224 F. 444 | 2d Cir. | 1915
William F. Doyle was an officer, stockholder, and director of the Metropolitan Dairy Company, which was adjudicated a bankrupt February 12, 1914, on a petition filed in January of that year. In June, 1913, the corporation was in straitened circumstances, needing cash to meet obligations presently due. Whether at the time it was insolvent, or insolvency was imminent, it is not necessary now to decide. The special master found, on uncontradicted evidence, that on June 16, 1913, Doyle tried to borrow $7,500 from Levy Bros, for the corporation, stating that the corporation would give a chattel mortgage for it on property which the event shows was worth that sum. Levy declined to make the loan on such security, but did make a personal loan to Doyle on his note secured by a policy of life insurance, and gave him the money.
This money was loaned by Doyle to the corporation through his wife, who indorsed Levy’s check and took the bank’s note and the mortgage
If the mortgage had been given at the same time as the loan was made, there could be no question. It is a wholly novel proposition to us that the officer and director of a corporation, which is losing money, is in financial straits, and facing imminent failure, may not lend it money of his own on its mortgage of its personal property, to secure only the cash turned over, without, by any subterfuge, including any existing indebtedness to him. No authority to such a proposition is cited; certainly neither the Bankrupt Act nor section 66 of the New York Stock Corporation Law supports it. It is not giving a preference to give security on free assets to the extent of new hard cash paid into the treasury by any one.
The cash was paid -to the corporation on June 17th, and the mortgage given June 23d. If these were separate transactions, the mortgage would be given to secure an existing debt, and the trustee’s contention would have merit. But it is contended that the resolution under which the mortgage was executed (it took some time to make the inventory) was passed June 14th, three days before the loan was made. If this be so, we do not see why there was not a single transaction — why the execution and filing of the mortgage does not, under the resolution, date back to the moment of receiving the loan for which it was given. There is no suggestion of any rights accruing to any one during the interim.
The record as to this vital point in the case is unsatisfactory. Counsel who represented the bankrupt before the special master- — he is not the counsel who argued this appeal — was present at the argument and stated that he gave the minute book of the board of directors to the special master. The special master, in response to a call by this court, certifies that no books of the company are in his possession. Whether the trustee has the books of the bankrupt does not appear. The special master, however, sends to us two documents — one purporting to be minutes of board of directors of June 14, 1913, the other purporting to be a consent of stockholders dated June 17, 1913. Both of them purport to- authorize this chattel mortgage. He states that they were left wfith him by counsel for the bankrupts, but were not “offered in evidence.” We think it would have tended to a more satisfactory determination of the questions before him if he had called for the production of the minute book. Apparently, for some reason which is not clear, neither the special master nor the District Judge thought that it was a matter.of any importance that before the money was actually loaned the corporation agreed that in consideration for such loan it would execute the chattel mortgage.
We are averse to disposing of the case finally until all the facts are before us, and therefore reverse the order and remand the cause to- the
