106 F. 484 | D. Kan. | 1901
This cause arises upon-a certification by the referee in bankruptcy for review of two questions which arose in the administration of the bankrupt’s estate:
1. The bankrupt was found to have been insolvent during the entire four months preceding the filing of his petition in bankruptcy.. During that period certain of the creditors who presented their claims for allowance had innocently received from the bankrupt payments
' 2. Some of the creditors who had thus innocently secured preferences by receiving payments on their accounts thereafter in good faith gave the debtor further credit, without security, for property which became a part of the debtor’s estate, and such new credits remained unpaid at the time of the adjudication in bankruptcy. The question in this connection is wheiher such a creditor is entitled to have his new credit set off against the preference which he is called upon to surrender as a condition to the allowance of his claims. Glause “b” of section 66 of the bankrupt act of 1898 provides that, if a preference is received with reasonable cause on the part of the creditor or his agent acting in ihe matter to believe that it was intended as a preference, it shall be voidable by the trustee, who may,' under such circumstances, maintain an action to recover the property or its value. Clause “c” of the same section provides that if a creditor has been preferred, and afterwards in good faith gives the debtor further credit, without security, for property which becomes a part of the debtor’s estate, the amount of the new credit remaining unpaid at the time- of the adjudication in bankruptcy may he set off against the amount which would otherwise be recoverable from him. The rule in respect of a preference innocently received without reasonable cause for belief that a preference was intended is that an affirmative action for its recovery cannot he maintained by the trustee, but the creditor will be denied the right to have his claims against the bankrupt’s estate allowed, unless he surrenders the preference. The solution of the question under consideration turns upon the interpretation to he given to the term “recoverable,” as used in clause “c” of section 60. The new credit can only be set off againgt a preference that is recoverable from the creditor. It has been held in some jurisdictions that, in order- that a new credit may he used as a set-off against a preference previously received, the preference must he one that is recoverable in an action brought by the irustee for that purpose, — that is to say, a preference received with reasonable cause for belief that it was so intended; that the new credit cannot he the basis of a set-off against a preference innocently received for the reason that such a preference is not one that is “recoverable.” In re Christensen (D. C.) 101 Fed. 802; In re Arndt (D. C.) 104 Fed. 234. I am of the opinion that this interpretation is too restricted, and is not in harmony with the equitable spirit of the bankrupt act. The term “recoverable,” in its larger and more popular sense, implies a capability of being obtained by course of law. Recovery, as a legal