Court Opinion

ID: 8190277
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:13:10.869662+00
Date Added: 2024-06-11T16:40:35.163743
License: Public Domain

ViNJE, J.
Under the allegations of the complaint and the •evidence in the case the vital question to determine is whether or not the preference Avas made November 11, 1908, or November 30, 1908. If it was made on the former date, then it did not come within the condemnation of subd. a of sec. 60 of the United States bankruptcy act [32 U. S. Stats, at Large, *442p. 199, sec. 13; U. S. Comp. Stats. (Supp. 1909) p. 1314},. wbicb provides that: '
“A person shall be deemed to have given a preference if,, being insolvent, he has, within four months before the filing of' the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.”
The evidence substantially supports the allegations of the complaint, and it seems to us it appears conclusively from such evidence that on the 11th of November, 1908, more than four months before the petition in bankruptcy was filed,, Cotey & Son made an absolute sale of their stock of goods to Salter, the terms of the sale being that Salter should pay $4,000 for the stock, and that payment should be made to the wholesale houses in full, and the balance of the $4,000 should be prorated between the two banks. The provision in th©' agreement that Cotey & Son should O K or approve the wholesale bills in no way affected the title to the money Salter paid. The evidence shows that on the 11th of November Cotey &• Son owed wholesale houses from $2,300 to $2,800; they owed the Bank of Pittsville 'about $2,700, and the Bank of Grand' Rapids about $2,400, so that if not a single bill of the wholesale houses had been approved the whole $4,000 belonged to the banks named. The balance ultimately to be paid the-banks would of course depend upon the amount of bills belonging to wholesale houses approved. If they were all approved, only from $1,200 to $1,700 of the $4,000 would be prorated by the banks.
On November 11th Salter took possession of the stock of goods and dealt with it as his own. He deposited $4,000 in the Bank of Pittsville and paid it out pursuant to the agreement, paying on the 30th day of November the sum of $503.50» *443to tbe defendant bank on its claim against tbe bankrupts. Tbe trial court instructed tbe jury tbat “tbe funds in tbe bands of tbe Pittsville bank, against wbicb tbe Salter check was drawn and out of wbicb it was paid, for tbe purposes of tbis case, was tbe money or assets of Cotey & Son, and as sucb subject to be lawfully applied to tbe payment of tbeir lawful debts.” In so instructing tbe jury tbe court erred, because tbe sale was an absolute one and tbe money in question belonged to tbe creditors mentioned in tbe agreement. Cotey & Son bad no title to or control over it. At best tbeir power to approve or disapprove of bills could only affect tbe proportionate share tbe wholesale-house creditors and tbe banks should receive. They could not reserve a penny for themselves nor for any other creditors.
Tbe result arrived at as to tbe effect of tbe transaction of November 11, 1908, renders it unnecessary to consider tbe other questions discussed in tbe brief, namely, whether Cotey & Son were insolvent on tbe 30th day of November, 1908, whether tbe cashier, Redford, knew, or bad reasonable cause to believe, tbat A. B. Cotey & Son were insolvent on said date or intended to give a preference to the defendant bank, whether tbe payment of tbe amount of $503.50 enabled tbe defendant bank to obtain a greater percentage of its debt against Cotey & Son than any other creditor of its class, and whether tbe payment by Salter to tbe cashier, Redford, was made with tbe knowledge and consent of A. B. Cotey & Son.
By the Court. — Judgment reversed, and cause remanded with directions to dismiss tbe complaint.