Stevens v. Nave-McCord Mercantile Co., 150 F. 71 (8th Cir. 1906)

Cardinal rules for the construction of statutes are that the Intention of the legislative body should be ascertained and given effect if possibles p. 72that this" Intention must be deduced from the entire body of the statute-, that the object which the enacting body sought to attain, and the evil which it was endeavoring to remedy, may always be considered to ascertain its intention; that the statute must be given a rational, sensible construction, one that will advance the remedy and repress the wrong, if that interpretation be consonant with its terms; and that the intention of the enacting body when thus ascertained must prevail over technical rules of interpretation and the dry words of the statute.

It is contended that the appeal should he dismissed because Fowler and Deardorff were not jointly iilterested with Martha Stevens in. the order of dismissal, and because they were separately interested in the order which refused to permit them to join in her petition only white she alone was interested in the order of dismissal. But a proceeding in bankruptcy is a proceeding in equity. Upon an appeal from a final decision in equity, all the anterior rulings in the progress of the cause are reviewable. All the parties interested p. 74in the proceedings must be made parties to the appeal and must be given notice of its pendency and hearing. None of the rulings or orders preceding the judgment of dismissal of the petition were appealable in this case, and every party interested in the foregoing rulings had a right to appeal from the final decision and by means of that appeal to review the previous rulings. The ultimate relief which Fowler and Deardorff sought was that which Martha Stevens prayed, an adjudication of Stevens a bankrupt, and the refusal of the court to permit them to join in her petition and the dismissal of the latter were embodied in the same order. The three petitioners were thus jointly interested in, and aggrieved by, this final decision which refused to adjudge Stevens a bankrupt, and they lawfully challenged it by their joint appeal. The motion to dismiss the appeal is denied.

The argument, in support of the contention that creditors who have secured a voidable preference must be counted in computing the number of creditors that must join in the petition, is that such parties have provable claims, and that every one who has a provable claim, and who is not excluded by section 59e (30 Stat. 562, 3 U. S. Comp. St. 1901, p. 3445), is a countable creditor under the bankruptcy law of 1898. It is that section 59b provides that “three or more creditors who have provable claims against any person * * * or if all of the creditors of such person are less than twelve in number, then one of such creditors * * * may file a petition to have him adjudged a bankrupt”; that section 1, subd. 9 (30 Stat. 544 [U. S. Comp. St. 1901, p. 3419]), declares that ‘creditor’ shall .include any one who owns a demand or claim provable in bankruptcy”; that section 59f authorizes “creditors other than original petitioners” to be heard in opposition to the prayer of the petition”; that section 18b (30 Stat. 551 [U. S. Comp. St. 1901, p. 3429]) allows “the btCiiklupt or any creditor” to appear and plead to the petition; that section 57d (30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]) provides that “claims which have been duly proved shall be allowed * * * p. 75unless objection to their allowance shall be made’ by parties in interest * * * ”; that section 57g provides that “the claims of creditors who have received preferences shall not be allowed unless such .creditors shall surrender their preferences”; and that section 59e proT vides that, “in computing the number of creditors of a bankrupt for the purpose of determining how many creditors must, join in the petition, such creditors as were employed by him at the time of the filing of the petition or are related to him by consanguinity or affinity within the third degree, as determined by the common law, and have not joined in the petition, shall not be counted.” Counsel reason with much force and cogency that these provisions of the bankruptcy law clearly show that a preferred creditor has a claim which may always be proved and filed, and which may thereafter be allowed upon his surrender of his preference, and that the express specification in 59e of the creditors who may not be counted in determining how many creditors must join in the petition excludes preferred creditors who are not thus mentioned from the latter catagory under the familiar rule, “Fxpressio unius est exclusio alterius,” and thus unavoidably includes them in those that must be counted. The argument is very persuasive, but it is met by other considerations which must not be disregarded. A creditor who has a voidable preference may make and file his formal proof of claim without surrendering his preference, and in that sense’ his claim is provable. In other words, it is susceptible of a formal statement in writing under oath which may be filed in court, under sections 57a and 5 7c. But the claimant may not secure an allowance of his claim, he may not vote upon it at a meeting of creditors,, he may not obtain any advantage by means of it in the bankruptcy proceedings, until he first surrenders his preference. Sections 57g, 56a (30 Stat. 560 [U. S. Comp. St. 1901, pp. 3442, 3443]); Keppel v. Tiffin Savings Bank, 197 U. S. 357, 361, 367, 25 Sup. Ct. 443, 49 L. Ed. 790. Cardinal rules for the construction of a statute are that the intention of the legislative body which enacted it should be ascertained and given effect, if possible, regardless of technical rules of construction and the dry words of the enactment; that that intention must be deduced not from a part but from the entire law,; that the object which the enacting body sought to attain and the evil which it was endeavoring to remedy may always be considered for the purpose of ascertaining its intention; that the statute must be given a rational, sensible construction; and that, if'this be consonant with its terms, it must have an interpretation which will . advance the remedy and repress the wrong. U. S. v. Ninety-Nine Diamonds (C. C. A. 8th Cir.) 139 Fed. 961, 965, 72 C. C. A. 9, 2 L. R. A. (N. S.) 185.

