Bankruptcy, Unlawful preference. Practice, Civil, Exceptions. Payment. Sale.
At the trial of an action by a trustee in bankruptcy against a creditor of the bankrupt to recover, under the provisions of § 60, a, b, of the bankruptcy act of 1898 as amended in 1903, payments alleged to have been made as unlawful preferences by the bankrupt to the defendant, there was evidence tending to show that the bankrupt's wife was the defendant's first cousin, that the bankrupt had known and had had business relations with the defendant for many years, buying goods of him on credit and making payments on account and sometimes owing the defendant considerable amounts of money, that a year and four months before the bankruptcy the bankrupt owed the defendant over $2,500 and that the defendant never had asked the bankrupt for any notes; that for more than five months before the bankruptcy the bankrupt was insolvent; that four months and three days before the bankruptcy the defendant demanded from the bankrupt twenty-six notes bearing interest at twelve per cent per annum, payable at monthly intervals and amounting in all to the bankrupt's then indebtedness to him, $1,962; that such methods were not in the usual course of business between them; that thereafter for all merchandise sold by the defendant to the bankrupt he received a check of the bankrupt dated ten days ahead, that most of such checks afterwards were cashed, and that several of the monthly notes also were paid, all such payments being made within four months of the bankruptcy. Four months and three days after the giving of the notes, the bankrupt filed a voluntary petition in bankruptcy showing liabilities amounting to $7,002 and assets amounting to $315. The defendant asked the presiding judge to rule that the evidence was insufficient to justify a verdict for the plaintiff. The ruling was refused. Held, that the ruling properly was refused, since there was evidence warranting the jury in finding that the bankrupt intended to and did prefer the defendant, and that the defendant had reasonable cause to believe and did believe that the bankrupt so intended.
At the trial of an action by a trustee in bankruptcy against a creditor of the bankrupt to recover, under the provisions of § 60, a, b, of the bankruptcy act of 1898 as amended in 1903, payments alleged to have been made as unlawful preferences by the bankrupt to the defendant, there was evidence warranting the jury in finding for the plaintiff as to some at least of the payments. At the close of the evidence, the defendant asked the judge to rule "that the evidence was insufficient to justify a verdict for the plaintiff." The ruling was refused and there was a verdict for the plaintiff in a sum less than the total amount claimed in the declaration. The defendant alleged an exception only to the refusal to give the ruling asked for by him. Held, that it was not open to the defendant to contend in this court that some but not all of the payments set out in the declaration were payments made in cash sales.
Where an insolvent person purchases goods from one who knows of his insolvency and gives therefor checks dated ten days ahead, which checks afterwards are paid, such purchases may be found to have been made not for cash, and the payments may be found to have been made in satisfaction of antecedent debts and to have been preferences within § 60, a, b, of the bankruptcy act of 1898 as amended in 1903.
SHELDON, J.
The evidence was very meagre, but in our opinion it presented a question for the jury. They could find that Saltman was insolvent on and before March 14, 1908, and remained so until he went into bankruptcy four months and three days later. From the very character of the transaction between the defendant and Saltman, the giving of the notes bearing the rate of interest and coming due at the dates fixed, and the arrangement that Saltman should still buy goods of the defendant and pay for them either in cash or by checks to be dated some days ahead and then to be collected in regular course, in connection with what could be found to be the desperate condition of Saltman's finances, the jury could infer not only that Saltman intended to prefer and did prefer the defendant, but that the defendant had reasonable cause to believe and actually did believe that Saltman intended thereby to give him a preference. Three of these notes were paid as they respectively came due. Certainly the jury could find that these payments constituted preferences, that Saltman so intended, and that the defendant had reasonable cause to believe this. That entitled the plaintiff to go to the jury. Purinton v. Chamberlin, 131 Mass. 589, 590. Killam v. Peirce, 153 Mass. 502. Chipman v. McClellan, 159 Mass. 363. Jaquith v. Winnisimmet National Bank, 182 Mass. 53. Atherton v. Emerson, 199 Mass. 199, 211. Ridge Avenue Bank v. Studheim, 145 Fed. Rep. 798.
The defendant's counsel has ingeniously argued that the payments made by Saltman for goods bought by him after the transaction of March could not be recovered as preferences, because they were really cash payments and so understood by the parties. But this point is not open to him; for his only exception was to the refusal of the judge to rule that the evidence was insufficient to justify a verdict for the plaintiff, that is, a verdict for any amount. Moreover, the jury could find that these payments were made, not when the goods were bought and the checks dated ahead were given, but only when the days of their dates were respectively reached and they were paid. In that event, the purchases were not made for cash, and the payments were really payments of a precedent debt. In re Lyon, 121 Fed. Rep. 723.
Exceptions overruled.