, concealed certain property from his trustee, did not keep books of account, and made a false oath as to his property. Upon all of these specifications the special commissioner has found in favor of the bankrupt, and upon the motion to confirm the special commissioner's report exception is principally taken to the finding upon the allegation that subsequent to the first day of the four months prior to the filing of his petition the bankrupt had transferred real property.
This objection is based upon the provisions of the bankruptcy law. Section 4, subd. “b,” par. 4, (Act February 5, 1903, c. 487, 32 Stat. 797 [U. S. Comp. St. Supp. 1905, p. 684]), provides that the application for the discharge of a bankrupt shall not be granted where it appears that the bankrupt has "at any time subsequent to the first day of the four months immediately preceding the filing of the petition transferred, removed, destroyed, or concealed, or permitted to be removed, destroyed, or concealed any of his property with intent to hinder, delay, or defraud his creditors.” Section 3, subd. “b” (Bankr. Act July 1, 1898, c. 541, 30 St. 546 [U. S. Comp. St. 1901, p. 3422]), in defining acts of bankruptcy which have occurred within four months prior to the filing of the petition, uses the following language:
"Such time shall not expire until four months after (1) the date of the recording or registering of the transfer or assignment when the act consists in having made a transfer of any of his property with intent to hinder, delay, or defraud his creditors or for the purpose of giving a preference as hereinbefore provided, or a general assignment for the benefit of his creditors, if by law such recording or registering is required or permitted, or, if it is not, from the date when the beneficiary takes notorious, exclusive, or continuous possession of the property unless the petitioning creditors have received actual notice of such transfer or assigninent."
Section 60 says:
"(a) Where the preference consists in a transfer, such period of four months shall not expire until four months after the date of the recording or registering of the transfer, if by law such recording or registering is required.
"(b) If a bankrupt shall have given a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.”
Section 67, par. "," is as follows:
"All conveyances, transfers, assignments, or incumbrances of his property, or any part thereof, made or given by a person adjudged a bankrupt under the provisions of this act subsequent to the passage of this act and within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors, or any of them, shall be null and void as against the creditors of such debtor, except as to purchasers in good faith and for a present fair consideration.”
Attention is called by the opposing creditor to the fact that section 241, c. 547, p. 607, Laws of 1896, known as the "Real Property Law," of New York, provides as follows:
"A conveyance of real property, within the state, on being duly acknowledged by the person executing the same
may be recorded in the office of the clerk of the county where said real property is situated."
And chapter 572, p. 652, Laws of 1896, amending section 1, tit. 5, c. 3, pt. 2 (1st Ed.) of the Revised Statutes, is as follows:
“Every conveyance of real estate within this state shall be recorded in the office of the clerk of the county where said real estate shall be situated.
By chapter 83, p. 77, of the Laws of 1852, the register of Kings county takes the place of and has entire charge of the matter of recording deeds, in lieu of the county clerk. The objecting creditor claims that the transfers objected to by him are such as must be recorded, under the laws of New York, in order to have them valid as against the creditors, and that they were recorded within the period within which the transfer of property, with intent to hinder or defraud creditors, is declared void under the bankruptcy law.
The point seems to be well taken that the bankruptcy law contemplates making a transfer, recorded within the period of four months prior to the act of bankruptcy, such a transfer as may be attacked by creditors. A transfer of property, of such a character that it may be held fraudulent, can be vacated both as against the bankrupt and as against the grantee, and, if the grantee does not record the instrument, his delay in so doing gives to the creditors of the bankrupt an opportunity to show the character of the transaction. In a fraudulent transaction, the grantee is presumed to be a party to the fraud, and does not occupy the position of an innocent holder for value. If, therefore, an instrument has been made by a bankrupt and recorded within the statutory period, it is a question of fact whether it was done with intent to defraud, hinder, or delay his creditors, or to give a preference to any one of them. A transfer made with this intent in view can be set aside, if recorded within the prescribed period. The special commissioner has held in the present case that the actual transfer, as shown by the evidence, occurred long prior to the date of record. He has decided the issue of fact in favor of the bankrupt, holding that the transfers were not with intent to hinder, delay, or defraud creditors, and his decision of this issue of fact should be followed, unless there is no evidence shown supporting the bankrupt's contention.
The report will be confirmed.
FIRESTONE TIRE & RUBBER CO. V. VEHICLE EQUIPMENT CO.
(Circuit Court, E. D. New York. August 6, 1907.) COURTS-JURISDICTION OF FEDERAL COURT-DISTRICT OF SUIT AGAINST COR
Where a state contains more than one federal judicial district, a corporation of the state, for the purpose of bringing suit or being sued in a federal court, is, at least prima facie, a resident and inhabitant of the district in which it has its principal office, as designated in its certificate or articles of incorporation in accordance with the requirement of the state law.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 13, Courts, $ 814.
Jurisdiction over corporations, see note to St. Louis, I, M. & S. Ry. Co. V. Newcom, 6 C. C. A. 174.]
On Motion to Set Aside Service of Summons and Complaint.
