able men must draw the same conclusion from them that the question of negligence is ever considered as one of law for the court."

These questions have been submitted to two juries composed of intelligent and fair-minded men, and in each instance they have found against the defendant, and I think the last verdict should be allowed to stand.

The motion for new trial is overruled.

WOOLFORD et al. v. DIAMOND STATE STEEL CO.
MADEIRA, HILL & CO. et al. v. SAME.

(District Court, D. Delaware. May 27, 1905.)
Nos. 122, 123.

1. INVOLUNTARY BANKRUPTCY-INSUFFICIENT PETITION-AMENDMENT.
Where two petitions in involuntary bankruptcy were filed in the dis-
trict court of the United States for the district of Delaware against a
corporation April 12, 1905, each alleging only one and the same act of
bankruptcy, namely, the appointment because of its insolvency of re-
ceivers and putting them in charge of the property of the corporation
December 12, 1904, by the circuit court of the United States for the
same district, and each of the petitions was substantially defective, al-
though curable by amendment; and where it further appeared that all
of the petitioning creditors in each petition before the appointment of
receivers by the circuit court took part in procuring or consented to
and approved the appointment of receivers and, thus, aided and assisted
in the commission of the act on which their petitions in bankruptcy
were founded; and where it further appeared that there was no evi-
dence that the corporation was insolvent within the meaning of that
term as used in the bankruptcy act; and where it further appeared
that the estate of the corporation was in course of administration by
the circuit court through its receivers, and that the receivers had faith-
fully, diligently and efficiently discharged their duty, and that what-
ever delay may have occurred was the result of causes over which they
had no control; and where it further appeared that the throwing of
the corporation into bankruptcy would cause unnecessary expense, delay
and confusion in the proper administration of its property: Held, that
applications to amend the petitions should be denied and motions for
the dismissal of the petitions should be granted.

2. SAME.

If the petitions had not been defective, the petitioners would have had a right under the bankruptcy act to proceed to support them by evidence and, if successful, to have the corporation adjudged bankrupt, regardless of any delay, confusion or expense attending such a course. But the petitions being fatally defective, leave to amend should not be granted, thereby withdrawing the administration of the property from the circuit court, unless for cogent reasons, not appearing in this case. (Syllabus by the Court.)

In Bankruptcy.

Robert H. Richards, Franklin S. Edmonds, Horace G. Knowles, and Dwight M. Lowry, for petitioning creditors.

H. H. Ward, A. C. Gray, and C. L. Ward, for the bankrupt.

BRADFORD, District Judge. Two petitions in involuntary bankruptcy were filed April 12, 1905, against The Diamond State Steel Company, a corporation of Delaware; one of them, being No.

122, purporting to have been signed and verified by or on behalf of Napoleon B. Woolford, the Sloss-Sheffield Steel and Iron Company, the Wilmington Oil Company and John R. Kilmer, and the other, being No. 123, by or on behalf of Madeira, Hill & Company, assignees of the George B. Newton & Company, the William H. Perry Company, and John J. Caine, Jr., Howard M. Plitt and George L. Plitt, trading as Caine & Plitt. In each of these petitions the commission of only one act of bankruptcy is alleged, namely, that December 12, 1904, and within four months next preceding the filing of the petition in bankruptcy, James P. Winchester and Howard T. Wallace were, because of the insolvency of The Diamond State Steel Company, appointed receivers and put in charge of the property of that company by the circuit court of the United States for the district of Delaware under a law of that state, pursuant to an order or decree in a suit in equity brought against the company by the firm of Henry A. Hitner's Sons. Appearances having been duly entered for the alleged bankrupt, a motion was by leave of the court made in each case that the petition be dismissed. Among the grounds upon which the motion in No. 122 is based the first is as follows:

"That it doth not appear by said petition, or by the record in said cause, that this court hath jurisdiction to adjudge the said The Diamond State Steel Company a bankrupt, in that it doth not appear either that said company hath had its principal place of business, resided or had its domicile within the territorial jurisdiction of said court for the six months, or the greater portion thereof, preceding the date of filing said petition, or that said company did not have its principal place of business, reside or have its domicile within the United States, but had property within the jurisdiction of said court, or that said company had been adjudged a bankrupt by a court of competent jurisdiction without the United States and had property within the jurisdiction of said court."

