Court Opinion

ID: 6467577
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:07:59.012104+00
Date Added: 2024-06-11T09:11:11.322317
License: Public Domain

OPINION OF THE COURT. PARKER, J. The appellant contends for a construction of sub-division “b” of the Bankruptcy Act to which we cannot give our consent. It contends that an actual intent on the part of the bankrupt to create a preference, as well as the fact that the creditor preferred shall have reasonable cause to believe that the transaction was intended thereby to give preference, is necessary in order to authorize' the recovery of the subject matter of the preference by the trustee in bankruptcy. It cites Hardy v. Gray, et al., 144 Fed. 922, in support of the contention, which case seems to support the same. 'That was a case arising under sub-division “g” of section 5-7 of the Bankruptcy Act, as amended by section-12 of the act of February 5, 1903, (32 Stat. 799). The amendment of 1903 brought into the section the same terms as those employed in sub-division “b” of section 60, and therefore the case is in point upon the question in this case. We refuse, however, to follow this case for the reason that we regard the same as unsound and as being in conflict with the controlling and much greater weight of authority. Appellee contends that under the statute the intent of the bankrupt in making a preference is wholly immaterial if the preferred creditor had reason to believe that the preference was intended, and cites Western Tie and Lumber Company v. Brown, 129 Fed. 728, in re Andrews, 135 Fed. 599; Brewster v. Goff Lumber Company, 164 Fed. 124; Western Tie & Lumber Co. v. Brown, 196 U. S. 502; and Benedict v. Deschel, 177 N. Y. 1, in support of his contention. In the case in 129 Fed. 728, in the Circuit Court of Appeals of the Eighth Circuit, it is said: “The preferences denounced by the statute are often secured by creditors without any desire or intention on ihe part of the debtors to give them, as in cases in which the creditors obtain judgments against’their debtors over defenses made to the actions in good faith, and in cases, like that a bar, where, without the consent of their debtors, creditors appropriate to the payment of their claims the property of their debtors which happens to be under their control. Such transactions are none the less voidable preferences, that the debtors do not intend them to have that effect. If they are conducted within the four months and if they have the effect to give to the creditors who conceive and execute them larger percentages of their claims than other creditors of the same class receive, they fall, as clearly under the ban of the law as transfers made by debtors with the intent on their part to give the preferences.'Such a transaction is voidable by the trustee not only when the party receiving it has a reasonable cause to believe that it was intended by the debtor, but also when it was intended by the creditor, or by the actor who accomplished- the result, to work a preference by means of the transactions.” The Supreme Court of the United States, in 196 U. S. 602, reversed this case, but upon another point, and upon the point in question said: “This conclusion, moreover, is the result of the finding that Harrison had no intention to give the tie company a preference, for if Harrison, being insolvent, to the knowledge of the company, within the prohibited period, gave to the tie company authority to collect the sums due to him by the laborers for goods sold them, with the right, or even the option to apply the money to a prior debt due by Harrison to the company, the necessary result of the transaction would have been to create a voidable preference. And if the inevitable result of the transaction would have been to create such a preference, then the law would conclusively impute to Harrison the intention to bring about the result necessarily arising from the nature of the act which he did.” In the case in 153 Fed. it is said: “It follows that a preference was-given which must be surrendered before proof, if the creditor then Tad reasonable cause to believe that it was intended thereby to give a preference/ If the debtor is insolvent, he intends preference by any payment of a pre-existing debt. If the creditor has reasonable cause to believe that the debtor is insolvent, then the creditor has reasonable cause to believe that a preference is intended.” In the case of 164 Fed., it is said: “That there was a preference in faetj cannot, of course, be gainsaid; the firm, as well as the individual members of it, being insolvent, and the Goff Lumber Company securing by the transaction over one-third of their bill, where other creditors will get practically nothing. This being the inevitable effect, it will be conclusively presionecl 'that it was so intended, even though it may be that Moore had no idea in reality of treating the Goff Lumber Company any differently from or of giving them any advantage over other creditors.” In the case of 177 N. Y. 1, it is said: “As to the debtor the statute declares that a judgment under certain conditions shall be held to be preferential. He is not to be heard upon the question of his intent. The effect of his act is fixed by law.” See also Van Idersteine v. National Discount Co., 174 Fed. 518; Coder v. Arts, 213 U. S. 223.  1 We therefore hold that in an action brought by a trustee in bankruptcy to recover a voidable preference, the intent of the bankrupt in making the preference is immaterial.  2 2. Appellant contends that as to all of the payments secured it should have the right of set-off against the claim of appellee by reason of the fact that the same were received in due course of business as a deposit in a bank, and as payments on notes and interest. The fifth finding of the court below, which seems to be supported at least by sufficient evidence, effectually cuts out this question from the case. The court finds that the appellant persuaded . and induced the bankrupt to pay to them the amount of money involved in this action for the express purpose and with the intent to apply the same upon the indebtedness then owing by the bankrupt to appellant. This being so, no question of the right of set-off for money deposited in the ordinary course of business, arises. There being no error in the record the judgment of the lower court will be affirmed; and it is so ordered.