Gans v. Ellison

Decision Date22 April 1902
Docket Number9.
PartiesGANS v. ELLISON et al.
CourtU.S. Court of Appeals — Third Circuit

Julius C. Levi, for appellant.

H. C Thompson, Jr., for appellees.

Before ACHESON, DALLAS, and GRAY, Circuit S, and GRAY, Circuit Judges.

ACHESON Circuit Judge.

This is an appeal by Aaron Gans, trustee of the estate of E. O Thompson's Sons, bankrupts, from an order of the district court approving the allowance by the referee in bankruptcy of the claim of John B. Ellison & Sons, creditors, and the claim of Harrington & Goodman, creditors, against the estate of the bankrupts. The same question of law is common to these two cases brought up by appeal. The facts in the respective cases are these: E.O. Thompson's Sons were indebted to John B Ellison & Sons in the sum of $6,671.89 for merchandise sold and delivered by the latter to the former. Within four months before the petition in bankruptcy was filed, these creditors without knowledge that their debtors were insolvent, innocently received on account of this indebtedness two payments of $900 each, and afterwards, in good faith, sold and delivered to the debtors upon credit, without security of any kind, additional merchandise to the value of $1,703.15, which became a part of the estate of the debtors. These creditors, tendering to the trustee in bankruptcy $96.82, the excess between the payments and new credits, claimed the right to prove against the estate for a dividend upon $6,671.89, the amount of the indebtedness as it originally stood. The referee allowed the claim, and the court approved the allowance. E. O. Thompson's Sons were indebted to Harrington & Goodman in the sum of $3,113.46 for merchandise sold and delivered by the latter to the former. Within four months before the petition in bankruptcy was filed, these creditors, without knowledge that their debtors were insolvent, innocently received on account of this indebtedness payments amounting in all to $540.65, and afterwards, in good faith, sold and delivered to the debtors upon credit, without security of any kind, additional merchandise to the value of $586.56, which became a part of the debtor's estate. Taking into account the excess of new credits over the payments, the amount due these creditors was $3,159.37, which they claimed the right to prove against the estate. The referee allowed the claim, and the court approved the allowance. All the above-mentioned transactions occurred in the regular course of business dealings between the parties. In the case of John B. Ellison & Sons, the appellant, the trustee in bankruptcy, contends that the entire sum of $1,800 so paid to these claimants must be refunded by them to the bankrupts' estate before they can prove against the estate; the claimants being entitled upon such refunding to a dividend upon the amount of the whole indebtedness to them. And the appellant takes a like position as to the claim of Harrington & Goodman.

The solution of the question now before us involves a particular consideration of the following cited paragraphs of the bankrupt act:

Paragraph 'g' of section 57:

'The claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences.'

Paragraph 'a' of section 60:

'A person shall be deemed to have given a preference, if being insolvent, he has 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 that any other of such creditors of the same class.'

Paragraph 'b' of section 60:

'If a bankrupt shall have given a preference within four months before the filing of a petition, or after the filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee and he may recover the property or its value from such person.'

Paragraph 'c' of section 60:

'If a creditor has been preferred, and afterwards in good faith gives the debtor further credit without security of any kind for property which becomes a part of the debtor's estates, the amount of such new credit remaining unpaid at the time of the adjudication to bankruptcy may be set off against the amount which would otherwise be recoverable from him.'

These paragraphs are closely related. They are parts of a system which aims at equality between creditors of the same class. They should then be read together, and in such manner as to harmonize the...

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10 cases
  • In re Fulghum Const. Corp.
    • United States
    • U.S. District Court — Middle District of Tennessee
    • September 18, 1981
    ...v. J.H. Fisher & Co., 159 F. 897 (6th Cir. 1908). See also In re Sagor & Brother, 9 Am.Bkrtcy.Rptr. 361 (2d Cir. 1903); Gans v. Ellison, 114 F. 734 (3d Cir. 1902); Kimball v. E.A. Rosenham Co., 114 F. 85 (8th Cir. 1902); Dickson v. Wyman, 111 F. 726 (1st Cir. 1901). Commentary on the old Ac......
  • In re Fulghum Const. Co.
    • United States
    • U.S. Bankruptcy Court — Middle District of Tennessee
    • November 28, 1980
    ...payments as a condition of the allowance of his claim, under section 57g of the bankrupt act of 1898. 114 F. at 88-89. In Gans v. Ellison, 114 F. 734 (3d Cir. 1902), the Third Circuit held that nothing in Pirie prevented a creditor who had no knowledge of the debtor's insolvency from applyi......
  • Farmers Bank of Clinton, Missouri v. Julian
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • December 18, 1967
    ...would interfere with equal distribution of assets among the creditors of a like class. In so holding the court in Gans v. Ellison, 114 F. 734, 737 (3 Cir. 1902) "The net balance in favor of the creditor is the real preference under the law. For only to the extent of such net gain does the c......
  • In re Thomas W. Garland, Inc.
    • United States
    • U.S. Bankruptcy Court — Eastern District of Missouri
    • May 5, 1982
    ...See also, Dickson v. Wyman, 111 F. 726 (1st Cir. 1901); In re Sagor & Brother, 9 Am.Bankr. Rep. 361 (2d Cir. 1903); Gans v. Ellison, 114 F. 734 (3d Cir., 1902). The United States Supreme Court, citing the decisions by the courts in Kimball, Dickson, Sagor, and Gans, confirmed the validity o......
  • Request a trial to view additional results

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