Goodfellow v. Webber Lumber and Supply Co. Inc.

• Decision Date: 24 November 1926
• Citation: 257 Mass. 503
• Parties: AUBREY Z. GOODFELLOW, trustee in bankruptcy, v. WEBBER LUMBER AND SUPPLY COMPANY, INCORPORATED.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

257 Mass. 503

AUBREY Z. GOODFELLOW, trustee in bankruptcy, v. WEBBER LUMBER AND SUPPLY COMPANY, INCORPORATED.

Supreme Judicial Court of Massachusetts, Worcester.

November 24, 1926

September 27, 1926.

Present: RUGG, C.

J., BRALEY, CROSBY CARROLL, & WAIT, JJ.

Bankruptcy Preference. Payment, By check. Jurisdiction.

The mere giving of a check for the amount of an account owed by the maker to the payee is not, as a matter of law, a payment; and if, at the time when the check is given, the maker has not funds to meet it in the bank upon which it is drawn and, before he presents the check for payment, the payee learns facts respecting the maker's financial condition which were sufficient to put a reasonably cautious and prudent man upon his inquiry as to whether or not the maker was insolvent and unable to pay his debts, receipt of the amount of the check thereafter properly may be found to constitute a preference under the national bankruptcy act.

The Superior Court of this Commonwealth has jurisdiction of a suit in equity by a trustee in bankruptcy to recover from the defendant an amount alleged to have been paid him by the bankrupt as a preference, when both the bankrupt and the defendant are residents of the county in which the suit is brought.

BILL IN EQUITY, by amendment from an action of CONTRACT begun by a writ dated November 15, 1923.

In the Superior Court, the suit was referred to a master. The substance of the master's findings of fact and of exceptions by the defendant to the master's report is stated in the opinion. By order of McLaughlin, J., a decree was entered overruling the defendant's exceptions and directing a repayment to the plaintiff of money, adjudged to have been paid to the defendant as a preference under the national bankruptcy act, in the sum of $2,260. The defendant appealed.

A.M. Levy, for the defendant. S.M. Salny, for the plaintiff.

CROSBY, J. The plaintiff, as trustee in bankruptcy of the estate of Hermas P. Charron, seeks to recover from the defendant, an unsecured creditor, an alleged preferential payment of $2,000 made by Charron to the defendant within four months before December 19, 1922, on which date the debtor was adjudicated a bankrupt.

In 1921 and 1922 Charron resided in Fitchburg where he was engaged in business as a contractor and builder. He purchased lumber and building materials during those years from the defendant, which was a dealer with a place of business in Fitchburg.

The case was referred to a master who made the following and other findings: In 1922 and before Charron was adjudicated a bankrupt the defendant had sold him lumber and materials from time to time. The defendant knew Charron had no capital when he engaged in business in that year, and that he had to pay what he owed out of amounts received on his building contracts. During this year he owed large amounts for labor hardware and other materials, he gave several checks which were not paid because of lack of funds, and he was not in a sound financial condition after the middle of the summer. He had the reputation among dealers and contractors of being financially weak, but the defendant did not know his reputation in this respect and did not know that his checks given to others had not been paid. On November 3, 1922, the defendant's salesman, one Tice, received from Charron a check for $2,000 drawn on the Safety Fund National Bank of Fitchburg. Charron did not have sufficient funds in the bank to pay the check if presented on the day it was delivered to the defendant, but he did then have in his possession a check on the same bank for $2,350, signed by one Fluet. On the day Tice received the $2,000 check he took it to the office of the defendant. A few days before November 3 one Aubuchom, a creditor of Charron had a talk with Henry S. Albro, the defendant's credit man and bookkeeper, in which the financial standing of Charron and other contractors was discussed, and it was suggested that the yards and dealers ought to exchange information in relation to Charron and others and that they should be denied credit because they were weak financially. Between November 3, when the $2,000 check was received, and November 6, when it was paid, Aubuchom went to the defendant's office and talked...