Court Opinion

ID: 6247070
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:02:44.727517+00
Date Added: 2024-06-11T08:59:19.312341
License: Public Domain

Opinion by
Mr. Justice Potter,
The plaintiff, as trustee in bankruptcy, filed this bill, to compel the return of certain securities, which had been transferred to the defendant, by the firm of Stahl & Straub, under circumstances which it was alleged constituted an unlawful preference, and a violation of the provisions of the national bankruptcy act. The result of the transaction was, that by the payment of about $8,000, the appellant received securities of the par value of more than $20,000.
It is admitted that at the time of the arrangement, the firm of Stahl & Straub were really insolvent, and that appellant was aware that they had suspended business on November 24,1899, and had not resumed at the date of the transaction, which was upon December 22, 1899. Six days later, a petition in bankruptcy was filed against them, and upon January 24, 1900, they were adjudged bankrupts.
We have then, the fact of insolvency and that the debtor firm made a transfer of securities within about a month before the filing of a petition in bankruptcy against them; and that this transfer of securities would enable the appellant to obtain a greater percentage of his debt than other creditors of the same class. Under the bankruptcy law, such a preference is voidable by the trustee, if the person receiving it “ had reasonable cause to believe that it was intended thereby to give a preference.”
It is here contended upon the part of appellant that, while he knew of the fact of Stahl & Straub’s suspension of business, yet he did not know they were insolvent, and that he therefore could not be held to have had reasonable cause to believe that a preference was intended to be given him by the bankrupts. But the requirement of the bankruptcy law is not that the transferee should have had reasonable cause to believe that the transferrers were insolvent, but that a preference was intended. It was not even necessary to show that the appel*158lant in this case actually knew, or believed that a preference was intended. Reasonable cause for such belief was enough. A creditor to whom a transfer is made, under such circumstances as would arouse inquiry in the mind of a prudent man, is bound to ascertain whether or not the financial condition of the debtor is such as to constitute of the transfer a preference. He cannot shut his eyes, and plead ignorance of all the signs of iminent financial peril, which are obvious to all who have to do with the debtor. In the present case, these signs were notoriously apparent, and to none were they more so, than to the appellant, and in so far as the evidence shows no one was more stimulated thereby, or. displayed greater activity in attempting to protect his interests.
The trial judge has found as a fact that the appellant had no reason to believe that the firm of Stahl & Staub were otherwise than hopelessly insolvent, after November 24, 1899. His conduct, and the energetic efforts which he made to secure Ins claim confirm this view. He was seeking to procure the payment of an antecedent debt. He was naturally'alarmed, when the suspension occurred, and there is nothing in the testimony to show that his apprehensions were in any way lulled or allayed at or before the time when he obtained the .transfer of the securities. Indeed he was able to accomplish this result only by the payment, or advancement, of a very considerable additional sum of money. Why should he have done this, unless with the expectation, and with the full belief that it would secure to him a greater percentage of his debt than would be received by other creditors of the same class. Under ordinary circumstances, his diligence would be most commendable; but in this case, it was strong evidence that he was seeking for himself, that which the bankruptcy law denies to any creditor, a preference over others of the same class.
The findings of fact by a chancellor are entitled to great weight, but aside from this we have no hesitation in saying, that the facts and circumstances disclosed by the testimony make it clear that the appellant had reasonable cause to believe that in the transfer of the securities to him, a preference was intended.
The assignments of error are overruled, the appeal is dismissed, and the decree is affirmed at the cost of the appellant,