General Electric Credit Corporation v. Davis, 6980.
| Decision Date | 13 June 1955 |
| Docket Number | No. 6980.,6980. |
| Citation | 224 F.2d 322 |
| Parties | GENERAL ELECTRIC CREDIT CORPORATION, Appellant, v. Marion J. DAVIS, Trustee for Gaither L. Lowery and Carl S. Lowery, Individually and T/A Lowery's TV and Appliance Center, Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Arthur O. Cooke, Greensboro, N. C. (William Owen Cooke and Cooke & Cooke, Greensboro, N. C., on the brief), for appellant.
W. Scott Buck, Winston-Salem, N. C., for appellee.
Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.
The trustee in bankruptcy for G. L. Lowery and C. S. Lowery, copartners trading as Lowery's TV and Appliance Center, filed a petition with the referee praying for an order directing the sale of certain goods in his possession free and clear of liens claimed by the General Electric Credit Corporation by virtue of certain trust receipts covering the goods which it held. The trustee asserted that the liens were invalid because they constituted voidable preferences in violation of § 60 of the Bankruptcy Act, as amended by the Act of March 18, 1950, 11 U.S.C.A. § 96. The statute defines a preference as a transfer of the property of the debtor while insolvent to or for the benefit of a creditor on account of an antecedent debt within four months before the filing of the petition in bankruptcy, the effect of which transfer will be to enable the creditor to obtain a greater percentage of his debt than some other creditor in the same class. A transfer of property, other than realty, is deemed to be made when it becomes so far perfected that no subsequent lien on the property can become superior to the right of the transferee; and if recording of an instrument is necessary to perfect the transfer, and the instrument is not recorded within 21 days after the transfer, then the transfer is deemed to be made at the time the recording is performed. Any preference may be voided if the creditor receiving it has at the time reasonable cause to believe that the debtor is insolvent.
There were two trust receipts in the pending case. One was dated November 12, 1953 for delivery of goods from November 13th to 16th, and was recorded on December 16, 1953. The balance due on this receipt is $280.65 and the value of the property covered thereby in the trustee's hands is $145. The second trust receipt was dated January 7, 1954, for delivery on the same day, and was recorded on February 16, 1954. The balance due on this receipt is $3,701.59 and the value of the property covered thereby in the trustee's hands is $2,500.
The copartners filed a voluntary petition in bankruptcy on March 29, 1954 praying that the partnership and each of the partners be adjudged bankrupt. Since both trust receipts were recorded more than 21 days after date, and less than four months before the petition in bankruptcy was filed, they were voidable upon the petition of the trustee if the partners were insolvent on the recording dates, and if the General Electric Credit Corporation had reason to believe that the partners were insolvent on these dates. The referee decided both issues in favor of the trustee and adjudged that the liens of the General Electric Credit Corporation were null and void, and ordered that the property be sold free from liens. The District Judge after hearing, approved and affirmed the order of the referee.
There are two questions to be decided on this appeal:
(1) does the evidence support the referee's finding that the bankrupts were insolvent at the time of the transfers, and
(2) did the appellant Credit Corporation then have reason to believe that they were insolvent.
The business venture of the partnership lasted approximately one year. Part of the merchandise was purchased from the General Electric Supply Company, a subsidiary of the Credit Corporation, and trust receipts were executed to it to secure the payment of goods delivered. The place of business...
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