In re Neill-Pinckney-Maxwell Co.

• Decision Date: 17 May 1909
• Docket Number: 3,001.
• Citation: 170 F. 481
• Parties: In re NEILL-PINCKNEY-MAXWELL CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

170 F. 481

In re NEILL-PINCKNEY-MAXWELL CO.

No. 3,001.

United States District Court, E.D. Pennsylvania.

May 17, 1909

Maxwell H. Kratz and J. Howard Reber, for trustee.

Joseph H. Brinton, for C. S. Knowles.

J. B McPHERSON, District Judge.

The order made by the referee on March 26, 1909, dismissing the trustee's petition praying for the reassignment of certain policies of insurance, is affirmed for the reasons given by the learned referee (Theodore M. Etting, Esq.).

Referee's Certificate on Review.

To the Honorable the Judges of said court:

The question presented for review is whether under the evidence the referee erred in dismissing a petition filed by the trustee asking for an order on a creditor to whom certain policies of fire insurance were assigned by the above-named bankrupt company, within four months of the bankruptcy, for the reassignment of the same.

The material averments in the above petition are alleged insolvency at the time of the assignment, knowledge and reasonable cause of belief on the part of the assignee that a preference was intended. The assignee in his answer denies all of the above averments.

Upon the issue thus raised extended proof has been offered by both parties. I find the facts to be as follows:

The Neill-Pinckney-Maxwell Company is a corporation incorporated under the laws of West Virginia. On January 30, 1908, an involuntary petition in bankruptcy was filed against the company, and on February 15, 1908, the company was adjudged a bankrupt. Prior to bankruptcy the company conducted a wholesale electrical supply business at 925 Arch street in the city of Philadelphia.

C.S Knowles, the assignee of the policies in dispute, is a Boston merchant, and was the largest creditor of the Neill-Pinckney-Maxwell Company at the time of its bankruptcy. During the entire summer of 1907 Knowles had endeavored to obtain a reduction of the indebtedness due him. The only amount which he succeeded in obtaining during that time was $500. At the time of the assignment the amount due Knowles was $10,958.98.

On September 15, 1907, Knowles, being dissatisfied with his inability to obtain money from the company and being doubtful about its financial standing, sent his credit man, Hardy, who had previously conducted the correspondence with the Neill-Pinckney-Maxwell Company, to Philadelphia for the purpose of ascertaining its financial condition and of endeavoring to obtain a payment if possible. Hardy did not succeed in getting any money, but he was given an opportunity of examining the company's books to ascertain the extent and value of its stock and resources. He made an estimate of the value of the merchandise on hand, bills receivable and fixtures, and ascertained the liabilities of the company. He found that the company had little or no money on hand, and that collections were difficult; but in this connection it must be remembered that the period was one of great depression in business and of consequent difficulty in collections.

Hardy's conclusion from the above examination was that the company was solvent, that its assets exceeded its liabilities by about $18,000, that it was carrying too much stock, and that its business was conducted at a place the rental of which was too high. These facts he mentioned at the time to Riffo, the president of the company, and reported the same to Knowles on his return to Boston. During August of 1907, in consequence of repeated dunning, the company gave Knowles notes in part payment of its indebtedness. The first of the above notes which was for $1,500, fell due in the latter part of September. Shortly before the note fell due, Riffo wrote to Knowles that he would be unable to meet the note when due, and asked for an extension. This circumstance, together with the fact that a check given by the company to Knowles had not been met when deposited, led to the sending of Hardy again to Philadelphia.

Hardy arrived in Philadelphia on September 25, 1907, and went to 925 Arch street. Riffo was not in the store at the time. Hardy then saw that the stock of the company had been injured by fire which had occurred on September 22d, two or three days before he left Boston. Hardy knew nothing of the fire prior to his arrival in Philadelphia, but he came to Philadelphia for the purpose of taking hostile proceedings against the company, and apparently with the intent of asking for the appointment of a receiver. After leaving 925 Arch street, Hardy saw his counsel, A. J. Wilkinson, Esq.; he apparently then knew that there was outstanding insurance on the stock. After leaving Mr. Wilkinson, he had an interview with Riffo alone, and then proposed that Riffo should make an assignment of the policies in dispute. Riffo apparently was in some doubt as to the legality of so conducted the correspondence with the Neill-Pinckney-Maxwell Company, doing, and preferred, before committing himself, to consult his counsel. Hardy assured him that there was no doubt about the legality if the company was solvent. Riffo assured him of the company's solvency. At this interview, Hardy, in pressing his demand for the assignment, stated in substance to Riffo that he had come to Philadelphia for the purpose of applying for a receiver, but that the fire had been for the company a fortunate circumstance. The result of this interview was that Hardy and Riffo proceeded to the office of Thomas D. Finletter, Esq., the general counsel of the company, Hardy being accompanied by A. J. Wilkinson, Esq., who, as before stated, had been previously retained in the case.

Riffo assured Mr. Wilkinson that the company was solvent, and Mr Finletter's advice was sought and obtained by Riffo. Mr. Finletter had no knowledge of the financial condition of the company, other than that which he possessed from statements furnished by Riffo. In answer to the inquiry as to whether the assignment in question could be made, Mr. Finletter advised Riffo that the assignment could be legally made if he so desired, inasmuch as it appeared from the statements which...