Commopts, Inc., a Corporation, Bankrupt-Appellant v. Frank Chinn, Creditors-Appellees

Officers of Commopts, Inc., on behalf of the corporation, transferred to themselves over $100,000 of corporate funds. Certain employee-creditors petitioned for an adjudication in bankruptcy, contending that that payment constituted an act of bankruptcy under 11 U.S.C. § 21 (a)(1), in that the corporation by this act of its officers “concealed, removed, or permitted to be concealed or removed * * * part of [the corporation’s] property, with intent to hinder, delay or defraud [its] creditors * * *The bankruptcy court agreed and entered an order adjudicating the corporation a bankrupt. The district court affirmed and this appeal was taken by the bankrupt.

Before the bankruptcy court the corporation asserted that transfer to the officers was to get the funds safely beyond the reach of the California Commissioner of Corporations, the SEC and the equity receiver of one of the corporation’s debtors. Thus the corporation in effect asserted that it meant to conceal the funds, but only as to certain claimants who were not creditors within the meaning of § 1(11) of the Bankruptcy Act, 11 U.S.C. § 1 (11). The bankruptcy court found otherwise: that the officers intended to keep the…