In re Craig, Reed & Emerson

• Decision Date: 15 January 1931
• Docket Number: No. 44210.,44210.
• Citation: 46 F.2d 811
• Parties: In re CRAIG, REED & EMERSON, Inc.
• Court: U.S. District Court — District of Massachusetts

46 F.2d 811 (1931)

In re CRAIG, REED & EMERSON, Inc.

No. 44210.

District Court, D. Massachusetts.

January 15, 1931.

Jacobs & Jacobs, of Boston, Mass., for Plymouth County Trust Co.

Phipps, Durgin & Cook, of Boston, Mass., for trustee in bankruptcy.

LOWELL, District Judge.

This proceeding by a trustee in bankruptcy to recover a preference was brought by a petition before Mr. Referee Ryan. The defendant consented to the jurisdiction of the referee, but, his decision being adverse, it now contends that the referee was incompetent to try the case even with its consent. "Second thoughts are best" is a good maxim, though its application here is unsportsmanlike. The contention is without merit. Section 23b, Bankr. Act (11 USCA § 46(b), gives power to "courts" by consent, and "court" may include the Referee (section 1 11 USCA § 1).

The point has often been assumed, or mentioned in obiter dicta, though apparently not adjudicated. Harrison v. Chamberlin, 271 U. S. 191, 46 S. Ct. 467, 70 L. Ed. 897. See Foster v. Manufacturers' Finance Co. (C. C. A.) 22 F.(2d) 609.

The bankrupt had been a depositor with the defendant for many years. It had borrowed money from it in the past on time loans, which it had been unable to repay. Two years before the bankruptcy these loans were changed into demand loans. In June, 1929, the bankrupt being in failing circumstances, a conference was held between the officers of the bankrupt and certain creditors to consider what should be done. At this conference it was decided that the bankrupt should be allowed to go on making shoes to see if it could pull through. The president of the defendant was present at this conference, though he took no part in the public discussion. There was conflicting evidence as to whether he made a side remark to the effect that the bank would give the bankrupt more time. On July 11 the bankrupt deposited in the Campello branch three checks, aggregating $15,100.78. On the morning of the 12th of July these checks had been sent to the main office, and then the bank set off against the demand notes the sum of $4,027.29, and thereafter honored only checks for wages, which it did under the advice of counsel that wage payments would be preferred under an assignment for the benefit of creditors. A day later, when the bank had discovered that the checks for $15,100.78 were good, it set off this amount against the demand notes, and two days after that it set off two further sums of $347.76 and $1,000.96. On July 13th the bank wrote to the bankrupt informing it of what had been done. The bankrupt vainly protested. It was told that it must make an assignment for the benefit of creditors. This assignment was drawn up by the bank's attorney, one of the subordinate officers of the bank being the assignee. The assignee proceeded to wind up the affairs of the concern, and about two months later the petition in bankruptcy was filed. At some time between July 10th and July 14th the following entry was made on the ledger card: "Show all checks to Mr. Crocker." (Crocker was the vice president of the bank.) The evidence as to when this entry was made was conflicting; the bookkeeper saying that it was made on July 10th, Mr. Crocker saying July 15th.

The referee ruled that the first set-off of $4,027.29 was valid, but that the others constituted preferences. He allowed interest on the amount found due from the date of the filing of the petition in...