Cullinane v. State Bank of Waverly

• Citation: 98 N.W. 887,123 Iowa 340
• Parties: RICHARD CULLINANE, Trustee, v. STATE BANK OF WAVERLY, Appellant
• Decision Date: 14 March 1904
• Court: Iowa Supreme Court

98 N.W. 887

123 Iowa 340

RICHARD CULLINANE, Trustee, v. STATE BANK OF WAVERLY, Appellant

Supreme Court of Iowa, Des Moines

March 14, 1904

Appeal from Bremer District Court.--HON. J. F. CLYDE, Judge.

ON September 22, 1898, White & Drake, a co-partnership doing business at Waverly, this state, then being indebted to the defendant bank in the sum of $ 1,616.62, all of which was past due, executed and delivered a chattel mortgage covering the entire stock of merchandise owned by said firm, and assigned in writing all its unpaid accounts and demands to the defendant bank to secure such indebtedness. The property so conveyed and assigned constituted all the property owned by said firm and by the individual members thereof. On September 28, 1898, the bank took possession, and sold the stock of merchandise, in accordance with the provisions of the mortgage, for the sum of $ 1,533.32, and applied said sum upon the indebtedness due to it. Of the accounts and demands assigned sufficient were collected by the bank to pay the balance of such indebtedness. January 19, 1899, the said co-partnership of White & Drake and S. E. White and C. W Drake, the individual members thereof, were adjudged bankrupts in certain proceedings brought for that purpose and then pending in the District Court of the United States Northern District of Iowa. The appellee was duly appointed trustee in such proceedings. This action is brought at law by the trustee to recover the full amount so collected and received by the defendant bank. There was a trial to the court, a jury being waived, and a judgment in favor of plaintiff. The defendant appeals.

Reversed.

Long, Hagemann & Farwell for appellant.

Gibson & Dawson for appellee.

OPINION

BISHOP, J.

A misunderstanding of the issues in this case led to an order granting a rehearing, and reargument of the case has now been had. We find the contention of plaintiff as made in his petition to be that at the time of the making of the mortgage to the defendant bank the firm of White & Drake was insolvent, and that the effect of such mortgage was to prefer the bank as a creditor. The allegations of the petition do not amount to a charge that the mortgage was made with intent to hinder, delay, and defraud. Now, under the provisions of Bankruptcy Act, July 1, 1898, chapter 541, section 60, 30 Statute 562 (U. S. Compiled Statutes 1901, page 3445), a person is deemed to have given a preference if, being insolvent, he shall make a transfer of any of his property, the effect whereof will be to enable one of his creditors to obtain a greater percentage of his debt than other creditors of the same class. And if preference be given within four months before the filing of a petition in bankruptcy, and the person receiving it shall have had reasonable cause to believe that it was intended thereby to give a preference, the transfer is voidable in a suit by the trustee, and he may recover the property or its value.

I. An insolvent, within the meaning of Bankruptcy Act, section 1 (15), 30 Statute 454 [U. S. Compiled Statutes 1901, page 3421], is one, the aggregate of whose property, etc., shall not, at a fair valuation, be sufficient in amount to pay his debts. The solvency of White & Drake, as a matter of fact within this definition, was a material inquiry in the case. To prove the amount of indebtedness of the firm, the plaintiff called as a witness the referee in bankruptcy, and he was permitted to testify in respect of the number and amount of claims filed with and allowed by him. This testimony was objected to by defendant as incompetent, in that defe...