Henry Jaquith v. Edwin Alden

• Decision Date: 27 April 1903
• Docket Number: No. 516,516
• Citation: 47 L.Ed. 717,189 U.S. 78,23 S.Ct. 649
• Parties: HENRY J. JAQUITH, Trustee, Appt. , v. G. EDWIN ALDEN
• Court: U.S. Supreme Court

189 U.S. 78

23 S.Ct. 649

47 L.Ed. 717

HENRY J. JAQUITH, Trustee, Appt.,

v G. EDWIN ALDEN.

No. 516.

Submitted January 12, 1903.

Decided April 27, 1903.

F. N. Woodward et al. filed their petition in bankruptcy, and were adjudicated bankrupts November 26, 1901. They had become insolvent August 15, and on that day were not indebted to G. Edwin Alden, who afterwards, in ignorance of the insolvency, made sales to Woodward et al., and received payments from them therefor in the regular course of business and without any idea or intention on the part of Alden of obtaining a preference thereby, the sales and payments being as follows:

                                            Sales
                 
                     Aug. 17, 1901  Rubber............... $289.46
                     "    28,  "      "................... 657.89
                     Sept. 30, "      "................... 644.28
                     Oct. 18,  "      "................... 535.99
                     Oct. 18,  "    Cartage.................. .50
                     "    31,  "    Asbestine.............. 10.40
                 
                                           Payments
                 
                     Sept.  4, 1901   Payment  of  bill  Aug.  17  $289.46
                     Sept. 28, 1901   Payment  of  bill  Aug.  28   657.89
                     Oct.  29, 1901   Payment  of  bill  Sept. 30   644.28
                 

The merchandise sold Woodward et al. was manufactured by them, and the result of the transactions was to increase their estate in value. Alden petitioned to be allowed to prove his claim of $546.89.

The referee disallowed the claim unless at least the amount of $633.88 was surrendered to the estate. The district judge reversed the judgment of the referee and allowed the claim, and the decree of the district court was affirmed by the circuit court of appeals (118 Fed. 270) on the authority of Dickson v. Wyman, 55 L. R. A. 349, 49 C. C. A. 574, 111 Fed. 726. Thereupon an appeal to this court was allowed and a certificate granted under § 25, b, 2.

Mr. Harry J. Jaquith in propria persona for appellant.

Messrs. Eugene M. Johnson, Arthur T. Johnson, and Alonzo R. Weed for appellee.

Mr. Chief Justice Fuller delivered the opinion of the court:

The facts found established that on August 15 the aggregate of the property of the bankrupts was not, at a fair valuation, sufficient in amount to pay their debts, but that Alden was ignorant of this, and, in good faith and in the regular course of business, sold material to the bankrupts, and received payment therefor several times between August 15 and November 26, when the petition was filed, on which day the amount of $546.89 for material delivered shortly before had not been paid. All the material so sold to them was manufactured by the bankrupts, and increased their estate in value.

The question is whether the payments made to Alden (or either of them) were preferences within § 60 of the bankruptcy act of 1898 [30 Stat. at L. 562, chap. 541, U. S. Comp. Stat. 1901, p. 3445], which must be surrendered, under § 57g, before his claim could be allowed.

Provisions of the act bearing on the subject are given below.¹

In Pirie v. Chicago Title & T. Co. 182 U. S. 438, 45 L. ed. 1171, 21 Sup. Ct. Rep. 906, the circuit court of appeals for the seventh circuit had affirmed an order of the district court for the northern district of Illinois, rejecting a claim of Carson, Pirie, & Company against the estate of Frank Brothers, bankrupts, and the case was then brought to this court on findings of fact and conclusions of law of the circuit court of appeals, made and filed 'pursuant to the requirements of subdivision 3, rule 36 of General Orders in Bankruptcy.' The first three of the findings were as follows:

'First. That on February 11, 1899, August Frank, Joseph Frank, and Louis Frank, trading as Frank Brothers, were duly adjudged bankrupts.

'Second. That for a long time prior thereto appellants carried on dealings with the said bankrupt firm, said dealings consisting of a sale by said appellants to said Frank Brothers of goods, wares, and merchandise amounting to the total sum of $4,403.77.

'Third. That said appellants, in the regular and ordinary course of business, and within four months prior to the adjudication in bankruptcy herein, did collect and receive from said bankrupts as partial payment of said account for such goods, wares, and merchandise so sold and delivered to said Frank Brothers, the sum of $1,336.79, leaving a balance due, owing and unpaid, amounting to $3,093.98.'

It was further found that, at the time this payment was made, Frank Brothers were hopelessly insolvent, to their knowledge; but that Carson, Pirie, & Company had no knowledge of such insolvency, nor had reasonable cause to believe that it existed; nor did they have reasonable cause to believe that the bankrupts, by the payment, intended thereby to give a preference; and that they had refused to surrender to the trustee the amount of the payment made to them by the bankrupts, as a condition of the allowance of their claim. Upon the facts the circuit court of appeals concluded, as matter of law, that the payment made 'at the time and in the manner above shown' constituted a preference; and that, by reason of the failure and refusal of Carson, Pirie, & Company to surrender the preference, they were not entitled to prove their claim.

The judgment below was affirmed by this court, and it was held that a payment of money was a transfer of property, and when made on an antecedent debt by an insolvent was a preference within § 60a, although the creditor was ignorant of the insolvency, and had no reasonable cause to believe that a preference was intended. The estate of the insolvent, as it existed at the date of the insolvency, was diminished by the payment, and the creditor who received it was enabled to obtain a greater percentage of his debt than any other of the creditors of the same class.

In the present case all the rubber was sold and delivered after the bankrupts' property had actually become insufficient to pay their debts, and their estate was increased in value...