The discharge of the bankrupt from his debts and the equál distribution of his unexempt property among his creditors of the same class were the chief objects which Congress sought to attain by the enactment of this statute. The preference of one or more creditors over others of the same class was one of the principal evils at which the statute was leveled. Witness the prohibition of the p. 76allowance of the claim of a preferred creditor and of his participation in the meetings of creditors until he surrenders his preference and the right granted to the trustee to recover from him the property he has obtained thereby or its value. Sections 56a, 57g, 60a, 60b (30 Stat. 560, 562 [U. S. Comp. St. 1901, pp. 3442, 3443, 3445]); Pirie v. Chicago Title & Trust Co., 182 U. S. 438, 449, 21 Sup. Ct. 906, 45 L. Ed. 1171; Kippel v. Tiffin Savings Bank, 197 U. S. 356, 361, 25 Sup. Ct. 443, 49 L. Ed. 790. The bankruptcy law contains no express provision that a creditor who holds a voidable preference may so use his claim as to obtain any advantage from it before he surrenders his preference. Should a provision be ingrafted upon this statute by construction by means of which he may avail himself of the act itself to defeat one of its main purposes, a construction by means of which he may use the statute to retain a preference which it was one of the chief objects of the act to avoid? For, if this statute be interpreted to mean that a debtor may confer voidable preferences upon all his creditors but two, and may thereby enable them to hold their preferences and be counted against an adjudication, the evil which Congress sought to remove is promoted, and the remedy it provided is impaired. Such an interpretation does not accord with the spirit of the law. It would not be a reasonable, sensible construction of it, and it seems to be contrary to the intention evidenced by the body of the statute. The most persuasive argument against this conclusion is that creditors holding' voidable preferences are not mentioned in section 59e in the list of those who may not be counted, and the rule that the specification of some is the exclusion of others. But, after a thoughtful consideration of this and the other contentions of counsel, the evil of preferences which the bankrupt law was enacted to remove, the remedy of an equal distribution of the property of the bankrupt which it was passed to provide, the prohibi- • tion of the use of their claims by preferred creditors until they surrender them which the act contains, the general scope of the law and all its provisions read and considered together, and the duty to give to it a rational and sensible interpretation, have forced our minds to the conclusion that it was the intention of Congress that creditors who hold voidable preferences should not be counted either for or against the petition for an adjudication in bankruptcy until they surrender their preferences. This intention, thus deduced, must therefore prevail over the technical rules of construction which counsel for the appellees invoke. The result is: A creditor who holds a voidable preference has a provable claim in the sense that he may make and file the formal proof thereof specified by the bankruptcy law; but he may not procure an allowance of his claim, he may not vote at a creditors’ meeting, and he may not obtain any advantage from his claim in the bankruptcy proceeding before he surrenders his preference.