Court Opinion

ID: 8745169
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:04:00.650026+00
Date Added: 2024-06-11T17:00:37.609774
License: Public Domain

LOWELL, District Judge.
In these cases the creditors seeking to prove have, according to the decision in Re Ft. Wayne Electric Corp., 3 Am. Bankr. R. 634, 99 Fed. 400, received preferences, unless the fact that the payments were received more than four months before the petition was filed takes them out of the scope of the decision. It was there held that a preference must be surrendered before the creditor could prove, even though he had no cause to believe that a preference was intended. The decision went largely upon the ground that the preference to be surrendered was not that limited in section 60b, but that described more generally in clause “a.” This contains no mention of a time 'limit. A literal construction of sections 57g and 60a makes them include preferences given and received beyond the four-months period, and this literal construction is confirmed by an examination of earlier drafts of the existing act. Section 69 of the original Torrey bill, which dealt with preferences, provided in its first paragraph that a respondent shall be deemed to have given a preference if he has within four months, etc. The second paragraph of the same section provided that if a bankrupt shall have given any preference, and the person receiving such preference shall have had reasonable cause to believe that a fraud on the act was intended, the preference shall be voidable. The fifth clause of section 72 of the Torrey bill provided that the claims of creditors who have received preferences shall not be allowed until the preference is surrendered. Under these provisions, plainly, the preference to be surrendered *738must' have been given within four months; but in all the subset quent drafts of the act, so far as I have read them, the time limit has been taken out of the first paragraph and inserted in the second. And thus, while no preference given beyond the four-months period is made voidable, all preferences, whenever given, must be surrendered before proof. Perhaps no very great weight should be given to the consideration just stated, as the original Torrey bill seems never to have been before congress; but, for what it is worth, the consideration makes strongly for the literal construction of the language of the existing act. As has been said, the word “preferences,” in section 57g, is used generally, and with apparently no more reference to a time limit than in section 60a. There are other places in the act where the same word appears to be without time limitation. See section 5g. It is urged as a strong argument against the literal construction of the act that this construction will unsettle business, by disturbing transactions long since past; but, if the construction contended for by the creditors is adopted, then only those preferences must be surrendered which have been given within the four-months period, and this whether the creditor had or had not knowledge that a preference was intended. Under the act of 1867, all preferences given after the passage of the act, and received with the knowledge of the intent to prefer, must have been surrendered before the creditor could prove. To permit a creditor to prove his debt, while retaining a prefer-' ence received five months before the petition, with full knowledge of the debtor’s insolvency and the intent to prefer, would be an unusual laxity. See, also, section 2, c. 9, of the act of 1841. If the court is compelled to choose between a construction which requires all preferences to be surrendered before proof whenever they are received, whether the creditor has knowledge of the intent to prefer or not, and a construction which permits the preferred creditor to prove, while retaining a preference received more than four months before the filing of the petition,, with full knowledge of the intent to prefer, I am brought to believe that the first construction is more consonant with the general spirit of the act. It cannot be said, indeed, that this construction is clear beyond a doubt, but it seenis to me to result logically from the case cited, which I am bound to follow. Were I to form a bankrupt act as seemed to me best for the interests of the community, I might differ from congress in some respects. That is not my office. , If the construction thus put upon section 57g makes it a real menace to legitimate business, concerning which no opinion i.s expressed, it is from congress that relief must be sought. For all these reasons, the decision of the referee in above case is affirmed.