Cross-references - Continued: To the Official Forms: Debtor's petition and schedules, No. 1. See also Forms in Bankruptcy, Nos. 64-71, 75, 76, Vol. III, post. SYNOPSIS OF SECTION WHO MAY FILE AND DISMISS PETITIONS I. Filing Petitions Generally, 1207. a. Comparative legislation, 1207. b. Scope of section, 1207. c. Motive of petitioner, 1208. d. Liability of petitioning creditors when unsuccessful, 1208. II. Who May File Voluntary Petitions, 1209. a. In general, 1209. b. Jurisdictional facts, 1209. c. Where involuntary petition has been filed, 1210. d. Form of petition and practice, 1212. III. Who May File Involuntary Petitions, 1212. a. In general, 1212. b. Creditors who were not such at time of commission of act of bankruptcy, 1213. c. Creditors who have provable claims, 1214. (1) IN GENERAL, 1214. (2) STOCKHOLDERS AND OFFICERS OF CORPORATIONS, 1216. d. Secured creditors, 1217. e. Creditors who have received preferences, 1217. f. Creditors who have attachments or garnishments, 1219. g. Creditors who have an advantage through fraud, 1220. h. Estoppel of creditors, 1220. (1) IN GENERAL, 1220. (2) ASSENT TO OR PARTICIPATION IN ASSIGNMENT OR RECEIVERSHIP, 1221. IV. Number of Creditors and Amount of Claims, 1223. a. Time controlling number and amount, 1223. b. Transactions affecting number of claims and amount, 1224. c. Creditors who are estopped from filing not to be counted, 1227. d. Counting creditors when but one creditor petitions, 1228. e. Exclusion of employees, relatives and officers, 1228. V. Petitions to be in Duplicate, 1229. a. In general, 1229. b. Waiver of duplicate, 1229. VI. Practice if Answer Avers More Than Twelve Creditors, 1230. a. In general, 1230. b. Filing "list of creditors," 1230. c. Practice, 1231. VII. Intervention by Creditors, 1231. a. In general, 1231. b. Who may intervene, 1235. d. Notice to creditors, 1237. VIII. Amendments of Petitions, 1238. IX. Dismissals of Petitions, 1238. I. FILING PETITIONS GENERALLY 3 a. Comparative legislation. In most of the continental countries, a single creditor, no matter what his debt, may petition. The English law permits one creditor, as well as two or more, in not less than £50, to apply. The same is true of the Canadian act, the minimum amount being $500.2 Our laws as to voluntary petitions are considered elsewhere. As to involuntary, the law of 1800 permitted a petition "by any one creditor" in $1,000, or two creditors in $1,500, or three creditors in $2,000; the law of 1841 allowed one creditor in $500 to petition; while the law of 1867, which originally gave the right to one or more creditors in $250, was, in 1874, so amended that it could be exercised only by one-fourth in number of the creditors the aggregate of whose provable debts amounted to onethird of all. The present act seems a compromise.* b. Scope of section. This section has to do primarily with: (1) who may file petitions; and secondarily with: (2) the practice where an answer denies that the creditors are less in number than twelve, (3) the intervention of creditors other than the petitioning creditors, and (4) the dismissal of petitions other than on the merits. It should 1. English Act of 1914, § 4 (1) (a); Williams on Bankruptcy (12th ed.), p. 40. 2. Can. Bankr. Act of 1919, § 4; Duncan on Bankruptcy, p. 123. 3. See under section 4 of this work. 4. See analogous provisions, supra. VOL. II-7 always be read in connection with § 18. Its limited scope and the other sections controlling on the frame of, the allegations in, the verification of, and the service of process under, involuntary petitions, are indicated elsewhere. c. Motive of petitioner. The motive of the bankrupt in filing a voluntary petition or of a creditor in filing an involuntary petition. should not be considered. If it be proved by competent evidence that the bankrupt is insolvent and committed acts of bankruptcy and the other necessary jurisdictional facts are present, an adjudication in bankruptcy will follow therefrom, and what reasons or motives inspired or instigated the proceedings are of no importance and will not defeat the adjudication." 7 d. Liability of petitioning creditors when unsuccessful.