Court Opinion

ID: 9638104
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:33:32.235697+00
Date Added: 2024-06-11T18:10:03.822318
License: Public Domain

JONES, Circuit Judge
(dissenting).
The construction which the majority of the court place upon Sec. 60, sub. a of the Bankruptcy Act, as amended by the Chandler Act, seems to me to deny the intended effect of the word “antecedent” (as now employed in the act to define the nature of debt capable of furnishing the basis for a preference) and, at the same time, to give an effect to the provision with respect to the presumed time of transfer under certain specified conditions, contrary to the intent of that provision.
The Chandler Act amendment of Sec. 60, sub. a, was the first time that the requirement of a debt’s antecedency was prescribed by a bankruptcy statute in relation to the establishment of a preference.1 True enough, such had actually been the law prior to the passage of the Chandler Act, but only by judicial construction. What, therefore, had been the law in material regard, the Chandler Act redeclared by providing in Sec. 60, sub. a, that “A preference is a transfer * * * of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt * * The Chandler Act made no new or special definition of “antecedent debt” but left the meaning of that term to the law’s prior understanding of it. In these circumstances I am unable to perceive how it can be inferred that Congress intended to- transform a debt actually incurred for a present consideration of full value into an antecedent debt simply because a further provision of Sec. 60, sub. a, postpones to “immediately before bankruptcy” the time of a transfer actually made contemporaneously with the incurrence of the debt but not perfected under local law against a bona fide purchaser and creditors of the transferor.
With a preference unqualifiedly defined, as above quoted, as a transfer for an antecedent debt (the transferor being insolvent and within four months of bankruptcy), it was then provided by the succeeding sentence of Sec. 60, sub. a, that “For the purposes of subdivisions a and b of this section, a transfer shall be deemed to have been made at the time when it became so far perfected that no bona-fide purchaser from the debtor and no creditor could thereafter have acquired any rights in the property so transferred superior to the rights of the transferee therein, and, if such transfer is not so perfected prior to the filing of the petition in bankruptcy * * * it shall be deemed to have been made immediately before bankruptcy.”
From the foregoing provision the majority conclude (and they have support in the views of learned authors2) that “a debt is to be treated as antecedent to a transfer actually made contemporaneously but not perfected as against purchasers and creditors of the debtor until a later time.” And so, according to the prevailing argument, the entire transaction of contemporaneous loan and transfer is split apart and the *898unperfected3 transfer is “deemed to have been made immediately before bankruptcy”, as Sec. 60, sub. a, provides, while the loan for which the transfer was contemporaneously made retains the original date of the actual transaction and thus becomes antecedent in relation to the time of the transfer, as statutorily presumed under the attending circumstances. To so hold seems to be a striking instance of lifting oneself by one’s bootstraps and terminates in a result which I do not think Sec. 60, sub. a, was intended to bring about. When the time of the transfer is brought to “immediately before bankruptcy” by virtue of Sec. 60, sub. a, because of a want of perfection thereof as against a bona fide purchaser and creditors of the transferor, the fact as to whether the unperfected transfer was for an antecedent debt or for a debt contemporaneously incurred is still to be reckoned with on the basis of actuality. It will be observed that Sec. 60, sub. a, does not strike down an unperfected transfer but merely moves by legal presumption, the time of its occurrence to “immediately before bankruptcy”.
In my opinion, the provision in Sec. 60, sub. a, with respect to the presumed time of transfer under the specified conditions was incorporated in the Chandler Act in order to bring constructively within the four months of bankruptcy (and thus render adjudicable on that basis) all unperfected transfers made while the debtor was insolvent more than four months prior to bankruptcy. Before the Chandler Act, the law did not reach such earlier transfers by an insolvent debtor. But under Sec. 60, sub. a, as now amended, any unperfected transfer by an insolvent can be assailed as a preference if, when actually made, the consideration therefor was an antecedent debt. So construed, the provision in "Sec. 60, sub. a, relating to the legally presumed time of transfer, works an important change in the law but it has nothing to do with determining the relative date of the incurrence of the debt for which an unperfectcd transfer was contemporaneously made. Whether the unperfected transfer, when made, was made on account of an antecedent debt or for a present consideration of full money’s worth remains the criterion for determining whether the transfer constituted a preference.
What the bankruptcy law is primarily concerned with is the equitable distribution of a bankrupt’s estate among creditors. A preference is the favoritism by an insolvent debtor of one creditor over others.4 But, in order that a payment or transfer by a debtor to one creditor may amount to a preference, it is necessary that the debtor’s estate be thereby depleted so that the remaining creditors cannot ratably receive commensurate shares on account of their claims.5 A transfer therefore which does not reduce the value of a debtor’s estate because he contemporaneously receives full value in exchange is not a preference. It is hardly likely that Congress intended by bringing an unperfected transfer to “immediately before bankruptcy” to constitute a preference out of a transaction which in no way depleted the debtor’s estate. Bankruptcy does not disapprove of an insolvent debtor’s giving security, even down to the date of bankruptcy, for a present loan of full value. Such action may possibly sustain the breath of fiscal life in a gasping debtor until complete recovery to the ultimate benefit of creditors generally. Indeed, it was in furtherance of that hope that the subject loans in the instant case were given and the transfers made as security therefor. The debtor’s estate was in no way depleted but received a needed and desired present benefit. In any view, a contemporaneous transfer in such circumstances is no more a preference under the Chandler Act amendment of Sec. 60, sub. a, than it was prior to the amendment.
*899Nor am I able to see how Sec. 60, sub. a, was intended, as the majority suggest, “to strike down secret liens even though given for a present consideration”. The time of the making of a secret lien, if perfected under local law, is no more deemed to have been “immediately before bankruptcy” than is the time of the making of a perfected open lien. And, by the same token, an unperfected open lien is subject to the same limitation under Sec. 60, sub. a, as is an unperfected secret lien. In no sense does Sec. 60, sub. a, seek to discriminate between secret and open liens. It simply prescribes the requisites under the bankruptcy law for determining the existence of a preferential transfer. And this, it does without attempting in any way to pass disapprovingly upon what may be a valid (although secret) lien under local law.
The transfers in this case, judged on the basis of having been made “immediately before bankruptcy” (actually they were made within four months of bankruptcy), were valid, having been given as security for debts contemporaneously incurred for full present consideration. Accordingly, I should affirm the order of the District Court.

