Everett v. Warfield Mining Co., 2894.

• Citation: 37 F.2d 328
• Decision Date: 14 January 1930
• Docket Number: No. 2894.,2894.
• Parties: EVERETT v. WARFIELD MINING CO.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

37 F.2d 328 (1930)

EVERETT v. WARFIELD MINING CO.

No. 2894.

Circuit Court of Appeals, Fourth Circuit.

January 14, 1930.

George S. Wallace, of Huntington, W. Va. (S. A. Headley, of Cincinnati, Ohio, on the brief), for appellant

Randolph Bias, of Williamson, W. Va., and Douglas W. Brown, of Huntington, W. Va., for appellee.

Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

On November 22, 1922, the Williamson Pond Creek Coal Sales Company paid to the Warfield Mining Company $16,000 on account. Within four months thereafter the coal sales company was adjudged bankrupt, and, upon the mining company's filing a claim for the balance due it, this $16,000 payment was attacked as a preference. The referee held that it was a preference, but this holding was reversed by the District Judge, and the trustee has appealed.

The $16,000 was paid to appellee under the following circumstances: In September preceding the payment a written contract had been entered into providing that bankrupt should handle the entire output of appellee's mines, and by the 20th day of each month should make payment for the coal shipped during the preceding month. On November 20th there was due for coal shipped during the month of October the sum of $15,731.82. Coal to the value of $7,902.73 had been shipped during the month of November, but payment was not yet due. On November 22d officials of appellee and bankrupt met at Detroit to negotiate with the Piney Ridge Coal Company with regard to a reduction in price of the coal which was being furnished it. That company owed bankrupt, at the time, approximately $100,000, of which it paid $40,000 in the course of the negotiations. The remaining $60,000 was attached in a suit against bankrupt instituted by another company. Of the $40,000 paid to bankrupt, $25,000 was in the form of a check, and this the bankrupt indorsed to appellee. The indebtedness of bankrupt for October coal being estimated at $20,000, appellee gave bankrupt its check for the $5,000 difference. Upon returning from Detroit, the official of appellee to whom payment had been made discovered that the indebtedness for October coal had been overestimated by about $4,000, and check for that amount was sent to bankrupt. It is contended by the trustee that the indorsement of the $25,000 check to appellee was to protect the funds covered thereby from being tied up by the attachment; but, while this may be true, it is entirely immaterial in the view which we take of the case. The questions here involved are, not whether the parties were seeking to evade an attachment, but whether the bankrupt was insolvent at the time of payment, and, if so, whether appellee had reasonable cause to believe that the payment would effect a preference.

On the first of these questions, we do not think that it has been sufficiently shown that bankrupt was insolvent at the time of the payment. There is no direct evidence of insolvency at that time, and the contention to that effect is based upon the fact that certain assets later became or proved to be worthless. Bankrupt had been chartered in 1921. In 1922 it had valuable contracts for the purchase and sale of coal; and, on the strength thereof, had set up on its books an item of $10,000 as good will. Counting this as an asset, an audit of its books on September 30, 1922, showed assets of $208,415.33, which amount was approximately $45,000 in excess of liabilities. It is not shown that any losses were sustained between the date of this audit and the payment in question; but insolvency is...