CHATFIELD, District Judge. The Vehicle Equipment Company is a corporation organized under the laws of the state of New York, and its original certificate of incorporation fixes Waverly, in the county of Tioga, and state of New York, as the location of its principal office. On the 27th day of March, 1906, a petition in bankruptcy was filed against the defendant in the Eastern district of New York, in which district the Vehicle Equipment Company had its manufacturing plant and what might be called its office for the transaction of general business. The petition in bankruptcy recited that the defendant had, for the greater portion of six months next preceding the date of filing of the petition, its principal place of business in the borough of Queens, city of New York, and state of New York, and was engaged in the manufacture and sale of electric automobiles and vehicles. The alleged bankrupt, upon the 6th day of April, 1906, filed a consent that the company be adjudicated a bankrupt, which consent was in the form of a resolution, which authorized the counsel of the company to admit the allegations of the petition and consent to an immediate adjudication in bankruptcy. Subsequently the property of the bankrupt was sold, and in the petition drawn in behalf of the receiver for approval of the sale a recital was made that the Vehicle Equipment Company was a business corporation, located and having its principal business office in the borough of Queens, city of New York, etc. An offer of composition was prepared, and a petition presented to the court, which contained the same recitals as in the petition for sale.
The plaintiff in this action is a corporation organized under the laws of the state of West Virginia, and a resident and citizen of that state. Under these circumstances it was possible to serve the defendant in either the Northern district of New York, where it has an office at the village of Waverly, or in the Eastern district of New York, where the bankruptcy proceedings were pending. The plaintiff started this action, and obtained the issuance of a summons, in the United States Circuit Court for this (the Eastern) district, upon the 25th day of April, 1907. At that time the property of the defendant was in the hands of the trustee in this district. Subsequent to the service of the process in this action, the property in the hands of the trustee, upon the confirmation of the composition, was returned to the bankrupt corporation, and there is nothing in the papers to show whether the corporation is at present doing business or where it is located.
The present action is one for the recovery of money for goods sold and delivered and services rendered, and the only ground of jurisdiction in the United States Circuit Court would seem to be diversity of citizenship. For the purposes of a bankruptcy proceeding the Eastern district of New York was apparently a proper district in which to file a petition in bankruptcy. The provisions of the statute give jurisdiction to the District Courts of the United States to “adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their (the courts') respective territorial jurisdictions for the preceding six months, or the greater portion thereof." The judiciary acts of 1887 and 1888 provide that “no civil suit shall be brought * * * against any person by any original process or proceeding in any other district than that whereof he is an inhabitant,” except that, "where the jurisdiction is founded only on the fact that the action is between citizens of different states, suits shall be brought only in the district of the residence of either the plaintiff or defendant." Act March 3, 1887, c. 373, § 1, 24 Stat. 552, as amended by Act Aug. 13, 1888, c. 866, § 1, 25 Stat. 433 (U. S. Comp. St. 1901, p. 508).
It was held in the cases of Shaw v. Quincy Mining Co., 145 U. S. 444, 12 Sup. Ct. 935, 36 L. Ed. 768, and Southern Pacific Co. v. Denton, 146 U. S. 202, 13 Sup. Ct. 44, 36 L. Ed. 942, that a corporation incorporated in but one state of the United States cannot be compelled to answer in another state, where it has its usual place of business, if the sole ground of jurisdiction be diversity of citizenship. In the case of Galveston, Harrisburg & San Antonio Railway Co. v. Gonzales, 151 U. S. 496, 14 Sup. Ct. 401, 38 L. Ed. 248, the Supreme Court of the United States considers at length the meaning of the word "inhabitant," as set forth in the law of 1888 and in section 740 of the Revised Statutes [U. S. Comp. St. 1901, p. 587]:
"When a state contains more than one district, every suit not of a local nature, in the Circuit or District Courts thereof, against a single defendant, inhabitant of such state, must be brought in the district where he resides."
The court quotes from the opinion of Judge Story in the case of Picquet v. Swan, 5 Mason, 35, Fed. Cas. No. 11,134, and also from the case of Shaw v. Quincy Mining Co., supra, to the effect that the word "inhabitant” is equivalent to the word “citizen," and is used to avoid the incongruity of speaking of citizens of anything less than a state, when the word “inhabitant” would apply to a citizen of any district in a state which was divided into more than one district. 504 of 151 U. S., page 404 of 14 Sup. Ct. (38 L. Ed. 248), the court says:
"In the case of a corporation the question of inbabitancy must be determined, not by the residence of any particular officer, but by the principal offices of the corporation, where its books are kept and its corporate business is transacted, even though it may transact its most important business in another place.”
"If the corporation be created by the laws of a state in which there are two judicial districts, it should be considered an inhabitant of that district in which its general offices are situated, and in which its general business, as distinguished from its local business, is done."
In this case the decision was by a divided court, but in the dissenting opinion it is also stated that, as between citizens of different states, the statutes of the state giving the corporation a residence for its principal office control the jurisdiction for the purpose of bringing suit. The case at bar is extreme, in the sense that the office maintained by the defendant corporation at Waverly, N. Y., was purely for organization and residence purposes. Personal taxes were paid by the corporation at Waverly; but no business, in the ordinary sense of the term, was transacted there. Nothing is offered to show that the office at Waverly has ever been given up, and, on the contrary, the opposing affidavits state that the corporation has no general office, other than its principal business office, designated to be located at Waverly, Tioga county, in the Northern district of New York.
The plaintiff contends that such designation is conclusive only as against the corporation and not in its favor, that the corporation can abandon the place designated and locate its actual existence elsewhere, and that the averments in the bankruptcy papers estop it from deny