First Nat. Bank of Cleveland v. Orten

• Decision Date: 30 June 1914
• Docket Number: Case Number: 3655
• Citation: 1914 OK 309,142 P. 1096,43 Okla. 325
• Parties: FIRST NAT. BANK OF CLEVELAND v. ORTEN.
• Court: Oklahoma Supreme Court

1914 OK 309

142 P. 1096

43 Okla. 325

FIRST NAT. BANK OF CLEVELAND v. ORTEN.

Case Number: 3655

Supreme Court of Oklahoma

Decided: June 30, 1914

Syllabus

¶0 1. BANKRUPTCY--Preference--What Constitutes--Homestead -- Insurance Money. Where for more than six months immediately before the filing of the petition in bankruptcy the bankrupt was a resident of the state, the head of a family, and the owner of a lot in a city and a two-story building thereon, on the lower floor of which he did business and lived on the upper floor, and the value thereof did not exceed $ 5,000, and where, prior to his adjudication in bankruptcy, said building was destroyed by fire, and where certain insurance money realized therefrom, within four months of the filing of the petition in bankruptcy, was paid by him to one of his creditors, held, that said lot and building were exempt to him as a homestead under Rev. Laws of Oklahoma 1910, sees. 3342, 3343, and that neither the title to said property nor the insurance money realized therefrom passed to the trustee in bankruptcy, and that said payment did not constitute a preference in violation of sections 60a and 60b of the Bankruptcy Act of July 1, 1898, c. 541, 30 St. at L. 562 (U. S. Comp. St. 1901, p. 3445), as amended by the Act of Feb. 5, 1903, c. 487, sec. 13, 32 St. at L. 799 (U. S. Comp. St. Supp. 1911, p. 1506).

2. SAME--"Preference"--What Constitutes. Within four months of the filing of the petition in bankruptcy, the bankrupt, after the destruction of certain property not exempt to him, assigned a policy of insurance thereon to his indorser on a promissory note payable to the defendant bank. A draft for the amount of the policy was afterwards made payable to him, and the indorser and the bankrupt thereafter cashed the draft at the bank and applied most of the proceeds in payment of the indorsed note. Assuming that the bankrupt was insolvent at the time, it was neither alleged nor proved that either the indorser or the bank had reasonable cause to believe that he was insolvent. Held, that such payment did not constitute a preference to the bank to the amount of the draft within the contemplation of sections 60a and 60b of the Bankruptcy Act of July 1, 1898, c. 541, 30 St. at L. 562 (U. S. Comp. St. 1901, p. 3445), as amended by Act Feb. 5, 1903, c. 487, sec. 13, 32 St. at L. 799 (U. S. Comp St. Supp. 1911, p. 1506).

Error from District Court, Pawnee County; L. M. Poe, Judge.

Action by L. V. Orten, trustee in bankruptcy, against the First National Bank of Cleveland, a corporation. Judgment for plaintiff, and defendant brings error. Reversed.

Dillard & Blake, for plaintiff in error

Biddison & Merritt and Orten & McNeill, for defendant in error

TURNER, J.

¶1 On September 1, 1910, in the district court of Pawnee county, L. V. Orten, trustee in bankruptcy of the estate of Wm. Scott, defendant in error, sued First National Bank of Cleveland, plaintiff in error, to recover $ 1,500, an alleged preference made to the bank by the bankrupt within four months of the filing of the petition in bankruptcy in violation of sections 60a and 60b of the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 562 (U. S. Comp. St. 1901, p. 3445), as amended by the act of 1903, which reads:

"A person shall be deemed to have given a preference, if being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will 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. * * * If a bankrupt shall have" given "a preference and the person receiving it, or to be benefited thereby, or his agent acting therein shall then have reasonable cause to believe" that it was intended thereby to give "preference, it shall be voidable by the trustee and he may recover the property or its value from such person. And for the purpose of such recovery any court of bankruptcy, as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction."

¶2 There was trial to a jury and judgment for the trustee for $ 1,435, and the bank brings the case here. It complains that the judgment is not sustained by the evidence and is contrary to law. The undisputed facts are that on November 22, 1909, a petition in involuntary bankruptcy was filed against Scott in the United States District Court for the Western District of this state, and on May 19, 1910, he (Scott) was adjudged a bankrupt; that for several years prior to July 21, 1908, he was a resident of Cleveland, Okla., the head of a family, and owned no real estate other than a two-story frame building in that city located on a certain lot belonging to him known as lot 12, block 19; that therein he did business as a grocer and used the second floor as his home; that on said date the building and its contents were destroyed by fire; that at that time he was the owner of three fire insurance policies in three different companies, one for $ 1,000 on the building, another of $ 600 ($ 450 of which was on the grocery stock and $ 150 on the store fixtures and furniture), and another of $ 300 on his household goods; that after the fire, on the same day, he assigned two of said policies, the one for $ 1,000 and the one for $ 600, to one Richards, who was indorser for him on a $ 900 note payable to the defendant bank, to which he was indebted in all "a little better than $ 1,400"; and thereafter three separate drafts were issued by the insurance companies, one for $ 1,000, one for $ 600 payable to Richards, and the other for $ 300 payable to the bankrupt, which, when received, were on February 24, 1910, cashed at defendant bank and enough of the proceeds of the two drafts issued to Richards applied in payment of the bankrupt's said indebtedness, amounting in all to $ 1,435. As to the proceeds of the $ 300, no more need be said, as the same was not paid to the bank, as a part of this alleged preference. As to the $ 1,000 draft, said payment did not constitute a preference within the contemplation of said section of the statute. This for the reason that the same, being the proceeds realized from the insurance of the homestead of the bankrupt, which was exempt, is also exempt from the payment of his debts, and, being exempt, the title thereto did not pass to the trustee.

¶3 Bankruptcy Laws 1898, c. 3, sec. 6, reads:

"This act shall not affect the allowance to the bankrupts of the exemptions which are prescribed by the state laws in force at the time of the filing of the petition in the state wherein they have had their domicile for the six months or the greater portion thereof immediately preceding the filing of the petition."

¶4 At that time Rev. Laws of Okla. 1910, sec....