 3 Collier on Bankruptcy, 14th Ed., par. 60.19, p. 818.

 See McLaughlin, Aspects of the Chandler Bill to Amend the Bankruptcy Act (1937) 4 University of Chicago Law Review 369, 388: Mulder, Ambiguities in the Chandler Act (1940) 89 University of Pennsylvania Law Review, 10, 25; 3 Collier on Bankruptcy, 14th Ed., par. 60.48, p. 962 et seq. But see contra 4 Remington on Bankruptcy, 4th Ed., § 1717 (text and appendix).

 The term “unperfected” as used herein should not be taken to imply that the assignments in this case were wanting in legal validity. Under local law they were binding and conclusive as to the assignor and its creditors from the time they were made. See In re Phillips’ Estate (No. 4), 205 Pa. 525, 531, 55 A. 213, 66 L.R.A. 760, 97 Am.St.Rep. 746. They were, moreover, good against the world except that a subsequent bona fide purchaser without notice could have acquired rights in the assigned accounts superior to the rights of the original assignees if he was first to give notice of his acquisition to the persons owing the accounts. It was only to that limited extent that there was any want of perfection in the transfers.

 3 Collier on Bankruptcy, 14th Ed., par. 60.02, pp. 750-751.

 See National Bank of Newport, N. Y., v. National Herkimer County Bank, 225 U.S. 178, 184, 32 S.Ct. 633, 56 L. Ed. 1042; also 3 Collier on Bankruptcy, 14th Ed., par. 60.19, p. 819.