Opinion
Wilzin & Halperin, of New York City (Michael Halperin, of New York City, of counsel), for alleged bankrupt.
David Greenberg, of New York City, for petitioning creditors.
CONGER, District Judge.
This is a petition to review an order of the Referee dismissing an amended involuntary petition in bankruptcy. The review relates to the findings made by the Referee with respect to an allegedly fraudulent transfer and two payments made by the bankrupt which are asserted to have been preferential. The original petition was filed on December 26, 1939, and the amended petition containing the specifications passed upon by the Referee was filed on January 30, 1940.
The alleged bankrupt has an exhibit in the entertainment section of the New York World's Fair. On July 10, 1939, when it had no surplus funds, it issued its check to Gardner Displays, Inc., for the sum of $3,000 which was paid under date of July 12th. Gardner Displays then paid over this sum to one Edward James, former president of the alleged bankrupt who thereupon transferred his stock in D.W.F., Inc., to the alleged bankrupt corporation. Entries were made in the books under date of September 30, 1939, indicating the true nature of the transaction. Petitioner argues, however, that the transaction was concealed until that date.
The Referee thought that the transfer was perfected on July 10, 1939, and four months having passed before the filing of the petition, it could not constitute an act of bankruptcy. I can see no reason to disturb his ruling. The date of the transfer controls, irrespective of when the creditors ascertain it. Congleton v. Roberts, 5 Cir., 61 F.2d 902; Jones v. Coates, 8 Cir., 196 F. 860.
On July 19, 1939, most of the creditors of the alleged bankrupt, including the petitioning creditors, entered into a stipulation whereby they agreed to accept payment of their respective debts 'as and when distribution can be made from the earnings of said D.W.F. Inc.' The consideration recited was that no salaries would be paid to the officers of the alleged bankrupt, and that the corporation would keep a working capital balance of $3,000. Admittedly, after the date of the stipulation, the alleged bankrupt paid certain sums to two creditors, one of whom was a party to the agreement, and these payments are asserted to have been preferential.
The Referee found, however, that these payments were not current obligations, which at the time of payment could have been reduced to judgment, and thus were not payments to creditors of the same class as the petitioning creditors. In addition, he found that there was no proof of the intent to prefer, necessarily connected with illegal preferences.
The petitioning creditors argue that the agreement of July 19th, should have been ordered rescinded by the Referee on the ground that part of the consideration was an understanding that one of the persons interested in the exhibit would invest $2,500 in the alleged bankrupt corporation, which had not been done. The Referee rejected the argument on the grounds that petitioners had not pleaded their right to rescission, and he struck out the testimony with respect to the alleged failure of consideration, because it had not been connected with the issues set forth in the petition. I agree with the Referee. The technical requirements of a rescission were in no way met by the petitioners. See In re Bancunity Corporation, D.C., 36 F.2d 595. Thus the agreement stood and the creditors allegedly preferred cannot be considered as creditors of the same class as petitioners. In any event, the Referee has found that there was no intent to prefer and this finding should not be upset except for compelling reasons. Order 47 of the General Orders in Bankruptcy, 11 U.S.C.A.following section 53.
Motion to review is denied. Settle order on notice.