been held that an attaching creditor may resist an involuntary petition without surrendering his attachment,160 and so may a judgment creditor whose judgment is unsatisfied,161 or, a secured creditor having a provable claim for the excess of the value of his securities.162 Stockholders of a bankrupt corporation may be permitted to intervene in the proceedings upon a proper showing, notably that they had attempted to induce the directors or managers of the corporation to take remedial action,163 although a receiver has already been appointed by a State court.164 The procedure after answer is considered elsewhere.165

c. Practice. Whether creditors "join in the petition" or "file an answer," they should enter an appearance.166 This is usually enough. If the application is to "join in" the petition, it may be by a verified

6,215; In re Mendelsohn, Fed. Cas. 9 420; In re Austin, Fed. Cas. 662; In re Jones, Fed. Cas. 7,442; In re Vogel, Fed. Cas. 16,981. Contra: In re Boston, etc., Co., Fed. Cas. 1,679; and, under the law of 1841, Dutton v. Freeman, Fed. Cas. 4.210; In re Tallmadge, Fed. Cas. 13,738; Jackson v. Wauchula Manufacturing and Timber Co. (C. C. A., 5th Cir.), 36 Am. B. R. 408, 230 Fed. 409.

160. In re Moench (D. C., N. Y.), 10 Am. B. R. 590, 123 Fed. 977.

161. Matter of Carey (C. C. A., 2d Cir.), 42 Am. B. R. 553, 254 Fed. 688, rev'g 42 Am. B. R. 187.

162. Johansen Bros. Shoe Co. v. Alles (C. C. A., 8th Cir.), 28 Am. B. R. 299, 197 Fed. 274.

163. Ogden & Jamison v. Gilt Edge Mines Co. (C. C. A., 8th Cir.), 34 Am. B. R. 893, 225 Fed. 723; In re Eureka Anthracite Coal Co. (D. C., Ark.), 28 Am. B. R. 758, 197 Fed. 216. Compare Matter of Hargadine-McKittrick, etc., Co. (D. C., Mo.), 39 Am. B. R. 142, 239 Fed. 155.

164. Matter of Beaver Cotton Mills (D. C., Ga.), 48 Am. B. R. 689, 275 Fed. 498; Matter of Grafton Gas & Electric Light Co. (D. C., W. Va.), 48 Am. B. R. 689, 275 Fed. 498.

165. See under Section Eighteen of this work.

166. For practice, compare In re Taylor, 1 N. B. N. 412. For forms, see "Supplementary Forms," No. 74, Vol. III, post.

Pleading in intervention- Creditors on a petition to intervene are only bound to allege facts establishing their right to intervene and to file an answer; they need not show facts constituting a good answer. Matter of Gibney Tire & Rubber Co. (D. C., Pa.), 39 Am. B. R. 355, 241 Fed. 879.

Where, after a bankrupt has answered an involuntary petition, admitting a preferential payment to a creditor and declaring his willingness to submit to adjudication, such creditor filed an answer denying the receipt of a preference, after which the petition was amended so as to charge another act of bankruptcy consisting of a preferential payment to another creditor, which the bankrupt likewise admitted and declared his willingness to submit to adjudication on that ground, the creditor's answer raises merely academic questions and the adjudication is properly entered upon the preference charged in the amended petition. In re Cleary (D. C., Pa.), 24 Am. B. R. 742, 179 Fed. 990.

petition, and is usually heard ex parte. If granted, the applicant becomes as much a petitioning creditor as if he had joined in the original petition.167 Whether a new act of bankruptcy can be alleged in such a petition is doubted. If such act was committed more than four months before, though within four months of the filing of the original petition, it certainly should not be.168 In any event, a petition. which thus changes the issue should not be made, save on notice to all parties. The better practice is to amend the original petition,169 after the order of intervention is granted. All parties to the proceeding should be notified of the entry of the order; this is usually done by the intervenor's attorney. Professional courtesy suggests that such notice be accompanied by copies of the petition and order,169a if any. Any party to the proceeding may respond that the intervenor is not a creditor;170 otherwise, a reply is usually unnecessary. If the order has been granted, such a response can be brought upon motion to vacate or an order to show cause. Notice should be given all parties who have appeared. Where the validity of the claim of a petitioning creditor is put in issue and the claim is adjudged valid, the adjudication is res adjudicata in the hearing of a subsequent objection to the allowance of the claim on the same ground.171

d. Notice to creditors. The bankruptcy statute carefully selects and specifies the instances in which it intends to give the creditor the right to notice.172 The filing of a petition in involuntary proceedings by proper parties, making the jurisdictional allegations, operates as lis pendens, and is notice to all the world; and no other notice to creditors of the proceeding is necessary.' 173 The only instance in which any right to notice is given the creditor, as to the disposition of an involuntary petition, is when it is proposed to dismiss the proceedings by consent of the parties, or for want of prosecution.174

167. Compare In re Beddingfield (D. C., Ga.), 2 Am. B. R. 355, 96 Ted. 190.

Form of petition.-See Forms in Bankruptcy, No. 75, Vol. III, post.

