Opinion
No. 3920.
Decided June 6, 1950.
The filing of a petition in bankruptcy and for an arrangement in such proceedings does not divest the Superior Court of its continuing jurisdiction over a pending action of assumpsit against the debtor or avoid real estate attachment liens where there has been no adjudication of bankruptcy and the debtor was not shown to be insolvent when the liens were obtained.
ASSUMPSIT, for goods sold and delivered. The writs of the plaintiff Robards and Manchester Paint and Wallpaper Company were' dated September 23 and September 27, 1948, respectively and their real estate attachments were made in the same order on the 24th and 28th of the month. As a result of an agreement between counsel the plaintiffs partially released the attachments on certain real estate upon an understanding with the defendant that all funds realized from the sale of this property were to be "held in escrow" by defendant's counsel as trustee or agent for the attaching creditors and used to pay these creditors in accordance with the priority of their attachments. The defendant sold the property shortly after he obtained the releases realizing sufficient funds to pay the creditors in full. On November 10, 1948, the plaintiffs filed motions for judgment and for an order to compel defendant's counsel to pay over the net proceeds received from the sale. On November 26, 1948, a creditor's petition in bankruptcy against the defendant was filed. A schedule filed by the defendant in the bankruptcy proceedings showed assets of $30,506.66 and liabilities of $28,990.60. On November 30, the plaintiffs' motions were granted by the Superior Court ex parte.
On February 1, 1949, the defendant filed a petition for an arrangement in the pending bankruptcy proceeding which was confirmed in June of the same year.
On March 9, 1949, the Court after hearing made certain findings and rulings, confirming the judgments for the plaintiffs entered on November 30 of the previous fall as of that date and ordered defendant's counsel charged as trustee in each case for the amount of the specifications and costs. On March 25, 1949, the Court further ordered the trustee to file with the Clerk of the Superior Court the money in his hands received from the sale of the real estate pending a determination of the appeal from the orders and judgments. To this order the defendant and his counsel excepted as well as to the findings and rulings on the ground that they were against the law and the evidence.
Transferred by Wescott, J. Further facts appear in the opinion.
J. Morton Rosenblum (by brief and orally), for the plaintiffs.
Maurice A. Broderick (by brief and orally), for the defendant.
The nub of the defendant's case as set forth in his brief is that the jurisdiction of the state court was suspended by the filing of the bankruptcy petition on November 26, 1948, and that all orders made by it since then are invalid. Among other reasons in support of his position he stresses the filing of a petition for an arrangement on February 1, 1949. It appears to us that this claim must be rejected and the orders and judgments of the Superior Court sustained. Viewing the facts here it seems that the state court having obtained jurisdiction maintains it and may issue valid judgments and orders. The Trial Justice properly ruled that to avoid the liens under Bankruptcy Act (11 U.S.C.A., s. 107f) the burden was on the defendant to show that he was insolvent when the attachments were made. Fischer v. Pauline Oil Co., 309 U.S. 294, rehearing denied 309 U.S. 697; 4 Collier, Bankruptcy, 14th (ed.), ss. 67.05, 70.06; 8 C. J. S., Bankruptcy, s. 247. The schedule filed by the defendant showed assets in excess of his liabilities and there has been no adjudication of bankruptcy nor any evidence tending to indicate insolvency at the time in question. The Court's findings as well as his ruling appear sustainable. See Goddard v. Hazelton, ante, 231.
In the absence of any objection by a trustee or anyone claiming under him for the benefit of creditors the plaintiffs would ordinarily be entitled to pursue their remedy against this defendant, who was not shown to be insolvent when the liens were obtained, in the court which first acquired jurisdiction. Wilkinson v. Goree, 18 F (2d) 455, certiorari denied, 274 U.S. 761; Smith v. Bank, 76 Colo. 34; 5 Remington, Bankruptcy (4th ed.), ss. 2042, 2067, 2068; 8 C. J. S. Bankruptcy, s. 261, (a, b). Under the facts here we do not believe the filing of a petition for an arrangement on February 1, 1949, ipso facto overcame the general rule so as to avoid the attachments or divest the Superior Court of jurisdiction. Tiebout v. Milton, 143 F.2d 585; McKenzie v. Bank of Georgia a.; 76 Ga. App. Rep. 539. See also, Fischer v. Pauline Oil Co., 309 U.S. 294. It follows that the order must be
Exceptions overruled.
All concurred.