206 F. 797 | W.D. Mo. | 1913
Starkweather & Albert, the bankrupts, borrowed $10,000 in the fall of 1910 from the National Bank of Webb City, Mo. There was no further amount borrowed, but the notes representing the transaction were renewed from time to time without any payments, except perhaps interest, thereon, so that in December, 1911, the original indebtedness still existed. Upon December 7, 1911, a note for $2,500, representing part of the original loan, fell due, and the cashier of the bank requested Starkweather & Albert to pay it, threatening to charge it against their account if they did not do so. Stark-weather & Albert did not wish the amount charged against them, because, while the bank books showed on that date more than $2,500 to their credit, there were outstanding checks, some of which would go to protest if the amount were immediately charged against the ac
However, it is not necessary to rest the case upon this ground, which perhaps only partially reaches the fund which the bank is alleged to hold preferentially. The matter may be disposed of upon a broader ground: That the bank did not stand upon its right of set-off. It simply threatened to exercise that right. The matter terminated, however, on the basis of voluntary payments by Starkweather & Albert, in giving checks which were received by the bank as payments. While the distinction seems narrow between a payment resulting from the exercise of the right of set-off and a payment by check given in the
“There was in the bank on deposit to the credit of Hitchcock & Endicott, on the day they gave the judgment note, the sum of $325.20. This sum was not computed or deducted when the note was given. On the next day, before the bank caused the judgment to be entered up, they credited this amount on the note, and took judgment for that much less. They now assert that this was what they had. a right to do, and that it should remain a valid set-off. But this does not appear to have been really what was done. It appears that HMchcoclc £ Endicott gave the bank a che ole for the sum, and by virtue of that check it teas indorsed on the note as a payment. Now, as both the bank and the bankrupts knew of the insolvency of the latter, this was a payment by way of preference, and therefore void by the thirty-fifth section of the Bankrupt Act. In this case, as in the other, if they had stood on their right of set-off, it might possibly have been available; but when they treat it as the bankrupts’ property, and endeavor to secure an illegal preference by-getting the bankrupts to malee a payment in the one ease, and seizing it by execution ih the other, when they knew of the insolvency, both appropriations are void.”
The case just cited impresses me as excluding any question of set-off, and leaves the matter to be determined upon the question of whether the payments made were voidable preferences. This necessitates some quotation from the Bankruptcy Act. It is provided bisection 57g, as amended (Act Feb. 5, 1903, c. 487, § 12, 32 Stat. 799 [U. S. Comp. St. Supp. 1911, p. 1504]), as follows:
•‘The claims of creditors who have received preferences, voidable under section 60, subdivision ‘b,’ or to whom conveyances, transfers, assignments, or incumbrances, void or voidable under section 67, subdivision ‘e,’ have been made or given, shall not be allowed unless such creditor shall surrender such preferences, conveyances, transfers, assignments, or incumbrances.”
Section 60, subd. “b,” referred to in the section just quoted, is, so far as here material, as follows:
“If a bankrupt shall have * * * made a transfer of any of his property and if, at the time of the transfer, * * * and being within four months before the filing of the petition in bankruptcy or after the filing thereof and before the adjudication, the bankrupt be insolvent and the * * * transfer then operate as a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall then have reasonable cause to believe that the enforcement of such * * * transfer*801 would effect a pi-efereneo. it shall be voidable by the trustee, and he may recover lile property or its value from such person.” TJ. S. Oomp. St. Supp. 3911, p. 3506.
It is true that there are circumstances developed by the record supporting the other view and tending to indicate that the bank had no such reasonable cause to believe that it was receiving a preference. Nor do we overlook in this connection the fact: that the cashier of the bank denies making the statements attributed to him by the par
The result is that the order of the referee appealed from must be affirmed,