Douglass v. Pugh, 1289.
| Decision Date | 12 October 1959 |
| Docket Number | No. 1289.,1289. |
| Citation | 177 F. Supp. 274 |
| Parties | Prentiss DOUGLASS, Trustee in Bankruptcy of the Commercial Plumbing & Heating Co., Inc., Plaintiff, v. Carrie D. PUGH, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
Edward F. Prichard, Jr., Lexington, Ky., for plaintiff.
Paul Mansfield, Lexington, Ky., for defendant.
On September 30, 1957, upon an involuntary petition in bankruptcy filed by certain of its creditors, Commercial Plumbing & Heating Company, Inc., was adjudged a bankrupt by this court.
By this plenary action the trustee in bankruptcy seeks to avoid as preferences and to recover from the defendant, Carrie D. Pugh, payments in the total sum of $8,850 received by defendant out of general corporate funds of the bankrupt some two weeks prior to bankruptcy and a few days before the company ceased to do business on September 19, 1957. The payments were made by the bankrupt to defendant, its acting Secretary-Treasurer, in satisfaction of a note evidencing a personal loan in the amount of $8,850.70 which defendant had made to the bankrupt August 30, 1957, one month prior to bankruptcy.
The defendant, Mrs. Pugh, was employed as bookkeeper by the bankrupt from November 1956 until it ceased to do business. Sometime after August 1, 1957, following the dismissal of a foreman named Greer, who had theretofore countersigned checks drawn on the corporation, defendant was given authority to sign and countersign checks as "Secretary-Treasurer."
By the end of August 1957, the credit of the corporation had become impaired, and funds were needed to meet the payroll and to pay suppliers of materials to various jobs on which the corporation was subcontractor. The corporation was engaged as subcontractor under a prime contractor named Fox & Lewis in installing plumbing fixtures in several schools in Bourbon County, Kentucky. The president of the corporation, Archie J. Henkenberns induced the defendant, Mrs. Pugh, to use her personal credit to borrow money for the use of the corporation and in return therefor agreed to assign to her estimates in the approximate amount of $8,850.70 purporting to represent money due for work completed for Fox & Lewis.
On August 30, 1957, the defendant borrowed $8,850.70 from the Bank of Commerce, Lexington, Kentucky and gave the bank her personal note for that amount. The note, which was due and payable 15 days after date, contains the following notation on its face: "Assignment of Accounts Fox & Lewis General Contractors for $8850.70," deposited as collateral security for payment of the note.
On the same date the bankrupt executed to defendant its note in the amount of $8,850.70 signed by A. J. Henkenberns, President. Henkenberns testified that the estimates of money due for work completed for Fox & Lewis were orally assigned to defendant to secure payment of the latter note. Thereupon, the money which defendant had borrowed from the bank was used to meet the payroll and current expenses of the corporation.
On or about September 10, 1957, Fox & Lewis refused to make payment on the estimates in question on the ground that Greer, the foreman who had been dismissed, had padded previous estimates and no further sums for work completed were due. No money was ever collected from Fox & Lewis on these estimates. The trustee testified he had investigated the matter and found no money was due from Fox & Lewis.
Defendant was paid on the note of the corporation held by her $7,000 on September 11, 1957, $646.71 on September 13, 1957, and $246.12 and $1,000 on September 14, 1957. She immediately applied these sums in satisfaction of her personal note to the bank, which was due on September 14, 1957.
All the payments received by defendant were by checks drawn on the corporation payable to her except the final payment of $1,000, which was by a check payable to the corporation and endorsed to defendant. All such payments to defendant were out of general funds of the corporation.
Prior to the filing of the involuntary petition in bankruptcy against the corporation, the defendant Mrs. Pugh assisted Mr. Henkenberns, the president, in making a list of its accounts payable and accounts receivable, which is filed herein as Exhibit No. 1, and the attorney to whom it was...
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