Case Name: REBER v. LOUIS SHULMAN & BRO.
Court: United States District Court for the Eastern District of Pennsylvania
Jurisdiction: United States
Decision Date: 1910-05-26
Citations: 179 F. 574
Docket Number: No. 1
Parties: REBER v. LOUIS SHULMAN & BRO.
Judges: 
Reporter: Federal Reporter
Volume: 179
Pages: 574–575

Head Matter:
REBER v. LOUIS SHULMAN & BRO.
(District Court, E. D. Pennsylvania.
May 26, 1910.)
No. 1,
Sept. Sess. 1909.
Bankruptcy (§ 303 ) — Preference—Burden, of Proof.
In an action by a trustee in bankruptcy against an accommodation indorser of the bankrupts’ paper to recover an alleged preference, consisting of the bankrupts’ payment of the debt to the holder of the paper within the statutory period relieving defendants from their contingent liability, the burden was on the trustee to prove by evidence establishing more than a suspicion that the bankrupts intended thereby to prefer defendants when the debt was so paid, and that defendants knew or had reasonable cause to believe that such preference was intended.
[Ed. Note. — Eor other cases, see Bankruptcy, Cent. Dig. § 458; Dec. Dig. § 303.*]
'Action by J. Howard Reber, trustee of J. Stern & Sons, bankrupts, against Louis Shulman & Bro. to recover a preference. On motions for a new trial and for judgment notwithstanding the verdict. Motion for judgment notwithstanding the verdict allowed.
Clinton O. Mayer, for plaintiff.
Samuel J. Gottesfeld, for defendant.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date» & Rep’r Indexes

Opinion:
J. B. McPHERSON, District Judge.
This is a suit to recover a preference, not of the usual kind where payment has been made directly to a defendant, but where the payment has been made to one person and another person has benefited thereby. Shulman & Bro. were accommodation parties to commercial paper, of which Charles Nemcof was the holder. The bankrupts were primarily liable, and paid the debt directly to Nemcof within the statutory period, thus relieving the defendants of their contingent liability. It was conceded at the trial that the bankrupts knew of their insolvency when payment was made, and also that the payment gave to Nemcof a forbidden advantage. This left for determination the questions (1) whether the bankrupts intended to prefer the defendants when payment was made to Nemcof, and (2) whether the defendants knew or had reasonable cause to believe that such a preference was intended. These were questions of fact, and the jury answered them in favor of the trustee; but it is necessary now to consider the preliminary question of law that was reserved at the trial, whether there was submissible evidence upon these points, and I have come to the conclusion that such evidence was not presented. In my opinion the evidence was too slight to carry the case to the jury upon the vital question whether the defendants knew or had reasonable cause to believe at the time when payment was made that the bankrupts intended to give them a preference. The testimony need not be discussed in detail. This has been fully done in the briefs that have been submitted upon these motions, and I shall content myself with the remark that the evidence upon which the trustee seems to rely leaves entirely too much to inference. The burden of proof was upon him to establish all the elements of the preference, and as it seems to me he did no more than furnish some ground for suspicion that the defendants may have had cause to believe that the bankrupts were not in a satisfactory financial condition. Upon the equally vital point whether there was reasonable cause for the belief that the bankrupts intended the payment to be preferential, I think that the evidence can hardly be said to exist. At all events, it was so slight that no verdict based upon it should be permitted to stand. It is my duty, therefore, to sustain the motion for judgment notwithstanding the verdict.
The motion for a new trial is refused, and the clerk is directed to enter judgment in favor of the defendants upon the point reserved notwithstanding the verdict. To the entry of such judgment an exception is sealed for the plaintiff.