107 F. 80 | E.D.N.C. | 1901
(after stating the facts as above). The question presented is, do the payments amount to a preference prohibited by the bankruptcy law?' The bankrupt did not know at the time the payments were made of his insolvency. How, then, could he have intended a preference? The decision of the referee is based on section 57g, — “the claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences,” — and the question presented is, have these creditors received a preference, within the meaning of the bankruptcy act? If they have, then the referee should be affirmed; if not, reversed. What is a preference under the act of 1898 has given rise to many questions, the decisions of which are by no means uniform, or satisfying to the investigating attorney or judicial officers. But many of these questions raised, discussed, and decided are not germane to the case at bar. On the question involved, though, ignoring others entirely, there is doubt when the diverse ways it has been decided are considered. Section 60a, omitting words which have no bearing on the question, provides: “A. person shall be deemed to have given a preference if, being insolvent, he has made a transfer of any of his property and the effect of such transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.” Section 1, subsec. 25, defines “transfer” to include a transfer of property as a payment, but does not seem to warrant the construction in Electric Co. v. Worden, 3 Am. Bankr. R. 186, 96 Fed. 803, that payment of money in due course of business is included. Subsection “b” of section 60 provides, when a preference is voidable, — i. e. limiting the time to four months, —and when the party benefited thereby, or his agent, “shall have had reasonable cause to believe it was intended thereby to give a preference.” Subsection “a,” quoted, does not limit the time to within four months, or any other period, and to strictly construe it any payment at any time may prevent a creditor from proving a debt unless he refunds all sums paid. This was certainly not the legislative intention. No court has so decided; none will so decide. And et the construction seems to be logical. It is not one of that class of preferences which may be set aside now involved, but what payment constitutes a preference preventing a creditor proving his claim. The statute provides for setting aside certain preferences (Bankr. Act, § 60, subsecs, “b,” “e”; Id. § 67, subsecs, “c,” “f”; Id. § 70, subsec. “c”), but recognizes others as valid (Id. § 64, subsec. “b”; Loveland, Bankr. § 190). Preferences, under some circumstances, may be avoided, and the property recovered by the trustee for the benefit of the estate. The true intent seems to be that a person who holds a voidable pref-, erence shall not be allowed to prove his claim until he surrenders the advantage which he has obtained in fraud of the act. To hold every payment on a debt in the course of commercial transactions a preference would be to decide the bankrupt act was intended to effectually end all dealings on credit, even the 30, 60, and 90 day basis, upon which the bulk of trading is transacted; and to a great extent paralyze business. No one would impute such an intention to the congress of the United States. A payment made in the ordinary course