The opinion of the court was delivered by: BRUCHHAUSEN
Motion by Louis Ostrer, the alleged bankrupt, to dismiss the petition, filed on January 25, 1963, by the Meadow Brook National Bank, a creditor.
The Bank, in the petition, alleged that Ostrer committed an act of bankruptcy within the four month period prior to the date of filing the petition in making a preferential transfer or transfers of his property, while insolvent, and that he should be adjudged a bankrupt.
The movant contends that the petition is defective in failing to specify the names of the transferees receiving preferences, the dates of the transfers, the amounts and nature of payment and that the petition sets forth that there are less than twelve creditors, despite the petitioner's knowledge that they numbered more than twelve.
The petition was filed herein on January 25, 1963. Ostrer was charged therein with the commission of an act of bankruptcy in the following language, viz.:
'4. Within four months next preceding the filing of the petition, the said alleged bankrupt committed an act of bankruptcy in that the alleged bankrupt did heretofore, to wit, on or about the 17th day of October, 1962 * * *
'(b) While insolvent transfer property and various moneys amounting in the aggregate to the value or sum of $ 50,000 to various creditors with intent thereby to prefer such creditors over other creditors of the same class, the names of the creditors receiving such preference being unknown to your petitioners * * *.'
A preferential transfer is an act of bankruptcy. The statute defines it as a transfer of property, made by a debtor, while insolvent, to a creditor for an antecedent debt, within four months before the filing against him of the petition initiating the bankruptcy proceeding. The effect of such a transfer is to enable the transferee to obtain a greater percentage of his debt than some other creditor of the same class. 11 U.S.C. §§ 21, sub. a(2) and 96, sub. a(1).
The petitioner, the Bank, seeks leave of the Court to amend the petition. In the opposing affidavits, the Bank sets forth the proposed amendments, the facts leading up to the filing of the petition. Ostrer, the debtor, restricts his reply thereto to the assertion that they are irrelevant and immaterial. In substance, the Bank alleges that on June 14, 1962, it commenced an action against Ostrer in the New York State Supreme Court to recover the sum of $ 386,948.78 on promissory notes given for loans; that the notes were made, endorsed or guaranteed by Ostrer; that one of the causes of action alleged a fraud perpetrated on the Bank by Ostrer in submitting to the Bank a credit statement, claiming a net of over one million dollars whereas his net worth was considerably less; that Ostrer's counsel obtained an extension of time to answer; that settlement negotiations were had; that Ostrer informed the Bank's representative that his only asset of any consequence was the right to future commissions from renewals of insurance policies originally procured by him, which commissions were valued by him at over $ 50,000 in a credit statement furnished by him to the Bank; that by the middle of October, 1962 Ostrer agreed to factor the commissions and pay to the Bank a lump sum of $ 50,000; that on or about October 16, 1962 Ostrer's representative informed the Bankhs representative that settlement negotiations must be terminated because Ostrer without his knowledge succeeded in factoring the commissions and used the money to pay another creditor; that the Bank learned that the commissions had been factored with Stratford Financial Corp. and that the name of the creditor to whom Ostrer paid the commission was not disclosed.
A petition, alleging an act of bankruptcy in the broad language of the statute, while not jurisdictionally defective is insufficient and not a good pleading. However, the Court has the power to allow its amendment. South Suburban Safeway Lines, Inc. v. Carcards, Inc., 2 Cir., 256 F.2d 934.
It should be noted that the subject petition was not limited to the statutory language but furnished further details, i.e., that the transfer aggregated $ 50,000 and occurred on or about October 17, 1962. Those allegations correspond with the proposed amendment to the effect that Ostrer transferred $ 50,000 to a creditor on or about October 16, 1962.
A pleading, including a petition, may be amended so as to relate back to the date of the original pleading. General Order 37; Section 15(c) of the Federal Rules of Civil Procedure; Bixby v. First National Bank of Elwood, 7 Cir., 250 F.2d 713, certiorari denied 356 U.S. 958, 78 S. Ct. 994, 2 L. Ed. 2d 1065; Dworsky v. Alanjay Bias Binding Corporation, 2 Cir., 182 F.2d 803.
The principal issue is whether the Court should grant the Bank's plea to add the proposed amendment to the subject petition, thus relating it back to the date of its filing on January 25, 1963. The petitioner contends that unless the amendment is allowed, nunc pro tunc, it would be obliged to file a new petition, thus placing the $ 50,000 payment beyond the four months of the new filing date.
Whether or not the amendment should be related back depends upon the facts and the applicable law. Cases in this Circuit are as follows: In re J. P. Linahan, Inc., 2 Cir., 133 F.2d 688; Dworsky v. Alanjay Bias Binding Corporation, 2 Cir., 182 F.2d 803; In re Ideal Mercantile Corporation, D.C., 143 F.Supp. 810, affirmed 2 Cir., 244 F.2d 828, 829; Matter of Segal, Eastern District of New York, August 10, 1954, unreported, file No. Bk-51615, affirmed in 2 Cir., 220 F.2d 36, referred to therein as Dina Mfg. Co. v. Segal.
In the Linahan case, supra, the petitioner alleged a transfer of $ 40,000, without further detail. The Court ...