STAGEMAN, Bankruptcy Judge
A company's quitclaim conveyance of property to its majority shareholder was not an act of bankruptcy by preferential transfer, since the company had previously assigned its assets to the shareholder. The conveyance was merely the fruit of the claims assigned, being necessitated by the shareholder's assumption of the corporate mantle.
Creditors of the company sought to have it adjudicated an involuntary bankrupt. They used the "fleshless words" of Section 3a(2) and (3) of the Bankruptcy Act as the basis for their charge that the company should be adjudicated. The dispute centered on the second act of bankruptcy contained in Section 3a(2), which is commonly called a preferential transfer.
The company was not prosperous. Most of its debt was owed to one of its organizers, who was also its majority stockholder and a member of its board of directors. The company's assets were assigned to the stockholder in consideration of the indebtedness and the assumption of a mortgage. Thereafter, the stockholder dominated, operated and acted for the company. Using the company name, he settled claims held by the company. As part of one settlement, property was deeded to the company. The company then quitclaimed the lot to the shareholder. The creditors asserted that this conveyance by quitclaim amounted to an act of bankruptcy by preferential transfer.
The court noted that the quitclaim conveyance was merely fruit of the claims assigned previously. The deed was necessitated by the stockholder's assumption of the corporate mantle. All of the company's interest in the claim was gone. The company neither retained nor obtained any property in its own right after the assignment which would be subject to transfer or lien. Only the bare legal title of the lot, held in trust for the stockholder, was transferred. Thus, the court dismissed the creditors' allegations that the company was guilty of committing acts of bankruptcy. See Sec. 3a(2) at ¶ 2073.
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