American National Bank & Trust Co. of Chicago, Ill. v. Bone
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
| Citation | 333 F.2d 984 |
| Docket Number | No. 17529.,17529. |
| Parties | AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, ILLINOIS, Appellant, v. Joseph M. BONE, Jr., Trustee in Bankruptcy of John D. Schindler, Bankrupt, Appellee. |
| Decision Date | 08 July 1964 |
Terence C. Porter, of Welliver, Porter & Cleaveland, Columbia, Mo., made argument for appellant and filed brief with William M. Howard, St. Louis, Mo.
Everett S. Van Matre, of Van Matre & Van Matre, Mexico, Mo., made argument for appellee and filed brief.
Before VAN OOSTERHOUT, BLACKMUN and MEHAFFY, Circuit Judges.
VAN OOSTERHOUT, Circuit Judge.
This is an appeal by American National Bank and Trust Company of Chicago, Illinois, (American Bank) from judgment of the district court adopting and confirming findings of fact and conclusions of law of the Referee in Bankruptcy denying American Bank a secured claim based upon a second Deed of Trust upon real estate of the bankrupt, John D. Schindler, upon the ground that such security constituted a preferential transfer voidable by the Trustee under § 60 of the Bankruptcy Act.
Mr. Schindler, a customer of the First National Bank of Centralia, Missouri, had loan needs in excess of the loan limits of the Centralia bank. In 1959 the Centralia bank arranged with its Chicago correspondent, American Bank, for the handling of the Schindler loan account. Loans in varying amounts were made to the bankrupt by the Centralia bank and sold without recourse to American Bank. All such loans were prearranged and secured by chattel mortgages upon livestock and crops. The aggregate of the loans at times ran up to $100,000.
In October 1960 American Bank learned that the bankrupt had sold a substantial amount of mortgaged beans and corn without applying the proceeds upon the mortgage debt. Thereupon, an officer of the bank made an investigation, arranged for the liquidation of the chattel security and for taking of additional security.
The additional security thereafter furnished included a $125,000 collateral note secured by second Deed of Trust upon bankrupt's real estate. Said deed also secured a $25,000 collateral note to the Centralia bank which such bank sought to establish before the Referee. The claim of the Centralia bank is not before us upon this appeal.
The collateral agreements were signed making the trust deed security for the bankrupt's debt to the American Bank. Aside from the preference issue, the validity of the Trust Deed is not challenged. The Trust Deed was recorded on November 21, 1960.
Mr. Schindler filed a voluntary bankruptcy petition on March 13, 1961, and was adjudged a bankrupt on the same date. It is undisputed that on the date of bankruptcy Schindler owed American Bank a principal balance of $38,430.97 and interest to date of bankruptcy of $496.63.
American Bank had on October 20, 1960, more than four months prior to bankruptcy, obtained from the bankrupt the chattel mortgage on 230 acres of growing fall wheat. The bankrupt's real estate was sold free and clear of the lien of this chattel mortgage, with such lien being transferred to the sale proceeds. The value of the wheat was fixed at $12,000 and American Bank was allowed a secured claim in such amount. This finding is not challenged upon this appeal and its only significance is that if such $12,000 is paid, American Bank's claim will be reduced to the extent of payment.
Before the Referee the Bank claimed interest for the period subsequent to the filing of the petition and for attorney's fees. Such claims were disallowed and no error is here claimed with respect to the interest and attorney fee items.
American Bank was allowed an unsecured claim of $26,927.60 but was denied a lien for such amount under its Deed of Trust. This appeal is from the final order denying the secured claim based on the Deed of Trust.
American Bank's secured claim was on file when the Referee on May 5, 1961, ordered the sale of the bankrupt's real estate free and clear of claimant's lien, which lien was transferred to the proceeds. The proceeds of sale in the amount of $425,000 were collected by the Trustee. After payment of prior liens, $106,333.89 of the proceeds remained in the Trustee's hands, which amount is sufficient to take care of any secured claim American Bank may be entitled to.
The trial court, without hearing any additional evidence, affirmed by summary order the Referee's determination that the Trust Deed was a preferential transfer voidable under § 60 of the Bankruptcy Act. The presence of many of the elements of voidable preference are clearly established and there is no attack upon the finding that the Trust Deed was made within four months of bankruptcy, that it constituted a transfer of property for the benefit of the creditor, that it was based upon an antecedent debt and that no new extension of credit was involved.