The averment in the petition in this connection is as follows:

"That The Diamond State Steel Company, a corporation created and existing under the laws of the State of Delaware, is engaged principally in manufacturing pursuits and owes debts to the amount of one thousand dollars and over and is insolvent."

The motion in No. 123 assigns six grounds, the first of which is as follows:

"That it doth not appear by said petition or by the record in said cause that this court hath jurisdiction to adjudge the said The Diamond State Steel Company a bankrupt, in that it doth not appear that said company is a corporation engaged principally in manufacturing, trading, printing, publishing, mining or mercantile pursuits."

The allegation in the petition to which the above ground applies is as follows:

"That The Diamond State Steel Company, a corporation organized under the laws of the state of Delaware, in the said district, has for the greater portion of six months next preceding the date of filing this petition had its principal place of business at the City of Wilmington, in the County of New Castle, and State and district aforesaid, and owes debts to the amount of $1,000.00."

Each petition omits an essential averment. The petition in No. 122 does not set forth facts to satisfy the requirements of section 2

(1), and that in No. 123 fails to disclose a case coming within section 4b of the bankruptcy act, of July 1, 1898, c. 541, 30 Stat. 545, 547, [U. S. Comp. St. 1901, pp. 3420, 3423]. The defect in each petition is substantial and, while not an incurable one, is fatal unless cured by amendment. The other grounds assigned relate to the verification of the petitions, but, while not doubting the sufficiency of some of them, need not be discussed. During or at the conclusion of the argument on the motions to dismiss the counsel for the petitioning creditors asked leave to amend the two petitions in such manner as to cure their defects, and thereupon a hearing was had upon this application. Thereafter it was suggested by the court to counsel that, as no affidavits or exhibits had been presented during the hearing bearing upon the propriety of allowing the proposed amendments, the court was not in possession of the facts necessary to an exercise of sound discretion in deciding the question of amendment. Leave was accordingly granted to counsel on both sides to produce affidavits and exhibits in support of or opposition to the application, and the application was fully heard May 15 and 16, 1905, on voluminous affidavits and exhibits. The hearing included the application in each case and was had on the same proofs, it having been agreed by counsel in open court that all affidavits and exhibits produced, whether entitled in one case or the other, should be treated as evidence in both so far as applicable in their nature. Both applications may conveniently be considered in one opinion. The records of this court show that an involuntary petition in bankruptcy, No. 105, against The Diamond State Steel Company was filed August 9, 1904, and that another involuntary petition in bankruptcy, No. 106, against the same company was filed August 10, 1904. In No. 105 Howard T. Wallace and James P. Winchester were appointed temporary receivers in bankruptcy August 13, 1904, and duly qualified. They were, among other things, authorized to conduct the business of the alleged bankrupt until the dismissal of the petition, the qualification of a trustee, or the further order of the court, and directed forthwith to make and file an inventory of all property which should come into their possession as receivers, together with a list of debts and credits due from and to the estate in their charge. The two cases were consolidated August 15, 1904. An inventory, as of August 15, 1904, was filed by the receivers September 20, 1904, showing that the par value of the preferred stock of The Diamond State Steel Company was $2,250,000.00, and of its common stock $2,000,000.00; that its issue of mortgage bonds was $1,000,000.00, on which there was some accrued interest; that the real estate of the company was valued on its books at $4,608,905.99; that the mortgage bond issue of $1,000,000 covered the real estate and works of the company which, in the opinion of the receivers, were worth, for the purpose of its business, considerably more than the amount of the bond issue; that, in addition to the real estate and plant of the company, its assets amounted to $511,537.71, and its liabilities, other than mortgage bonds, to $385,979.83. The Diamond State Steel Company, having filed its answer to the consolidated petitions denying insolvency, which was essential to the main

tenance of each of the petitions, the consolidated petitions were set for a hearing November 25, 1904, and on the next following day, the counsel for the petitioning creditors having abandoned the prosecution of the cases, the court removed the receivers and ordered that due notice of the proposed dismissal of the proceedings in bankruptcy be given to creditors; that the receivers forthwith deliver the entire estate in their hands to The Diamond State Steel Company, except the amount allowed to them for their compensation and for counsel fees, and that within ten days they file an account of all their transactions. After due notice to creditors, including 228 mailed written notices and public notice by advertisement to all creditors of the company, the consolidated petitions. were, December 12, 1904, in the absence of objection from any source, dismissed for want of prosecution; the court retaining jurisdiction for the purpose of passing upon the account of the receivers. The account was filed December 6, 1904, and subsequently was favorably reported on by the master, save in one comparatively unimportant particular, satisfactorily explained by the master, and was approved by the court. The account furnishes strong evidence of the capacity and diligence of the receivers and their fidelity to the trust imposed upon them, and that under their management the interests of the company and its creditors had been conserved and promoted in the face of adverse circumstances. From the time of their appointment in December, 1904, in the suit of Henry A. Hitner's Sons the receivers have had the charge and management of the property and business of The Diamond State Steel Company under the orders and decrees of the circuit court.

