Armstrong v. Fernandez

Appellees, residing in Juana Diaz, Puerto Rico, filed, on the 29th day of March, A. D. 1906, their petition in duplicate, praying that Pascasio Alvarado, also of Juana Diaz, be adjudged a bankrupt. They averred that Alvarado had, for the greater portion of six months next preceding the filing of the petition, his principal place of business at Juana Diaz, and owed debts to the amount of $1,000, and that petitioners were his creditors and had provable claims amounting in the aggregate, in excess of securities held by them, to the sum of $500, the nature and amount of each of said claims being specified.

The petition further stated 'that said Pascasio Alvarado is insolvent, and that within four months next preceding the date of this petition the said Pascasio Alvarado committed an act of bankruptcy, in that he did heretofore, to wit, on the 28th day of February, A. D. 1906, permit and suffer several of his creditors, to wit, Alberto Armstrong et al., to secure and obtain an advantage through legal proceedings over his creditors, in that he suffered and permitted the said _____ to attach all of his properties and interest, real and personal, by virtue of a writ of fieri facias issued out of the United States district court for, Porto Rico on January 20, A. D. 1906, on a judgment rendered in the above said court at the January term, A. D. 1906, in favor of the said Alberto Armstrong et al., and against the said Pascasio Alvarado. And your petitioners further represent that within four months next preceding the date of this petition, the said Pascasio Alvarado did commit another act of bankruptcy in that he did heretofore, to wit, on the 14th day of March, 1906, in a latter addressed to Eduardo Fernandez, one of the petitioners, admit his inability to pay his debts, and his willingness to be adjudged a bankrupt on that ground.'

Alvarado was served with process March 30, returnable April 13, and on April 24 an order was made by the clerk of the court reciting the absence of the judge from the division of the district, and referring the petition to a referee in bankruptcy in the city of Ponce and district of Puerto Rico.

On the 28th of April counsel for Armstrong, as liquidator of the firm of Boysen & Company, creditors of Alvarado, moved the referee to dismiss the petition because of the defectiveness of verification. The alleged defect was because the justice of the peace who took the jurat had omitted to attach to his signature of 'justice of the peace' the words 'of Juana Diaz, Porto Rico.'

On the 8th of May the referee overruled a motion to amend, and dismissed the petition with costs. Afterwards he filed in the clerk's office an order, dated July 6, stating that a motion for rehearing had been granted, and setting aside the order of dismissal, at the same time directing that the amendment might be made.

Thereafter, July 16, 1906, motion was made by counsel for Armstrong and others in the district court, before the judge thereof, to set aside the order of the referee dated July 6, whereupon the court set aside the clerk's order of reference and ordered the case back for further proceedings. And then the court denied the motion of counsel for Armstrong et al., and gave the petitioning creditors until the 18th to amend their petition in the matter of the verification. On the 17th of July the amendment was made by inserting after the words 'justice of the peace,' at the close of the verification, the words 'of Juana Diaz, Puerto Rico;' and the justice of the peace so certifying.

July 18, Armstrong's attorneys again moved to dismiss on the ground that the petition did not make the averment that the alleged bankrupt did not come within the excepted classes of persons who might not be declared bankrupt. This motion was denied by the court, and the petitioning creditors were allowed to amend in the particular named.

The amendment was made so as to aver that Pascasio Alvarado 'is not a wageearner nor a person engaged chiefly in farming or the tillage of the soil, and who is chiefly engaged in commercial business.'

July 19 Armstrong and others by answer denied 'the allegations of the involuntary petition that the alleged bankrupt does not come within the excepted classes of the bankruptcy act, and that he has committed the acts of bankruptcy therein alleged.'

On the same day the court heard the testimony of the petitioning creditors, Fernandez et al., 'upon the issue raised by said answer.' At its conclusion counsel for opposing creditors moved that the petition be dismissed, which motion was denied. Then the court heard 'the testimony offered by the opposing creditors, and at the conclusion of all the testimony overrules said answer and denial, and directs that a proper order of adjudication and reference be prepared, to which counsel for Armstrong et al. except.'

The order of adjudication was thereupon entered.

An appeal to this court was prayed and allowed, and errors assigned to the effect that the referee in bankruptcy erred in granting a rehearing by his order of July 6; that error was committed in refusing to annul that order of the referee; that the court also erred in overruling the motion of July 18, to dismiss the petition; and that the court erred in adjudicating Alvarado a bankrupt.

The district judge filed findings of fact and conclusions of law under general order 36, as follows:

'On July 16, 1906, when the present incumbent of this bench held his first term of court at Ponce, in this district, the above-entitled matter came or for hearing, and it developed that the petition for involuntary bankruptcy had theretofore been duly filed and sent out to the referee, who, it appears, had first dismissed the petition for informality as to the verification thereof, but thereafter rescinded his order in that regard and permitted the petition to stand. On this state of affairs, Armstrong & Company, in open court, moved that the petition be dismissed for improper verification, in accordance with the first action of the referee. Other creditors resisted this motion. The court thereupon entered an order recalling the matter from the hands of the referee, and in open court permitted the verification nunc pro tunc to be corrected and the petition to be considered as filed, as thus amended. Then the question as to whether or not the defendant was a person 'engaged chiefly in agriculture or the tillage of the soil' was raised by Armstrong & Company, and on the decision of which would depend the right of the court to declare him a bankrupt at all. On this question the court gave the parties opportunity to procure evidence, and set the case down for a succeeding day for that purpose, and did, at the time fixed, hear evidence pro and con on the subject. From the evidence thus adduced the following facts apear:

'That Pascasio Alvarado is now a feeble old man living at Juana Diaz, near said Ponce, with his sons, one of whom conducts his business, which it appears is being wound up; that for more than twenty-five years last past he has been engaged in conducting a large merchantile business at said place, and that he kept a stock of goods ranging from $25,000 upwards, continuously, and was well known to the wholesale merchants of Europe, and perhaps of the United States; that during the last two years he has been, or at least his sons, for him, have been, engaged in selling out the remainder of his stock of goods and in endeavoring to collect the debts belonging to the estate, in cash and in coffee and other products; that at the time the business was put into liquidation and this son took charge of it, and since, the estate was in possession, or quasi possession, of several pieces of land under mortgage, which it collected payments from in the way of portions of the coffee and other crops raised, and perhaps the estate was the absolute owner of some small portion of land itself, on which some coffee is raised. Most of the evidence thus taken is transmitted herewith, duly certified. The court, of course, had the benefit of the full record of the case and of the arguments of counsel and statements made in open court at the time.

'The court held, on this evidence, that the defendant was not a 'wage-earner or a person chiefly engaged in the tillage of the soil,' but that he was, and is, a merchant, and that all the debts he owes were created as a merchant, and that he could, therefore, be declared a bankrupt, and so held. From this action of the court, Armstrong & Company, who have some attachment or other liens on some of his estate, not four months old at the time of the filing of the petition, have appealed.'

Messrs.N. B. K. Pettingill and Harry P. Leake for appellant.

[Argument of Counsel from pages 328-330 intentionally omitted]

No appearance for appellees.

Mr. Chief Justice Fuller delivered the opinion of the court: