291 F. 580 | D. Mass. | 1923
There are several authorities which support the contentions of the defendant, the most important being Warmath v. O’Daniel, 159 Fed. 87, 86 C. C. A. 277, 16 L. R. A. (N. S.) 414; Sessler v. Nemcof (D. C.) 183 Fed. 656; First State Bank v. Spencer, 219 Fed. 503, 135 C. C. A. 253; Simpson v. Western Hardware Co. (D. C.) 227 Fed. 304. The leading case is Warmath v. O’Daniel.
Cases taking the opposite view are Cox v. Wall (D. C.) 99 Fed. 546; Pond v. N. Y. Bank (D. C.) 124 Fed. 992; Re Plant (D. C.) 148 Fed.
The practice in this circuit since the well-considered case of Goodenow v. Milliken, Fed. Cas. No. 5,535, decided by Judge Fox in 1871, has been to allow recovery of a money preference by a bill in equity. See, for instance, Cohen v. Goldman, 250 Fed. 599, 162 C. C. A. 615; Tremont Tr. Co. v. Cohen (C. C. A.) 263 Fed. 81.
Judge Brown, in Johnson v. Hanley Co. (D. C.) 188 Fed. 752, seemed to be doubtful of the matter, but as he did not cite the case of Goodenow v. Milliken I do not think he could have had that authority in mind. The rule which prevails in this circuit seems to me to be supported by the better reasoning. Bankruptcy is equitable in its nature. A preference is a creature of the bankruptcy statute, and was unknown to the common law. It is a technical fraud, and was developed by the equity judges of England (Lowell, Bankruptcy, p. 42 et seq.), and did not appear in any statute there until 1869 (Id. p. 44). The amendment of 1903 to the Bankruptcy Act, which was passed on account of the decision of the case of Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175, provided that suits to set aside preferences might be brought in courts of bankruptcy, which, except in the few instances mentioned in the Bankruptcy Act, are courts of equitable powers only. Following the practice in this circuit, I denied the defendant’s motion to dismiss the first suit and heard them both.
The bankrupt was insolvent in July. If the defendant had inquired on the 10th of August, it would have discovered its insolvent condition. The attitude of the defendant is well shown by the testimony of Baker, its general manager. He said:
“Where we take collateral we have no occasion to inquire into the condition of the borrower.”
The fact that the bankrupt could pay only $10,000 out of a debt of $21,000, which arose out of a transaction which the defendant regarded as criminal, put the defendant on its inquiry. Watchmaker v. Barnes, 259 Fed. 783, 170 C. C. A. 583.
I find that, when the defendant received the payment of $10,000 on August 10th, it received a greater percentage of its debt than other
The defendant’s requests for rulings are all denied, except so far as they are covered by the above opinion.
Let a decree be entered in the first suit, equity No. 1106, that the plaintiffs recover the sum of $10,000, and in the second suit that they recover the sum of $8,318.
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