In re Hamilton Auto. Co.

• Decision Date: 07 October 1913
• Docket Number: 1,989.
• Citation: 209 F. 596
• Parties: In re HAMILTON AUTOMOBILE CO. v. JOHNSON. KIMBALL & CO.
• Court: U.S. Court of Appeals — Seventh Circuit

209 F. 596

In re HAMILTON AUTOMOBILE CO.

KIMBALL & CO. v. JOHNSON.

No. 1,989.

United States Court of Appeals, Seventh Circuit.

October 7, 1913

On March 12, 1908, appellant filed its claim before the referee in Re Hamilton Automobile Company, a bankrupt, for $1,782.58. Thereafter the trustee filed his objections to the allowance thereof, and such further action was had that the referee found that appellant had received a preference upon its original account, consisting of a Lozier automobile valued at $1,500 and an open account in favor of bankrupt against Levy Mayer in the sum of $1,300. Upon the refusal of appellant to surrender its said alleged preference, the referee disallowed its said claim, on December 16, 1908. Appellant then filed a petition to review. Upon the hearing thereof, the District Court confirmed the referee's action in the premises, Thereupon the trustee brought suit and recovered judgment against appellant for said preference of $1,500, which amount, with costs, was duly paid by the trustee. No action was brought by the trustee to recover for said alleged claim against Levy Mayer.

Edward B. Esher and Elmer H. Adams, of Chicago, Ill. (James Rosenthal and Francis J. Houlihan, both of Chicago, Ill., of counsel), for appellant.

Frederick D. Silber, Martin J. Isaacs, Clarence J. Silber, and James D Woley, all of Chicago, Ill., for appellee.

Before BAKER, SEAMAN, and KOHLSAAT, Circuit Judges.

KOHLSAAT Circuit Judge (after stating the facts as above).

Appellee raises the following objections to the relief herein prayed by appellant, viz.:

1. The insufficiency of the amended petition;

2. The inclusion by the referee of the claim against Mayer as among those constituting the preference, thereby showing it to be of value and not surrendered as provided by statute.

3. The bar of the first order disallowing appellant's claim.

4. The bar of the one-year limitation of section 57n.

Unless weight be given to said objections 2, 3, and 4, no reason is perceived why the petition is insufficient. Under the decisions of the Supreme Court in Keppel, Trustee, etc., v. Tiffin Savings Bank, 197 U.S. 356, 25 Sup.Ct. 443, 49 L.Ed 790, and Page v. Rogers, Trustee, 211 U.S. 575, 29 Sup.Ct. 159, 53 L.Ed. 332, appellant stands in the position of a creditor who has received and surrendered a preference.

We are not impressed with the argument that, by reason of its failure to account for the claim against Levy Mayer at an earlier date, it has failed to surrender completely the preference charged. The appellant charges in its verified amended petition that said claim is valueless because said Mayer had a perfect defense thereto, and that, if such were not the case, said claim was as good and collectible at the time it was tendered to the trustee as when assigned to appellant. The bankruptcy act deals with matter of substance and the mere preferential transfer of a worthless claim does not come within the meaning of the act. The trustee was not, nor were the creditors, in any way prejudiced by the action of appellant with reference to said claim. Nor do we find, in the recital of the referee enumerating said claim as a part of the preference obtained by appellant, any authority for holding that it was of any value. It was not followed up by the trustee, and was evidently not worth the trouble. Moreover, there was ample time in which he could have brought suit to recover the amount it called for, after it was tendered back to him. It is plain from the record that appellant surrendered all the advantage it had received from the preference.

The action of the referee in allowing appellant's claim after the surrender of the preference had the effect of undoing his former order disallowing said claim as it was then presented, but came clearly within the powers conferred by the act. Clause 2 of section 2 of chapter 2 of the bankruptcy act authorizes District Courts of the United States to 'allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates. ' Subject to revision by the District Court, the referee is authorized to perform these acts. Section 57g reads:

'The claims of creditors who have received preferences, voidable under section sixty, subdivision b, or whom conveyances, transfers, assignments, or incumbrances, void or voidable under section sixty-seven, subdivision e, have been made or given, shall not be allowed unless such creditors shall surrender such preferences, conveyances, transfers, assignments, or incumbrances. ' Act July 1, 1898, c. 541, 30 Stat. 560 (U.S. Comp. St. 1901, p. 3443) as amended by Act Feb. 5, 1903, c. 487, Sec. 12, 32 Stat. 799 (U.S. Comp. St. Supp. 1911, p. 1504).

Subdivision k of said section 57 provides that:...