-A petition filed by bona fide creditors, without malice, without libelous and slanderous charges, with reasonable grounds for believing the allegations contained in the petition, with probable cause, and upon legal advice, although not successfully prosecuted, will not sustain an action for damages; but where a bankruptcy proceeding is instituted without probable cause and with malicious intent, an action for malicious prosecution will lie. Material allegations in a petition in bankruptcy are absolutely privileged and cannot be made the basis of an action for libel." A State court has the power to restrain, by injunction, a creditor from prosecuting a fraudulent and oppressive 5. Matter of Hargadine-McKittrick, etc., Co. (D. C., Mo.), 39 Am. B. R. 142, 239 Fed. 155; Bank of Elberton v. Swift (C. C. A., 5th Cir.), 46 Am. B. R. 75, 268 Fed. 305; Matter of Automatic Typewriter & Service Co. (C. C. A., 2d Cir.), 46 Am. B. R. 377, 271 Fed. 1; Matter of People's Warehouse Co. (D. C., Miss.), 48 Am. B. R. 56, 273 Fed. 611; State of Alabama v. Montevallo Mining Co. (D. C., Ala.), 48 Am. B. R. 283, 278 Fed. 989. 6. See also Am. B. R. Dig., § 286. 7. Harvey v. Gartner, 34 Am. B. R. 301, 67 So. 197; Matter of Terusaki (D. C., Wash.), 39 Am. B. R. 256, 238 Fed. 934. 8. Wilkinson-Goodfellow-Brooks Shoe Co. (C. C., Mo.), 15 Am. B. R. 554, 141 Fed. 218; Matter of Moehs & Rechnitzer (D. C., N. Y.), 22 Am. B. R. 286, 174 Fed. 165; Norin v. Scheldt Mfg. Co. (Ill. Sup. Ct.), 46 Am. B. R. 570, 130 N. E. 791. In England, see Williams on Bankruptcy (12th ed.), p. 58. 9. Libel, privileged communications. - Where, in an action for libel, the complaint alleges that defendants maliciously and wrongfully published concerning the plaintiff a statement in a petition in bankruptcy alleging that the bankrupt had made a fraudulent general assignment and had removed and concealed property with intent to defraud his creditors, the property so removed and concealed including goods recently purchased from defendants, and that a large quantity of said goods were in the possession of the plaintiff and being offered for sale by the plaintiff at a price much less than the present market value, characterizing the action of the plaintiff as dishonest and petition in bankruptcy against a debtor, especially in cases where the petitioning creditor has, prior to filing the petition, sought the aid of the State court with reference to the claim held by him." II. WHO MAY FILE VOLUNTARY PETITIONS11 a. In general. Subsection a provides that any qualified person may file a petition to be adjudged a voluntary bankrupt. Section 4 prescribes who may become a voluntary bankrupt. The discussion under that section may prove useful in determining whether a person is qualified. "Any qualified person" means, therefore, "any person except a municipal, railroad, insurance or banking corporation." A State court has no right to enjoin a party from applying to the court of bankruptcy to be adjudged a voluntary bankrupt." b. Jurisdictional facts. The court is bound to ascertain whether the required jurisdictional facts exist; it must be alleged in the petition, that the debtor is within the jurisdiction of the court, that he owes debts and that other essential requirements have been complied with.13 Only on these grounds can a creditor vacate the adjudication." "Debts" means debts, demands, or claims provable in bankruptcy.15 Debts not discharged, unless provable, are thus not debts. for the purpose here discussed. A debtor owing but one provable in collusion with the bankrupt to defraud said creditors and also assist him in concealing his assets, the alleged libel complained of being a statement in a pleading or petition filed in a court in pending judicial proceedings, pertinent and relevant to the issue there presented, was absolutely privileged and, appearing upon the face of the complaint, said complaint was demurrable. Rosenberg v. Dworetsky (Sup. Ct., App. Div., N. Y.), 24 Am. B. R. 583, 139 N. Y. App. Div. 517, 124 N. Y. Supp. 191. Petition against partnership.