168. For a sufficient reason, see In re Lacy, Fed. Cas. 7,965.

169. See under Section Eighteen of this work.

169a. Form of order.- See Forms in Bankruptcy, No. 76, Vol. III, post. 170. Compare In re Taylor, 1 N. B. N. 412.

171. Ayres v. Cone (C. C. A., 8th Cir.), 14 Am. B. R. 739, 138 Fed. 778. 172. Bankr. Act, § 58.

173. Gratiot County State Bank v. Johnson (U. S. Sup. Ct.), 43 Am. B. R. 357, 39 Sup. Ct. 263, rev'g 38 Am. B. R. 518, 160 N. W. 544; Coppard v. Gardner (Tex. Ct. of Civ. App.), 40 Am. B. R. 777, 199 S. W. 650, citing Collier on Bankruptcy (11th ed.),

858.

174. In re Billing (D. C., Ala.), 17

VIII. AMENDMENTS OF PETITIONS

Questions dealing with the right to amend petitions as to the number of petitioning creditors and the amount and nature of their claims have been fully considered under a previous section.175

IX. DISMISSALS OF PETITIONS

176

A proceeding once begun must result either in an adjudication or a dismissal. Subsection g has to do only with dismissals, other than on the merits. Its close connection with § 58-a (8) should be noted. Under that section is considered fully the necessity for notice to creditors of a motion to dismiss by consent or for want of prosecution.' Reference should also be had to § 18, ante, wherein is considered the right to dismiss by consent or for failure to prosecute."" Subsection g is clearly intended to prevent the use of the court as a means to compel a settlement with the petitioning creditor. It is in line with the principle that the filing of a petition confers jurisdiction as to all creditors as well as over all property; it guarantees them notice of the step which may end such jurisdiction.178

See Sec

Am. B. R. 80, 145 Fed. 395.
tion Fifty-eight, ante, "Of a proposed
dismissal of petitions."

175. See section 18, ante, subtitle, "Amendments to petitions."

176. See section 58, ante, subtitle, "Of proposed dismissal of a proceeding."

177. See section 18, ante, subtitle, "Dismissal by consent or for want of prosecution."

178. Matter of Malkan (C. C. A., 2d Cir.), 44 Am. B. R. 433, 261 Fed. 894; Matter of Glory Bottling Co. (C. C. A., 2d Cir.), 49 Am. B. R. 181, 283 Fed. 110..

SECTION SIXTY

PREFERRED CREDITORS

§ 60. Preferred Creditors.—a A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. Where the preference consists in a transfer, such period of four months shall not expire until four months after the date of the recording or registering of the transfer, if by law such recording or registering is required.*

b If a bankrupt shall have procured or suffered a judgment to be entered against him in favor of any person or have made a transfer of any of his property, and if, at the time of the transfer, or of the entry of the judgment, or of the recording or registering of the transfer if by law recording or registering thereof is required, and being within four months before the filing of the petition in bankruptcy or after the filing thereof and before the adjudication, the bankrupt be insolvent and the judgment or transfer then operate as a preference, and the person receiving it or to be benefited thereby, or his agent acting therein, shall then have reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference, it shall be voidable by the trustee and he may recover the property or its value from such person." And, for the purpose of such recovery, any court of bankruptcy, as hereinbefore defined, and any *Subsection a was amended in 1903 by adding the words "within four months before the adjudication" to the first sentence, and by adding all of the last sentence.

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State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.*

c If a creditor has been preferred, and afterwards in good faith gives the debtor further credit without security of any kind for property which becomes a part of the debtor's estates, the amount of such new credit remaining unpaid at the time of the adjudication in bankruptcy may be set off against the amount which would otherwise be recoverable from him.

d If a debtor shall, directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property to an attorney and counselor at law, solicitor in equity, or proctor in admiralty for services to be rendered, the transaction shall be re-examined by the court on petition of the trustee or any creditor and shall only be held valid to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate.

Analogous provisions: In U. S.: As to voidable preferences, Act of 1867, § 35, R. S., §§ 5128, 5130-a; Act of 1841, § 2; Act of 1800, § 28; As to fraudulent conveyances, Act of 1867, § 35, R. S., §§ 5129, 5130-a; As to transfers out of the ordinary course of business being presumptively fraudulent, Act of 1867, § 35, R. S., § 5130; As to fraudulent preferences being an objection to a discharge, Act of 1867, § 44, R. S., § 5110. In Eng. As to "fraudulent" preferences, Act of 1883, § 48, Act of 1914, § 44; as to "undue" preferences being an objection to a discharge, Act of 1914, § 26 (3) (i).

In Can.: Act of 1919, §§ 31, 32, 33.

Subsection b was amended in 1903. And again in 1910. As originally enacted this subsection read as follows: "If a bankrupt shall have given a preference within four months before the filing of a petition, or after the filing of the petition and before adjudication, and the person receiving it, or to be benefited thereby, or his agent acting herein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee and he may recover the property or its value from such person." By the amendment of 1903 it was made to read as follows: "If a bankrupt shall have given a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from the trustee. And for the purpose of such recovery, any court of bankruptcy, as hereinbefore defined, and any State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction."