129 F. 533 | 6th Cir. | 1904
delivered the opinion of the court. This was a petition filed by the plaintiffs in error against the defendant in error, Jacob Protter, asking that he be adjudged a bankrupt on the ground that, in violation of subdivision 3 of section 3, clause “a,” Bankruptcy Act, he had, while insolvent, “suffered or permitted certain creditors to obtain a preference through legal proceedings,” Act July 1, 1898, c. 541, 30 Stat. 546, 547 [U. S. Comp. St. 1901, p. 3422]. Protter answered, admitting that judgments had been rendered and executions levied as averred, but denying that thereby he violated the provision mentioned. He also denied he was insolvent, and demanded a jury trial. Upon the trial he appeared for examination, but failed to produce some of the books, papers, and accounts called for by the petitioners. The court declined to hold that for this failure the burden of proving his solvency rested upon him, and, having excluded sub
1. For some years prior to July 4, 1902, Protter was engaged in the umbrella business in Cleveland, Ohio. His liabilities at that time amounted to about $22,000, and he had insurance policies aggregating $35,000 on his stock of goods. On that day there was a fire in his store, and thereafter he practically did no business. On August 30th he made out proofs of loss, based upon an appraisement made by Hower, an insurance adjuster, and others, in which he claimed his entire loss by fire was $t8,476.95. The insurance companies rejected these proofs upon a number of grounds, and up to the time of the trial below no amended proofs had been filed. There were conferences between Protter and his attorneys and the attorneys representing certain of his creditors, at which Protter offered to pay 40 cents on the dollar, the creditors demanding 50 cents, so no agreement was reached. In October two judgments were rendered against him, one in a suit brought by the Wheeler & Wilson Manufacturing Company, the other in one brought by the Rest-Henner-Smith Company, upon which executions issued and levies were made, the property being advertised for sale in the first case on October 25th, and in the second on October 27th. On October 24th the petition praying that Protter be adjudged a bankrupt was filed. It is insisted that, under the circumstances, Protter did not “suffer or permit” these creditors to obtain a preference through the judgments and levies mentioned; that he cannot be said to “suffer or permit” that which he could not prevent; that, to come within the meaning of the law, he must have consciously and voluntarily co-operated with the creditors in “obtaining” the preference. But it was held in the case of Wilson v. Nelson, 183 U. S. 191,198, 22 Sup. Ct. 74, 77, 46 L. Ed. 147, that “the act of 1898 makes the result obtained by the creditor, and not the specific intent of the debtor, the essential fact.” A debtor who does not pay a lawful debt when due, and stands by while his creditor secures a judgment against him and levies upon his property, certainly “suffers and permits” such judgment to be taken, levy made, and preference thereby obtained. The debtor still has the privilege of avoiding the act of bankruptcy by discharging the preference at least five days before the time set for sale. But Protter did not take advantage of this, so the only question in his case is whether he was insolvent at the time he committed the act of bankruptcy.
2. We have quoted the words of subdivision 3 defining the act of bankruptcy charged against Protter. Clause “d” of the same section provides:
“Whenever a person against whom a petition has been filed as hereinbefore provided under the second and third subdivisions of this section takes issue with and denies the allegation of his insolvency, it shall be his duty to appear in court on the hearing, with his books, papers and accounts, and submit to an examination, and give testimony as to all matters tending to establish solvency or insolvency, and in case of his failure to so attend and submit to examination the burden of proving his solvency shall rest upon him.”
Proffer’s assets at the time he committed the act of bankruptcy consisted of his notes and bills receivable (put at $2,436.78), the goods on hand after the fire, and his claim against the insurance companies.
3. The inventory on which Protter’s proof of loss was based was made by Hower, an insurance adjuster, Wise, a clerk of Protter, and two others. Hower wrote down the items, which were called out by Wise. The quantities were given by Wise, the prices by Protter. Where the goods were in the original bolt or package, the yardage on the tag was taken. If the bolt had been broken, the quantity was estimated by counting the folds. In this way the appraisers estimated the goods on hand to be worth $22,864.08, sound value. The damage to
4. Protter stated that his accounts and bills receivable amounted to $2,436.78. Lowe and the appraisers who worked with him ascertained the goods on hand, after the fire, to be worth (sound value) $9,015.26. and Protter’s appraisers placed the value of the goods totally destroyed at $3,180.00. These amounts aggregated $14,632.04, and it was conceded that Protter’s liabilities amounted to $22,000. In view of this, we think it was for the jury to determine whether Protter was insolvent or not. The court erred in taking the case from the jury and directing a verdict for the defendant.
The judgment of the court below is reversed.