-A petition, in an action for malicious prosecution, which alleges that the defendant and others filed a petition in bankruptcy against a certain co-partnership, that it was insolvent and bankrupt, and that the plaintiff was a member thereof, and caused a subpoena to be issued and served on the plaintiff, does not state a cause of action, as the petition in bankruptcy was not filed against the plaintiff. Peterson v. Peregoy & Moore Co. (Iowa Sup. Ct.), 40 Am. B. R. 67, 163 N. W. 224. 10. Pusey v. Bradley, 46 How. Pr. 255, 1 N. Y. Super. Ct. 661. 11. See also Am. B. R. Dig., §§ 121154, 106-199. 12. Fillingin v. Thorton, 12 N. B. R. 92, 49 Ga. 384; Matter of HargadineMcKittrick, etc., Co. (D. C., Mo.), 39 Am. B. R. 142, 239 Fed. 155. 13. In re Carbone (Ref., Wash.), 13 Am. B. R. 55. 14. In re Gromme, 1 Fed. 464; In re Goodfellow, Fed. Cas. 5,536; In re Atlantic Mut. Life Ins. Co., Fed. Cas. 628; In re Carbone (Ref., Wash.), 13 Am. B. R. 55. 15. In re Yates (D. C., Cal.), 8 Am. B. R. 69, 114 Fed. 365. Compare §§ 1 (11), 63-a. debt may be adjudged a voluntary bankrupt.16 If the single debt is not dischargeable, because based on fraud or deceit, the proceeding will not lie.1 17 c. Where involuntary petition has been filed.18 The practice of allowing a bankrupt to file a voluntary petition in bankruptcy after an involuntary petition had been filed against him appears to have been disapproved by the court under the act of 1867 and an adjudication upon a voluntary petition was set aside,19 the court evidently not following an earlier case decided under the act of 1841, holding that a debtor might file a voluntary petition after an involuntary petition had been filed against him.20 Under the present act it is 16. Single provable debt.- In the case of In re Schwaninger (D. C., Wis.), 16 Am. B. R. 427, 144 Fed. 555, it appeared from the schedules of the bankrupt that he had but one debt, which was in the form a of judgment. The creditor raised the point that § 4 requires that a person must have debts," clearly indicating that it was the purpose of the act to apply only to such debtors as have a plurality of debts. The court applied subdivision 29 of § 1, which provides that "words importing the plural number may be applied to and mean only a single person or thing," and it was held that this provision made § 4 applicable to a debtor who owed a single debt. The court said: "It is difficult to understand why a debtor owing a single obligation should not fall within the merciful policy of the act. It is an accidental circumstance that the indebtedness was not distributed among two or more creditors. His case is clearly within the spirit of the act, and no good reason has been suggested why he should not be within its scope and operation. It is my belief that Congress had not in mind any purpose to discriminate against an unfortunate debtor who is oppressed by a single obligation, and that the will of Congress will be effectuated by making the definition above recited, applicable to section 4, and treating the term 'debt' where it occurs in such section as equivalent to 'debts.'" See In re Yates (D. C., Cal.), 8 Am. B. R. 69, 114 Fed. 365; In re Maples (D. C., Mont.), 5 Am. B. R. 426, 105 Fed. 922. 17. Where the only claim has been adjudicated by a State court to be based upon deceit and false representations by the bankrupt inducing the sale of a farm, the court should dismiss the petition. Matter of Shepardson (D. C., Vt.), 34 Am. B. R. 284, 220 Fed. 186; Re Maples (D. C., Vt.), 5 Am. B. R. 426, 105 Fed. 919; Re Yates (D. C., Cal.), 8 Am. B. R. 69, 114 Fed. 365; Re Colaluca (D. C., Mass.), 13 Am. B. R. 292, 133 Fed. 255. 18. See also Am. B. R. Dig., § 198. 19. Rule under former act. In the case of In re Stewart, 3 N. B. R. 108, Fed. Cas. 13,419, an adjudication was made upon a voluntary petition but the same was set aside by the court on motion. The court in granting the motion said: "It was never intended by the bankruptcy act and no correct rule of practice can tolerate that when a creditor has instituted proceedings to enforce his debtor into bankruptcy such debtor should be allowed to become a bankrupt and to be adjudicated before the determination of the creditor's petition. To permit such a practice might work a most flagrant wrong upon the rights of the petitioning creditor." 20. In re Canfield, 1 N. Y. Leg. Obs. 234, 5 Law. Rep. 415. See also In re |