In re Lyon

• Decision Date: 25 February 1903
• Docket Number: 60.
• Citation: 121 F. 723
• Parties: In re LYON.
• Court: U.S. Court of Appeals — Second Circuit

121 F. 723

In re LYON.

No. 60.

United States Court of Appeals, Second Circuit.

February 25, 1903

Stillman F. Kneeland, for petitioner.

Perry I. Trafford, for respondent.

Before WALLACE, LACOMBE, and COXE, Circuit Judges.

LACOMBE Circuit Judge.

This case, although it involves the question of preferential transfers of property, presents questions totally different from those discussed in Re Sagor, decided at this session 121 F. 658. The relevant sections of the bankrupt act are:

'Sec 57g, c. 541, Act July 1, 1898, 30 Stat. 560 (U.S. Comp. St. 1901, p. 3443). The claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences.'

'Sec. 60a, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3445). A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.'

The facts are as follows: Batten & Co. were newspaper agents, who were in the habit of rendering monthly statements to the bankrupt, the work charged for each month being payable at the end of that month or the first of the following. On November 6, 1899, there was found to be due for advertising done for said bankrupt the sum of $1,888.61. The debtor thereupon gave to the creditor his check dated November 6th for $202.25, and on that day and subsequently several other post dated checks for similar amounts. Payment of these checks as they came due reduced the amount of this indebtedness by the end of December to $630.47. During December additional obligations to Batten & Co. were incurred for advertising, aggregating $546.02, and it is for this latter sum that claim has been filed. On January 2, 1900, the unpaid balance of $630.47 for advertising prior to November was provided for by delivering to the creditors three checks of the debtor, dated January 2d, January 8th, and January 20th respectively. It is this last check only which is the subject of controversy; the earlier ones were paid on or about their respective dates, but during the entire period the debtor was solvent. The final check was drawn to the order of Batten & Co. on the Astor Place Bank, where Lyon had an account, was post dated January 20, 1900, and called for $210.15. Batten & Co. held it till January 20th, and, on that day, in the ordinary course of business, duly indorsed and transferred the same to the National Shoe & Leather Bank, in which the firm had an account. On the following day the check was paid through the clearing house by the Astor Place Bank to the Shoe & Leather Bank, and the amount thereof charged by the Astor Place Bank against the account of the bankrupt. It was found by the referee, and is not disputed, that Lyon became insolvent on January 20, 1900, and that the payment of the check was a preferential transfer of property, under section 60a, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3445). The District Judge held that the effect of the delivery of the check to the petitioners was to diminish the assets of the bankrupt when insolvent, to the detriment of its other creditors, and was therefore a payment when insolvent, and a payment directly for the benefit of the petitioners through the medium of its bank. Evidently the words 'delivery of the check' should be 'payment of the check,' for delivery of the check was not made during insolvency.

The case may be best disposed of by considering the successive propositions advanced by the appellants.

It is contended that upon the transfer of the check to the Shoe &amp Leather Bank the title thereto passed to the bank, and that, therefore, the bank became the sole creditor of the maker for the amount. No doubt the title did thus pass; but it does not follow that Batten & Co., who became indorsers of the check, ceased to be creditors of the bankrupt, within the terms of the act. Section 1, subd. 9, 30 Stat. 544 (U.S. Comp. St. 1901, p. 3419), provides that the word 'creditor' shall include any one who own a demand or claim provable in bankruptcy. Section 57i, 30 Stat. 560 (U.S. Comp. St. 1901, p. 3443), provides for proof of claim by persons situated as indorsers are. The indorsers being solvent, it was immaterial to the bank whether Lyon's check was paid or not; payment of it was wholly for the benefit of Batten & Co. This whole question has been discussed...