In re Henry C. King Co.

• Decision Date: 22 January 1902
• Docket Number: 3,916.
• Citation: 113 F. 110
• Parties: In re HENRY C. King. Co.
• Court: U.S. District Court — District of Massachusetts

113 F. 110

In re HENRY C. King. Co.

No. 3,916.

United States District Court, D. Massachusetts.

January 22, 1902

Wilbur E. Rowell, for creditor proving claim.

Jeremiah J. Mahoney, for objecting creditors.

LOWELL District Judge.

In this case the creditor, a clerk of the bankrupt, had, four months before the date of the bankruptcy, a claim against the bankrupt for wages amounting to $333.19. During four months immediately preceding bankruptcy he earned $445, and within three months preceding bankruptcy earned more than $300. During the four months, however, and with knowledge of the bankrupt's insolvency during that time, he received in goods and money $403.77, having an open running account with the bankrupt; on the one side for wages due, and on the other side for groceries, wood, coal, and money received from the bankrupt at irregular intervals. (333.19 was credited in settlement of the wages due four months before bankruptcy. The balance received-- $70.58-- was credited upon the wages earned within four months of bankruptcy. The creditor now seeks to prove for $300 as a preferred creditor, under the decision of the circuit court of appeals in Dickson v Wyman, 111 F. 726. But that decision is carefully limited to a transaction 'without any intention to acquire any unjust preference,' 'without reasonably cause on (the creditor's) part to believe him insolvent ' In the case at bar the creditor knew the bankrupt's insolvency. In spite of the language in Dickson v. Wyman, it would seem that knowledge of insolvency, cannot affect the question of preference or no preference. A preference is defined in Bankr. Act, Sec. 60a, without reference to knowledge of insolvency. Pirie v. Trust Co., 182 U.S. 438, 21 Sup.Ct. 906, 45 L.Ed. 1171. That case held that the transaction was none the less a preference because the element of knowledge was wanting, and, if this be so, a transaction can hardly be any more a preference because knowledge of insolvency is present; in other words, knowledge of insolvency converts an innocent preference which may be retained if the creditor will forego proof, into a guilty preference which may be recovered back by the trustee. But since the element of knowledge is excluded from the definition of preference, it follows that even an innocent preference-- one received without knowledge of insolvency-- is still a preference, and must be surrendered before proof. It follows also that knowledge of insolvency cannot transform into a preference an act which otherwise is no preference. If a given payment, received without knowledge of insolvency need not be surrendered before proof, because it is no preference, the same payment received with knowledge of insolvency is not...