The granting of leave to amend the petitions, which might result in throwing The Diamond State Steel Company into bankruptcy, is a subject which has received careful consideration. In a suit between two individuals where one of them has made a slip in his pleadings, fatal unless corrected, the court usually will allow an amendment on or without terms, if not calculated to subject the other party to undue hardship or prejudice. Under such circumstances to refuse an amendment may and probably would not be an exercise of sound discretion. But there are cases in which leave to amend should be denied in the exercise of such discretion, owing to the character and relationship of the persons and interests to be affected. In one of the pending bankruptcy cases three alleged unsecured creditors, and, in the other, four, seek to have a large estate, real and personal, in which hundreds of creditors are interested, now in custodia legis and in course of administration by the circuit court, pursuant to the desire of an overwhelming majority of creditors holding an overwhelming proportion of the amount of unsecured claims, turned over to this court for administration in bankruptcy. If the petitions were not defective, the petitioners would have a right under the bankruptcy act to proceed to support them by evidence, and, if successful, to have The Diamond. State Steel Company adjudged bankrupt, regardless of any delay, confusion or expense attending such a course. But the petitions being fatally defective, leave to amend should not be granted and

the administration drawn from the circuit court unless for cogent reasons. It should at least appear that a clear preponderance of the interests of the unsecured creditors, to say nothing of the holders of mortgage bonds, would better be conserved or promoted by proceedings in bankruptcy than by the administration of receivers acting by authority of the circuit court. It is material to allude to the circumstances which led to the bringing of the suit of Henry A. Hitner's Sons and the appointment of receivers in December, 1904. Joseph G. Hitner, a member of the firm of Henry A. Hitner's Sons, in his affidavit states in substance, among other things, as reasons for his joining in the bill of complaint in the circuit court, that Wallace, subsequently appointed as one of the receivers, represented to him that by permitting the affairs of The Diamond State Steel Company to be administered under a general receivership, the best interests of the creditors would be preserved; that a greater opportunity would be given to Wallace to perfect certain plans for the reorganization of the company, involving a sale of its plant, about which he was then negotiating; that by such reorganization the creditors would be paid in full; that the policy of the said receivership would be one of quick and profitable liquidation and an early payment of all the claims of the general creditors; that all the plans for such reorganization could be more quickly and surely accomplished under a general receivership than under the bankruptcy proceedings. Hitner further states that in December he was of opinion that by reason of the then condition of the market, it would not be advisable to sacrifice the assets of the company in bankruptcy proceedings at that time, and' that if a general receiver should be appointed under the state law, with power to operate the plant, "by the time the spring came, a more advantageous sale of the said assets could be made, and the interests of the creditors thereby protected." Louis C. Madeira, Jr., Edward Page, Joseph G. Hitner, John J. Caine, Jr., Allen R. Hoffer and Eugene W. Stirlith, in a joint affidavit, state in substance, among other things, that they are the duly authorized representatives of creditors of The Diamond State Steel Company; that deponents used their influence with the creditors of the company to secure a discontinuance of the bankruptcy proceedings instituted in August, 1904, relying, in so doing, upon the representations of Wallace that the personal assets of the company were sufficient to pay all of its general creditors, and that by proceedings under a general receivership there would be a quick and profitable liquidation of such assets. Frank W. Todd in his affidavit states in substance, among other things, that for several years he has been acting treasurer of The Diamond State Steel Company; that pursuant to a call for the holding of a meeting of the unsecured creditors of the company, which was sent to all of its unsecured creditors, a meeting of such creditors was held in Wilmington, Delaware, November 22, 1904. It further appears. from Todd's affidavit that upwards of two-thirds in amount of the unsecured creditors of the company were present at the meeting, so called and held, either in person or by duly authorized representatives; such creditors being 229 in number, whose claims aggregated