1. In § 1(9) of the Bankruptcy Act, which declares that
"creditor" shall "include" anyone owning a claim provable in
bankruptcy, "include" is a word of extension or enlargement, not of
limitation. P.
287 U. S.
516.
Page 287 U. S. 514
2. In § 3a(1) of the Bankruptcy Act, by which a conveyance with
intent to hinder, delay or defraud creditors is declared an act of
bankruptcy, the word "creditors" has the meaning usually attributed
to it when used in the common law definition of fraudulent
conveyances. P.
287 U. S. 518.
3. Under the common law rule and the Bankruptcy Act, a creditor
having only a contingent claim is protected against fraudulent
conveyance. P.
287 U. S. 518.
So
held of a surety company's claim to be indemnified
against a liability that arose before the indemnitor transferred
his property, and was paid off by the surety afterwards.
4. Where the Circuit Court of Appeals reversed upon an erroneous
construction of a statute without disposing of other questions
presented to it, its decree was reversed and the case remanded to
it for further proceedings. P.
287 U. S. 518.
57 F.2d 829 reversed.
Certiorari to review the reversal of an adjudication of
bankruptcy.
MR. JUSTICE BUTLER delivered the opinion of the Court.
July 16, 1930, petitioner, claiming to be a creditor of
respondent in an amount exceeding $7,000, filed a petition in
bankruptcy against her in the United States District Court for
Massachusetts. It alleged that, on March 18, 1930, she conveyed her
property with intent to hinder, delay, and defraud her creditors,
including the petitioner, and that she was insolvent. Respondent's
answer denied that she committed the alleged act of bankruptcy or
was insolvent, or that petitioner was a creditor or had a provable
claim against her. The court heard the case on evidence taken by,
and the report of, a special master, made findings of fact, and
adjudged respondent a bankrupt.
Page 287 U. S. 515
The Circuit Court of Appeals reversed. 57 F.2d 829.
The substance of the findings, so far as material to our
decision, may be briefly stated:
Under date of April 18, 1927, one Mogliani, as principal, and
petitioner, as surety, executed a bond for $15,000 to the treasurer
of the commonwealth of Massachusetts to secure, among other things,
the payment of any judgment that might be obtained in an action
against the principal for injury resulting to any person by reason
of the discharge of fireworks by him at a public exhibition. The
bond was made and delivered pursuant to Massachusetts G.L.1921, c.
148, § 57 C, D. Acts 1921, c. 500. Petitioner became surety in
accordance with an application executed by respondent and in
reliance upon her agreement to indemnify it against every claim or
liability arising on the bond. The application and agreement were
accompanied by a financial statement made by her showing that, in
addition to considerable cash, she owned several pieces of real
estate worth much more than the amount of the bond. September 26,
1927, one Beatrice Ricci was injured by fireworks discharged at a
public exhibition under the direction of Mogliani. She sued him for
damages, and, March 4, 1930, got a verdict for $10,000. March 18,
respondent conveyed all her real estate to one Muollo, and, on the
same day, he mortgaged a part of it and quitclaimed all to her
husband to be held by the latter in trust for the benefit of their
children. These conveyances covered all respondent's property, and
were made without consideration and with specific intent on her
part to hinder, delay, and defraud the petitioner, her only
creditor. The verdict having been reduced, judgment was entered
April 10, 1930, in favor of Ricci and against Mogliani for
$6,650.48. Unable to collect from him, she demanded payment
from
Page 287 U. S. 516
petitioner. And, April 18, 1930, conformably to the statute, a
suit on the bond was brought against petitioner to recover for her
the amount of the judgment. Sometime before it filed the petition
in bankruptcy, petitioner paid to her attorney the sum claimed, and
judgment was entered against it for that amount.
The Circuit Court of Appeals sustained respondent's contention
that, to constitute an act of bankruptcy, a fraudulent transfer
must hinder, delay, or defraud a creditor holding a claim provable
at the time of such conveyance, and held that petitioner's claim
against respondent was contingent, and not provable until the entry
of the judgment against Mogliani, and that therefore respondent
committed no act of bankruptcy. And it directed the District Court
to dismiss the petition.
Unless required by the Act, the meaning of the word "creditors,"
as used in § 3a(1), is not to be restricted to those whose claims
are provable at the time of the fraudulent conveyance.
