Illinois Parlor Frame Co. v. Goldman

• Decision Date: 21 January 1919
• Docket Number: 2669.
• Citation: 257 F. 300
• Parties: ILLINOIS PARLOR FRAME CO. v. GOLDMAN. In re NATIONAL UPHOLSTERING CO.
• Court: U.S. Court of Appeals — Seventh Circuit

257 F. 300

ILLINOIS PARLOR FRAME CO. v. GOLDMAN.

In re NATIONAL UPHOLSTERING CO.

No. 2669.

United States Court of Appeals, Seventh Circuit.

January 21, 1919

Samuel B. King, of Chicago, Ill., for appellant.

Joseph Kamfner, of Chicago, Ill., for appellee.

Before BAKER, MACK, and EVANS, Circuit Judges.

MACK Circuit Judge.

While appellant gave bankrupt a line of credit to the amount of $1,000, it was induced to increase this subsequently to April 1, 1916, by certain material false and fraudulent representations of the bankrupt's manager, so that on June 9, 1916, the indebtedness amounted to $5,795.70. On that day, after discovery of the fraud, accounts aggregating in face value over $4,000 were transferred to appellant and were entered on the books as a cash credit. Thereafter additional accounts were transferred, certain goods were returned and credited at a fixed valuation, and certain additional goods were delivered to the bankrupt. Petition in bankruptcy was filed October 4, 1916.

On suit by the trustee in bankruptcy to recover preferences, the court, confirming the master's report, entered a money decree for the face value of the accounts and the fixed value of the returned goods, less the price of the goods sold to the bankrupt after June 9th.

1. Without detailing the evidence, in our judgment, it fully supports the findings of insolvency, preference, and appellant's knowledge thereof on June 9th.

2. Evidence of the goods sold to the bankrupt after April 1st and on hand June 9th was rejected by the master as immaterial, on the theory that taking payment or security on account of the entire debt was a confirmation, not a repudiation, of the earlier sales, and that, in that aspect the payment must be deemed to have been made on an antecedent debt.

But on June 9th appellant concededly had a right to rescind the fraudulent sales and to recover back such of the goods as were then in the bankrupt's possession. Clearly a return of these goods would not be a preference; to the extent of their value, payment could no more effectuate a preference neither transaction would diminish the estate to which bankrupt was then entitled. That appellant did not expressly assert a right of rescission is immaterial; it relinquished that right in confirming the sale; it then gave up a property interest equal to the value of the goods then on hand. To that extent the transfer was for a present consideration,...