Sirrine v. Stoner-Marshall Co.

• Citation: 42 S.E. 432,64 S.C. 457
• Parties: SIRRINE v. STONER-MARSHALL CO.
• Decision Date: 16 August 1902
• Court: United States State Supreme Court of South Carolina

42 S.E. 432

64 S.C. 457

SIRRINE v. STONER-MARSHALL CO.

Supreme Court of South Carolina

August 16, 1902

Appeal from common pleas circuit court of Greenville county Townsend, Judge.

Action by Wm. G. Sirrine, as trustee of the estate of W . F. Nesbitt & Co., bankrupts, against the Stoner-Marshall Company and the Geo. D. Witt Shoe Company. From the decree the plaintiff appeals. Affirmed.

Haynesworth Parker & Patterson, for appellant. Carey & McCullough, for appellee.

JONES J.

This is an action by the plaintiff, as trustee in bankruptcy of W. F Nesbitt & Co., to recover certain payments made by the bankrupts to the defendant within four months before adjudication of bankruptcy, on the ground that said payments were illegal, and preferences, under the United States bankrupt act of 1898. The master sustained the plaintiff's contention, but the circuit court reversed the master, and dismissed the complaint. The circuit decree--which cites Loveland, Bankr. § 194; In re Eggert (D. C.) 98 F. 843; Id., 43 C. C. A. 1, 102 F. 735; Grant v. Bank, 97 U.S. 80, 24 L.Ed. 971; Stucky v. Bank, 108 U.S. 74, 2 S.Ct. 219, 27 L.Ed 640--correctly states the four elements that constitute an illegal preference under the bankrupt act of 1898, as follows: "First. The transfer must be made from an insolvent person to a creditor. Second. The effect of such transfer must 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. Third. The person receiving it or to be benefited thereby, or his agent acting therein, must have had reasonable cause to believe that it was intended thereby to give a preference. Fourth. The transfer must have been made within four months before the filing of a petition in bankruptcy, or after filing the petition and before the adjudication." While we think the testimony sufficient to establish the first, second, and fourth conditions above named, we do not think the preponderance of the evidence is against the conclusion of the circuit court that the third condition was not shown to exist. Under the bankrupt act of 1867 a transfer was invalidated if the creditor had reasonable cause to believe the debtor insolvent, while under the bankrupt act of 1898 a transfer is invalidated if the creditor has "reasonable cause to believe it was intended as a preference." Under the act of 1867 insolvency existed when the debtor was unable to pay his debts as they became due in the ordinary course of his daily transactions, while under the act of 1898 insolvency exists when the debtor's whole property, at a fair valuation, is insufficient in amount to pay his debts. The rule established by the decisions of the United States supreme court as to the meaning of the words "reasonable cause to believe," etc., under the act of 1897, is applicable in determining the meaning of the words "reasonable cause to believe it was intended as a preference," under the act of 1898, since a reasonable cause to believe a "preference" was intended by the debtor involves a reasonable cause to believe the debtor to be insolvent, as a "preference" depends upon insolvency. The rule is thus stated in Grant v Bank, 97 U.S. 80, 24 L.Ed. 972: "It is not enough that a creditor has some cause to suspect the insolvency of his debtor, but he must have such a knowledge of facts as to induce a reasonable belief of his debtor's insolvency, in order to invalidate a security taken for his debt. *** He must have a knowledge of some fact or facts...