Section 1 declares:
"The words and phrases used in this title and in proceedings
pursuant hereto shall, unless the same be inconsistent with the
context, be construed as follows:"
"
* * * *"
"(9) 'creditor' shall include anyone who owns a demand or claim
provable in bankruptcy, and may include his duly authorized agent,
attorney, or proxy."
11 U.S.C. § 1(9). And § 3a contains the following:
"Acts of bankruptcy by a person shall consist of his having (1)
conveyed, transferred, concealed, or removed, or permitted to be
concealed or removed, any part of his property with intent to
hinder, delay, or defraud his creditors, or any of them."
11 U.S.C. § 21(a)(1). The decision below shows that, at common
law, the word "creditors" has a broader meaning. But the court
construed the definition of creditor, § 1(9), to be comprehensive,
and the word "include" to be one of limitation, the equivalent of
"include only," and to exclude every person not having a demand
presently
Page 287 U. S. 517
provable. Its ruling that respondent's transfer of her property
to defraud petitioner was not an act of bankruptcy rests upon that
construction.
In definitive provisions of statutes and other writings,
"include" is frequently, if not generally, used as a word of
extension or enlargement, rather than as one of limitation or
enumeration.
Fraser v. Bentel, 161 Cal. 390, 394, 119 P.
509;
People ex rel. Estate of Woolworth v. State Tax
Comm'n, 200 App.Div. 287, 289, 192 N.Y.S. 772;
Matter of
Goetz, 71 App.Div. 272, 275, 75 N.Y.S. 750;
Calhoun v.
Memphis & P. R. Co., Fed.Cas. No. 2,309;
Cooper v.
Stinson, 5 Minn. 522. Subject to the effect properly to be
given to context, § 1 prescribes the constructions to be put upon
various words and phrases used in the act. Some of the definitive
clauses commence with "shall include," others with "shall mean."
The former is used in eighteen instances, and the latter in nine
instances, and in two, both are used. When the section as a whole
is regarded, it is evident that these verbs are not used
synonymously or loosely, but with discrimination and a purpose to
give to each a meaning not attributable to the other. It is obvious
that, in some instances, at least, "shall include" is used without
implication that any exclusion is intended. Subsections (6) and
(7), in each of which both verbs are employed, illustrate the use
of "shall mean" to enumerate and restrict, and of "shall include"
to enlarge and extend. Subsection (17) declares "oath" shall
include affirmation. Subsection (19) declares "persons" shall
include corporations, officers, partnerships, and women. Men are
not mentioned. In these instances, the verb is used to expand, not
to restrict. It is plain that "shall include," as used in
subsection (9) when taken in connection with other parts of the
section, cannot reasonably be read to be the equivalent of "shall
mean" or "shall include only."
Page 287 U. S. 518
There being nothing to indicate any other purpose, Congress must
be deemed to have intended that in § 3a(1) "creditors" should be
given the meaning usually attributed to it when used in the common
law definition of fraudulent conveyances.
See Coder v.
Arts, 213 U. S. 223,
213 U. S. 242;
Lansing Boiler & Engine Works v. Joseph T. Ryerson &
Son, 128 F. 701, 703;
Githens v. Shiffler, 112 F.
505. Under the common law, rule a creditor having only a contingent
claim, such as was that of the petitioner at the time respondent
made the transfer in question, is protected against fraudulent
conveyance. And petitioner, from the time that it became surety on
Mogliani's bond, was entitled as a creditor under the agreement to
invoke that rule.
Yeend v. Weeks, 104 Ala. 331, 341, 16
So. 165;
Whitehouse v. Bolster, 95 Me. 458, 50 A. 240;
Mowry v. Reed, 187 Mass. 174, 177, 72 N.E. 936;
Stone
v. Myers, 9 Minn. 303;
Cook v. Johnson, 12 N.J.Eq.
51;
American Surety Co. v. Hattrem, 138 Or. 358, 364, 3
P.2d 1109, 6 P.2d 1087;
U.S. Fidelity & Guaranty Co. v.
Centropolis Bank, 17 F.2d 913, 916;
Thomson v. Crane,
73 F. 327, 331.
As the circuit court of appeals, upon constructions of §§ 1(9)
and 3a(1) which we hold erroneous, disposed of the case without
deciding other questions there raised, the decree will be reversed
and the case will be remanded to that court for further
consideration and proceedings in harmony with this opinion.
Reversed and remanded.