220 F. 985 | W.D.N.Y. | 1915
The trustee in bankruptcy of the estate of the O. D. Gregory Vinegar Company has brought an action against the defendants, who are engaged in business at Tonawanda, N. Y., as iprivate bankers, to recover alleged preferential payments made by the bankrupt contrary to an inhibition of the Bankruptcy Act and of section 66 of the Stock Corporation Daw1 of this state. The first cause of action is concerned with the question of whether the defendants had reasonable cause to believe a preference was intended at the time the payments in controversy were made to them.
The indisputable evidence shows that in October, 1908, the bankrupt wished to open an account at the private bank of the defendants, and that at the request of one Martin, a director of the bankrupt company
It is not shown that the defendants had any knowledge of the manner in which the notes of the Bank of Rochester were paid, but according to the evidence they presumed such payments had been made out of money realized from fire insurance at the time of the destruction of the Albion plant by fire. The account was never questioned by defendants in relation to the ability of the bankrupt to meet its obligations, nor were the details of the business discussed, nor was any statement of assets or liabilities received, from which the insolvency of the bankrupt might be inferred by them. The failure of the bankrupt to promptly pay the notes at maturity is not sufficient to charge the defendants with notice of the impending insolvency.
In Baker v. Emerson et al., 4 App. Div. 348, 38 N. Y. Supp. 576, is found a clear construction and interpretation of the statute under consideration, and at the end of the opinion it is stated that:
“The validity of the payment is not made to depend on whether it is made in the ordinary course of business, or on whether the creditor has any reasonable ground to believe the debtor insolvent, but simply on whether there is insolvency, actual or imminent, and an intent to prefer.”
See, also, Cæsar v. Bernard, 156 App. Div. 724, 141 N. Y. Supp. 659, affirmed 209 N. Y. 570, 103 N. E. 1122, which is thought to practically overrule Swan v. Stiles, 94 App. Div. 117, 87 N. Y. Supp. 1089, to which defendants attach importance in support of their claim that recovery cannot be had herein, as it is not shown that the corporation refused to pay the notes. It was not necessary for recovery that the defendants' should be stockholders in the insolvent corporation; if they as creditors received a preference, they may be proceeded against for recovery thereof. Montague v. Hotel Gotham, 208 N. Y. 442, 102 N. E. 513.
No other questions argued at the bar require special consideration. My conclusion is that, as to the cause of action alleged in the bill under section 60b of the Bankruptcy Act, the trustee cannot recover, but that as to the cause of action under section 66 of the Stock Corporation Law of New York the intent while insolvent to prefer the defendants has been fairly proven, and the complainant may therefore have a decree, with costs, directing the return to the trustee of the amount of such preference, with interest, subject, however, to the dividend to which the defendants will be entitled on distribution of the assets.