United States Supreme Court Cases & Opinions

U.S. Supreme Court

Gratiot County State Bank v. Johnson, 249 U.S. 246 (1919)

Gratiot County State Bank v. Johnson

No. 148

Submitted January 20, 1919

Decided March 17, 1919

249 U.S. 246

Syllabus

Although an adjudication of bankruptcy concludes all the world as to the status of the debtor qua bankrupt, it does not bind strangers as to the facts or subsidiary questions of law upon which it is based. P. 249 U. S. 248.

In a suit by the trustee to recover, as illegal preferences, payments made by the bankrupt within four months before the filing of the

Page 249 U. S. 247

involuntary petition, to a creditor who did not appear in the bankruptcy proceedings, the adjudication of bankruptcy is not conclusive evidence of the bankrupt's insolvency when such payments were made, even if based upon allegations and findings that the bankrupt was insolvent throughout the four months and that, during that period, he gave illegal preferences to such creditor, among others. Id.

Sections 18b and 59f of the Bankruptcy Act, allowing creditors to intervene, are permissive only, and, unless a creditor exercises the right, he remains a stranger to the proceedings. P. 249 U. S. 249.

The purpose of Congress in expressly authorizing such interventions in involuntary bankruptcy proceedings was to guard against improvident adjudications and protect those creditors whose peculiar interests might be prejudiced by establishing the status of bankruptcy. P. 249 U. S. 250.

193 Mich. 452 reversed.

The case is stated in the opinion.