Sloan v. Lewis - 89 U.S. 150 (1874)
U.S. Supreme Court
Sloan v. Lewis, 89 U.S. 22 Wall. 150 150 (1874)
Sloan v. Lewis
89 U.S. (22 Wall.) 150
1. Under the thirty-ninth section of the Bankrupt Act, enacting that a person may, in certain events, be decreed a bankrupt against his will "on the petition of one or more of his creditors the aggregate of whose debts provable under this act amounts to at least $250," it is not necessary that the principal of the debt should amount to $250. If, with interest plainly due on it, according to what appears on the face of the petition, it amounts to at least $250, that authorizes the decree.
2. In a case where the decree is thus authorized -- in other words, where jurisdiction exists in the district court of the United States to decree a person a bankrupt and the person has been decreed a bankrupt accordingly, a party against whom the assignee in bankruptcy brings suit in another court, not appellate, to recover assets of the bankrupt's estate cannot show that payments made on account had reduced the petitioning creditor's debt so low as that the bankrupt did not owe as much as the petitioning creditor in his petition alleged. The finding of the district
court of the existence of a debt to the amount of $250 due from the party proceeded against to the petitioning creditor is conclusive, in a collateral action, of the fact that a debt of that amount was due.
The Bankrupt Act [Footnote 1] enacts that any person owing debts and committing certain acts,
"Shall be adjudged a bankrupt on the petition of one or more of his creditors, the aggregate of whose debts provable under this act amounts to at least $250."
This enactment being in force, Bell filed a petition in the District Court of the United States of North Carolina, praying that a certain Rhyne might be decreed a bankrupt. The petition alleged,
"That your petitioner's demands against the said Rhyne exceed the sum of $250, and that the nature of them is as follows."
It then set forth three sealed notes amounting in the aggregate to $249.35, and on comparing the dates of the three notes with the date when the petition in bankruptcy was filed, it appeared that several years' interest was due on them.
The "debt" therefore, using the word "debt" in its strict common law parlance, was less than $250, though, with the interest added, it much exceeded that sum.
The debtor was, on this petition, decreed, against his will a bankrupt, and one Lewis was appointed his assignee.
Lewis now sued one Sloan in a state court of North Carolina to set aside certain conveyances made by the bankrupt in fraud, as was alleged, of the Bankrupt Law, and one of the defenses in the action was that the adjudication of bankruptcy was void because the record showed that the debt owing to the petitioning creditor was less than $250, and consequently that the court had no jurisdiction in the premises.
The state court in which the suit was brought considered that the district court of the United States which made the adjudication in bankruptcy had, in fixing the amount of the debt, properly added the interest to the principal of the debt. In addition it refused to allow the defendant to show that the debt of $249.35 had been reduced by a credit of $64 which the creditor petitioning in bankruptcy had not allowed -- a reduction, it may be noted, which was not alleged in the pleadings. Its view was that
"the petition of Bell in the bankrupt court had been passed on by that court and the matter presented by it there adjudicated, and that other courts, not appellate, could not go behind the record."
And fraud on the Bankrupt Act being found in the conveyances made by the bankrupt, it set them aside. This decree being affirmed by the supreme court of the state, the case was now brought here by Sloan, claiming under the conveyances.