American Bank upon this appeal urges that the Referee and the district court erred in denying its secured claim based upon the Trust Deed upon the ground that such transfer constituted a voidable preference for the following reasons:
1. There is no substantial evidence to support the finding that the bankrupt was insolvent on November 21, 1960, the effective date of the Trust Deed.
2. There is no substantial evidence to support a finding that American Bank had reasonable cause to believe the bankrupt was insolvent on the date the transfer became effective.
Insolvency at the time of the transfer and reasonable cause to believe the debtor is insolvent are necessary elements of an action to set aside a preferential transfer under § 60. Such issues are ordinarily fact issues. In Teasdale v. Prosperity Co., 8 Cir., 290 F.2d 345, 348, we stated the applicable rule for review as follows:
"It is a settled rule of this and other courts that the findings of fact by a referee in bankruptcy, if supported by substantial evidence, are not clearly erroneous; and, if approved and confirmed and adopted by the district court, they will not be disturbed on appeal."
Section 1 (19) of the Bankruptcy Act, which is here controlling, provides that a person shall be deemed insolvent whenever the aggregate of his property shall not, at a fair valuation, be sufficient in amount to pay his debts. The Referee in his opinion thus states the test of insolvency:
We believe such test as stated, when considered as a whole, properly reflects the law. American Bank objects to the language in the early part of the quotation with respect to value that can be made promptly effective. Standing in isolation, such statement is too broad. The latter statement from the Haight case more accurately states the law. The statute itself requires the valuation to be fair. See Pirie v. Chicago Title & Trust Co., 182 U.S. 438, 451, 21 S.Ct. 906, 45 L.Ed. 1171; Arkansas Oil & Mining Co. v. Murray Tool & Supply Co., 8 Cir., 127 F.2d 564, 566; 9 Am.Jur.2d Bankruptcy §§ 165, 1065.
The trial court set up a balance sheet based upon the evidence as follows:
"ASSETS
Stipulation ............................. $ 55,664.08
Livestock and Crops ..................... 32,622.31
2005 Acre farm .......................... 425,000.00
___________
Total .............................. $513,286.39
"LIABILITIES
Secured (Stipulation) .................. $423,411.24
Unsecured (Stipulation) ................ 90,693.83
___________
Total .............................. $514,105.07
Net Worth ..................... — $818.68"
The liabilities existing on November 21, 1960, were agreed to by stipulation. The value of the general assets...
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In re Marshall, LA 02-30769-SB.
...the modified balance sheet test that now appears in § 101(32)(A). See 1898 Act § 1(19); see also American Nat'l Bank & Trust Co. v. Bone, 333 F.2d 984, 986-87 (8th Cir.1964) (utilizing a balance sheet to show insolvency); Syracuse Engineering Co. v. Haight, 110 F.2d 468, 471 (2d Cir.1940). ......
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Marshall v. Marshall (In re Marshall), 09-55573
...the modified balance sheet test that now appears in § 101(32)(A). See 1898 Act § 1(19); see also American Nat'l Bank & Trust Co. v. Bone, 333 F.2d 984, 986-87 (8th Cir.1964) (utilizing a balance sheet to show insolvency); Syracuse Engineering Co. v. Haight, 110 F.2d 468, 471 (2d Cir.1940). ......
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Marshall v. Marshall, 09–55573.
...the modified balance sheet test that now appears in § 101(32)(A). See 1898 Act § 1(19); see also American Nat'l Bank & Trust Co. v. Bone, 333 F.2d 984, 986–87 (8th Cir.1964) (utilizing a balance sheet to show insolvency); Syracuse Engineering Co. v. Haight, 110 F.2d 468, 471 (2d Cir.1940). ......
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In re Bellanca Aircraft Corp., Bankruptcy No. 4-81-959
...time frame through either collection or sale at regular market value. See, e.g., American Nat'l Bank & Trust of Chicago, Illinois v. Bone, 333 F.2d 984, 986-87 (8th Cir.1964); Syracuse Eng. Co. v. Haight, 110 F.2d 468, 471-72 (2d Cir.1940); First Nat'l Bank of Stigler Oklahoma v. Perdue Hou......