Grand Rapids Trust Co. v. Reliable Coal & Mining Co.

• Citation: 213 N.W. 100,238 Mich. 248
• Decision Date: 01 April 1927
• Docket Number: No. 27.,27.
• Court: Supreme Court of Michigan
• Parties: GRAND RAPIDS TRUST CO. v. RELIABLE COAL & MINING CO. et al.

238 Mich. 248

213 N.W. 100

GRAND RAPIDS TRUST CO.

v.RELIABLE COAL & MINING CO. et al.

No. 27.

Supreme Court of Michigan.

April 1, 1927.

Appeal from Circuit Court, Kent County, in Chancery; Willis B. Perkins, Judge.

Proceeding in equity by the Grand Rapids Trust Company, as trustee in bankruptcy, for Mary J. Watson, doing business as the Watson Fuel & Supply Company, against the Reliable Coal & Mining Company, Marbold State Bank, and others to recover a preference. Decree for plaintiff, and defendant last named appeals. Affirmed.

Argued before the Entire Bench except BIRD, J.Corwin, Norcross & Cook, of Grand Rapids, for appellant.

J. T. & T. F. McAllister, of Grand Rapids, for appellee.

CLARK, J.

This is a proceeding in equity brought by a trustee in bankruptcy of Mary J. Watson, trading as Watson Fuel & Supply Company, to recover a preference voidable under section 60b of the Bankruptcy Act (U. S. Cump. St. § 9644). The bankrupt was engaged in the business of buying and selling coal at Grand Rapids. The defendant Reliable Coal & Mining Company, an Illinois corporation, was a dealer in coal at Chicago. Perry E. Larrabee, residing in Grand Rapids, was salesman and manager of ‘the Eastern Coal Department for Reliable Coal & Mining Company of Chicago.’ George B. Watson, husband of Mary J. Watson, managed her coal business for her. On June 21, 1923, the bankrupt ordered in writing from defendant, through Mr. Larrabee, 2 cars of coal, and on June 23, 20 cars, and on later days of June more cars. The orders were accepted and confirmed in writing. Thirty cars of coal were shipped during last days of June and during July and were received by the bankrupt in due course and sold to a number of customers. The orders to said defendant were confirmed as upon charge account. The writings are otherwise silent respecting method of payment.

Mr. Larrabee testified that at within a day or two after the taking of the order for the 20 cars, it was agreed orally by and between Mr. Watson for the bankrupt, and himself for said defendant, that the bankrupt was to pay for the coal either in cash or by assignment of customers' accounts for the coal. Later, on August 2, 1923, Mr. Watson confirmed this by stating verbally to the secretary of said defendant that ‘we would make settlement of the coal in that way either in cash or the assignment.’ The bankrupt gave defendant a check for $207, which was paid. On July 26, 1923, a second check for $338.99 was sent. This check was protested, no funds. By august 15, 1923, the bankrupt had received the 30 cars of coal and was indebted to said defendant therefor in the sum of approximately $4,400. On or near August 13 and 15, 1923, the bankrupt assigned to said defendant a number of notes and accounts arising from sales of the coal, aggregating about $4,100. These debtors of the bankrupt and Marbold State Bank, to whom said defendant later transferred a part of the choses in action so assigned, are made parties defendant.

On August 15, 1923, a bill was filed praying appointment of a receiver for the bankrupt, and one was appointed. On September 27, 1923, Mary J. Watson, trading as aforesaid, was adjudged bankrupt by the United States District Court, Western District of Michigan. The defense here is by said bank.

When the coal was sold and shipped to the bankrupt, it is probable that the seller did not know, and had no reasonable cause to believe, that the bankrupt was insolvent. But in August when the assignments of the notes and accounts were taken the creditor coal company did know that the bankrupt was insolvent. Shortly before the assignments were made, Mr. Larrabee was told by the bankrupt's bookkeeper that the prospect of anything being paid on the account ‘didn't look very good,’ ‘there wasn't much chance,’ and that the appointment of a receiver was then contemplated. Also shortly before the assignments were made Mr. Larrabee was told by the bankrupt's attorney:

‘I told Mr. Larrabee that the matter was in the hands of the Grand Rapids Trust Company, who were going to act as receiver of the Watson Fuel & Supply Company, and that if any assignments were made at that time, it would be a pure act of bankruptcy, and that the Grand Rapids Trust Company would not afford to do anything except throw them into bankruptcy; that if any of those assignments covered any of the property...