250 F. 361 | 2d Cir. | 1918
(after stating the facts as above).
The bankrupt company was a building contractor, and was indebted to defendant in the sum of 862, 500, which indebtedness matured on October 17, 1913. The whole amount of this indebtedness had been secured on September 20th by assignments of moneys which the bankrupt would be entitled to receive under its building contracts, which money it was understood amounted to $85,000, and would become due and payable to the Wills & Marvin Company on or about October 17th, and would constitute the last large payment to be received by that company under the contracts. The assignments so made were never filed or recorded. The Wills & Marvin Company collected the moneys due under the contracts, and it seems to be conceded that it had a right to do so, mid it thereupon deposited the moneys as collected to its own account in the defendant bank; and on October 17th the bankrupt's entire indebtedness to defendant was charged to the bankrupt’s deposit account and thus paid.
Did the defendant on September 20th have reasonable cause to believe that the bankrupt was insolvent? It appears that on September 18th a conference took place between the president of the bankrupt and the officers of the bank, and that at that conference the affairs of the bankrupt were gone over in detail. The president of the bankrupt testified that at that conference he called the attention of the defendant to the fact that he had been advised by attorneys that there was a ruling that, if a bankrupt paid a bill four' months prior to the date of bankruptcy, that might be considered as a preferential payment, and that he would have to leave it to them to consult their attorneys relative to that point. From 4 o’clock until 7 Was spent in discussing the various items in the statement submitted. “They went over the various items in the statement,” he says, “and then said that they would have to discuss the matter with their attorney, and would let me know.” The next day in the-afternoon he was notified that they had consulted their attorney, and had decided to require him to assign the balances owing and to become due to the bankrupt under all the contracts upon which the bankrupt was working at that time, and which aggregated about $85,000. The bankrupt was required to assign, and did assign to the defendant, practically everything that it had, except machinery and tools, valued at about $8,000 or $10,000. The defendant was informed at that time that the bankrupt had also been unable to secure any new contracts. The president of the bankrupt also told defendant at that -time that he could not see anything ahead except slow liquidation, unless his corporation was fortunate in obtaining additional capital.
Why should the defendant have been told by the president of the bankrupt that he had been informed by an attorney that, if a bankrupt paid a bill four months prior to the date of bankruptcy, it might be regarded as a preferential payment and that defendant had better consult its attorneys? There is only one inference to be drawn from such a conversation, and that is that bankruptcy was imminent. Such conversations do not occur concerning the affairs of solvent corporations. And conversations as to the absolute necessity of new capital if a company it to be -able to continue in business certainly imply a doubtful financial basis. It is difficult to believe that the experienced officials of the defendant bank did not know that the bankrupt was insolvent at the time of the assignments. If they did not know it, they certainly had notice of suspicious circumstances sufficient to put persons of ordinary prudence and sagacity upon notice, and they are charged with all the knowledge which they would have acquired, had they made the inquiry which the law under the circumstances demanded of them. The record certainly discloses that there was evidence in the case sufficient to justify the referee, if he believed it, in finding that the defendant’s officers knew, or had reasonable cause to believe, that the Wills & Marvin Company on September 20th was insolvent. And this court must accept the referee’s finding to that effect.
Date of Note. 15)13. Amount. Due Date.
June 26 ?5,000 September 29
July 2 1.500 October 2
July 2 2,000 October 2
July IT 2.500 October 17
July 23 4,000 October 23
July 29 3.500 October 29
August 13 500 November 13
August 19 2.500 November 19
August 21 5,000 November 21
August 25 4,000 November 25
The referee has found that the Wills & Marvin Company made a transfer to the defendant bank on September 20th, which was within four months of the filing of the petition in bankruptcy, and that the transfer enabled defendant to obtain a preference, and that the total amount of the preference was $30,300, which sum the defendant received on October 17th through the effect of the enforcement of the transfer. The whole object of the arrangement which the Wills & Marvin Company entered into with the defendant bank on September 20th was to change the existing obligations of the former to the latter, so that they would mature at a date prior to that when by their terms they became due, and to provide the bank with funds at the date of the earlier maturity, by the assignment of the moneys then to become due to the Wills & Marvin Company under its building contracts. That this resulted in a preference appears to us to be beyond question. We are unable to see that the referee fell into any error of law in so holding.
It is undoubtedly true that a bank has a general lien on all moneys of a depositor which are in its possession, for the balance of a general account, provided it is then due and payable, but not otherwise. A lien arises from contract or operation of law. It is not claimed that there was any express contract which gave the bank a lien; and none arose on that or any prior day by operation of law. The relation between
The right of withdrawal existed, for on that day the bank could not have exercised a right of set-off, any more than it could have asserted a. lien. The bank has called our attention to the decisions of the Supreme Court recognizing the right of a bank to set off a balance due from it against notes of the bankrupt held by it. But in New York County National Bank v. Massey, 192 U. S. 138, 24 Sup. Ct. 199, 48 L. Ed. 380, the right of set-off was. exercised by the bank after the petition in bankruptcy was filed. And in Studley v. Boylston Bank, 229 U. S. 523, 33 Sup. Ct. 806, 57 L. Ed. 1313, the bank, a few months prior to the adjudication in-bankruptcy had charged against the depositor’s account certain notes as they had matured, which had been made by the depositor and held by the bank. The deposits had been made in good faith, in the usual course of business, and with no purpose of enabling the bank to secure the right of set-off. The court, in sustaining the right of the bank to do what it did, said:
“IÍ this set-off of mutual debts has been lawfully made by the parties before the petition is filed, there is no necessity of the trustee doing so. If -it has not been done by the parties, then, under command of the statute, it must be done by the trustee. But there is nothing in section 68a which prevents the parties from voluntarily doing, before the petition is filed, what the law itself requires to be done after proceedings in bankruptcy are instituted.”
These cases differ from the case at bar, and it is now argued that the right of set-off existed at a date when the notes which the bank held had not matured and prior to the adjudication of bankruptcy. We are not aware that any such application of the doctrine is supported by any Supreme Court decision. We think it is not the law. The bank had no right to set off the unmatured notes until after the bankruptcy proceedings were commenced. Heyman v. Third National Bank (D. C.) 216 Fed. 685, 687; In re Starkweather and Albert (D. C.) 206 Fed. 797. There was no error, therefore, in the referee’s conclusion that no right of set-off existed under the facts of this case.
There remains the question as to the right of the defendant bank to participate in dividends: The defendant asserts in its brief that it is entitled to retain its dividends from and out of any recovery by the trustee. The right of defendant to participate in dividends is not challenged by the plaintiff, and the matter can be safely left to the bankruptcy court, to. dispose of in accordance with the established rules.-. ..
Judgment affirmed.