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IN RE SILVER

November 12, 1952

IN RE SILVER ET AL.


The opinion of the court was delivered by: Platt, District Judge.

The first ground for the dismissal of the amended petition is in fact a motion to strike therefrom the second act of bankruptcy. The original petition alleged as an act of bankruptcy that within four months next preceding the filing of the petition the alleged bankrupt committed an act of bankruptcy in that with intent to prefer Commodity Credit Corporation, on the 18th day of February, 1952 they made, executed, and delivered to Thomas A. Hagan, of Champaign, Illinois, a chattel mortgage to secure an antecedent debt of more than $300,000 to the Commodity Credit Corporation, and thereby preferred the said Commodity Credit Corporation to the amount of said mortgage. The mortgage was caused to be recorded in Champaign County, Illinois, on February 20, 1952. Petitioners in their amended petition added the fact that Silver Brothers and each of them were insolvent at the time of the transfer. An additional act of bankruptcy was stated, viz.: That Charles H. Willard on the 29th day of May, 1952 did cause a judgment to be taken against Harold A. Silver and John A. Silver, a partnership doing business as the Silver Brothers, while insolvent, said judgment being taken in the amount of $19,975 and costs, and that Silver Brothers permitted an execution to issue and did not cause the removal of said lien or discharge thereof within 30 days, and that they thereby did prefer said creditor.*fn2

Amendments to an involuntary petition in bankruptcy relate back to the date of the filing of the petition where the bankruptcy is imperfectly alleged in the petition. Rule 15(c), Federal Rules of Civil Procedure, 28 U.S.C.A.; General Order in Bankruptcy 37, 11 U.S.C.A. following section 53; In re Claudon, 7 Cir., 73 F.2d 876; In re Yellow Motor Co., 8 Cir., 34 F.2d 118. However, a new act of bankruptcy may not be added by amendment to deprive a creditor of a lien or preference acquired more than four months prior to the date of such an amendment. National Refining Co. v. Pennsylvania Petroleum Co., 8 Cir., 66 F.2d 914; Dworsky v. Alanjay Bias Binding Corporation, 2 Cir., 182 F.2d 803; Collier on Bankruptcy, 14th Ed., Vol. 2, Sec. 18.26.

In the instant case Silver Brothers, individually and as a partnership, were adjudicated a bankrupt on September 27, 1952, on a voluntary petition filed that day. The purpose of the adjudication sought on the amended involuntary petition is to prevent the preference, if any, obtained by the Commodity Credit Corporation's chattel mortgage. The amendment on August 25, 1952, adding a new act of bankruptcy, cannot be permitted to relate back to the date of the filing of the original petition to invalidate this transfer which occurred more than four months earlier.

The second ground presented by the motion to dismiss presents the problem as to whether there are three petitioning creditors who have claims fixed as to liability and liquidated as to amount. The amended petition alleges the petitioners' claims as follows:

The claim of J.E. Reeser and Son is based upon an open account for work, labor, and services performed by the said creditors and furnished to the alleged bankrupt in the construction of an elevator building at Myra Station, Urbana, Illinois. It was completed on the 10th day of November, 1949. There is due and owing J.E. Reeser and Son the sum of $23,619.62.

The claim of R.W. Beeson is based upon the fair, cash, market value of the grain which was delivered by R.W. Beeson to the elevator of the alleged bankrupt at Urbana, Illinois, under an agreement whereby the grain would be stored until Beeson elected to sell the same. It consisted of 839.68 bushels of oats, 393.33 bushels of beans, 237.80 bushels of wheat. After delivery and prior to the 20th day of February, 1952, the alleged bankrupt converted the grain to their own use and sold the same, and thereby became indebted to the claimant for the fair, cash, market value of said grain in the amount of $2,551.25 and the indebtedness has so continued.

The claim of Richard Phillips is based upon 1900 bushels of corn which were delivered by Richard Phillips to the elevator of the said Silver Brothers at Urbana, Illinois, under an agreement that the said grain would be stored until the said Phillips elected to sell the same. The petition alleges as a conclusion that the three creditors have provable claims against the alleged bankrupt, fixed as to liability and liquidated in amount in excess of the value of securities held by them in the amount of $500 or more.

Section 59 of the Bankruptcy Act, 11 U.S.C.A. Ch. 6, § 95, sub. b reads:

"Who may file and dismiss petitions

    "(b) Three or more creditors who have provable
  claims fixed as to liability and liquidated as to
  amount against any person which amount in the
  aggregate in excess of the value of securities
  held by them, if any, to $500 or over * * *."

The existence of such debts and their nature must be alleged with particularity and definiteness so as to enable the court to find from the petition the essential jurisdictional facts. In re St. Lawrence Condensed Milk Corp., 2 Cir., 9 F.2d 896, 899. Also see In re Adams, D.C., 53 F. Supp. 982, 983. It requires no citation for the rule that where a motion to dismiss is presented the facts well pleaded in the petition are taken to be true. Prior to the Bankruptcy Act of 1938 a creditor with a provable claim, though unliquidated, could qualify as a petitioning creditor. The Act of 1938, which amended Section 59, sub. b, required that the claim be "liquidated as to amount". Collier on Bankruptcy, 14th Ed., Vol. 3, Sec. 59.14, page 583.

It must be determined whether the petition sets forth three claims liquidated as to amount. The court said, In re Cook, D.C., 298 F. 125, at page 126:

    "`To liquidate a claim is to determine by
  agreement or litigation the precise amount of
  it.' Webster's International ...

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