Republic National Bank of Dallas v. Vial, 15652.

• Decision Date: 19 April 1956
• Docket Number: No. 15652.,15652.
• Citation: 232 F.2d 785
• Parties: REPUBLIC NATIONAL BANK OF DALLAS, Creditor, Appellant, v. Robert G. VIAL, Trustee for The Ronston Corporation, Bankrupt, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

232 F.2d 785 (1956)

REPUBLIC NATIONAL BANK OF DALLAS, Creditor, Appellant, v. Robert G. VIAL, Trustee for The Ronston Corporation, Bankrupt, Appellee.

No. 15652.

United States Court of Appeals Fifth Circuit.

April 19, 1956.

Larry DeBogory and DeBogory & DeBogory, Dallas, Tex., for appellant.

Philip I. Palmer, Dallas, Tex., for appellee.

Before BORAH, TUTTLE and BROWN, Circuit Judges.

BORAH, Circuit Judge.

This appeal by the Republic National Bank of Dallas is from an order of the District Court confirming, on petition for review, an order entered by the referee in the involuntary bankruptcy proceedings of the Ronston Corporation. The order rejected the bank's assertion of a valid lien on certain accounts receivable, allowed the bank's claim as an unsecured claim only, and required it to return to Robert G. Vial, who was trustee of the bankrupt's estate, the amount of certain collections which had been made on the accounts receivable during the four months preceding September 29, 1954, which was the date of the adjudication of bankruptcy.

On August 18, 1953, more than a year before bankruptcy, the appellant and the bankrupt entered into a continuing creditor-debtor relationship under the terms of which the bankrupt was to borrow money from appellant and simultaneously assign various accounts receivable as collateral security therefor. On that date, a written memorandum of agreement was entered into with the understanding that when money was needed by the bankrupt, it would execute and deliver a "Schedule of Accounts Receivable Assigned to Republic National Bank of Dallas", whereupon appellant would advance a loan amounting to 85% of the face value of the accounts shown on the schedule. In addition the bankrupt also executed a "Notice of Assignment of Accounts Receivable"¹ which was to be effective for three years, or until August 18, 1956, and this notice was duly filed with the County Clerk. Thereafter, whenever a new list of accounts receivable was presented to appellant to be pledged as collateral, entries were made on the books of the bankrupt, showing that each of the listed accounts was pledged, and appellant then loaned the bankrupt an amount equal to 85% of the face value of the listed accounts. Appellant continued to lend money to the bankrupt under this arrangement until as late as June 15, 1954. The bankrupt made most² of the collections on these assigned accounts and delivered to the appellant all sums so collected by depositing same to the credit of the appellant in a special "collateral account". At no time were the collections used by the bankrupt for purposes other than to satisfy its indebtedness to the appellant. When the full amounts of the accounts so pledged had been collected, 15% of their face value was returned to the bankrupt under the terms of the August 18, 1953, agreement. During the four months prior to bankruptcy, May 29 through September 29, 1954, appellant received collections totalling $11,142.83.³ Of this amount $6,641.42 represented collections on accounts which had been assigned prior to May 29, whereas $4,501.41 was collected on accounts assigned within four months of bankruptcy.

The claim of appellant was that under the terms of the assignments and by virtue of the recorded notice it had a valid lien upon these collections. The trustee in turn objected to the allowance of the claim as a secured claim on two grounds: (1) that the payments of collections on the assigned accounts receivable were made or suffered by the bankrupt at times when appellant had reasonable cause to believe the bankrupt was insolvent, and because the assignments were not protected under Art. 260-1 of the Revised Civil Statutes of Texas, Vernon's Ann.Civ.St.Tex., the payments constituted fraudulent transfers which were voidable under Sections 60 and 70, sub. e of the Bankruptcy Act, 11 U.S.C.A. §§ 96, 110, sub. e, and (2) that the payments of the collections constituted a voidable preference under Sections 60 and 70 of the Act because they were made on account of an antecedent debt and when paid appellant had reasonable cause to believe that the bankrupt was insolvent. The trustee thus contending for the avoidance of the preference alleged to have been received by the appellant, counter-claimed seeking the return of the full amount of the collections to the estate of the bankrupt.

At the hearing which was had before the referee, it was established as an uncontroverted fact that none of the accounts receivable on which the disputed collections were made was in existence at the time the statutory notice of assignment was recorded. The evidence was also sufficient to warrant the inference that the bankrupt was insolvent only on and after June 18, 1954. Evidence was adduced in an effort to show that at the time of the payment of the various collections made from June 1 through August 26, 1954, appellant had reasonable cause to believe that Ronston Corporation was insolvent, that is to say, a knowledge of some facts calculated to produce such a belief in the mind of an ordinarily intelligent man. This evidence was that appellant handled all of the bankrupt's financing; that it had received numerous financial statements from the bankrupt; that it was aware of the fact that the bankrupt had old debts which it had been unable to pay; and, that in June, 1954, it became clear to appellant that the bankrupt was in serious financial difficulty.

At the conclusion of the hearing, the referee entered his order, bottomed on the findings therein set forth and which are:

"(a) That a part of the security for the debt of the Republic National Bank is alleged to be an original written assignment of accounts receivable of date August 18, 1953, as permitted by Art. 260-1 R.S. of Texas, relating to assignments, of accounts receivable, but which original assignment has never been filed of record in Dallas County, Texas "(b) That notice of intention to make an assignment of assignor\'s accounts to assignee was executed and delivered to the Bank on August 18, 1953, and this notice of intention to give an assignment was filed of record at Dallas County, Texas on September 3, 1953. That within four months prior to the date of bankruptcy the assignee, Republic National Bank collected and received payment upon said accounts receivable amounting to the sum of $11,142.83. That during the said period the Bank had reasonable cause to believe that the assignor was insolvent and the accounts were given to secure a pre-existing debt owing by the bankrupt to the Republic National Bank.

"That the original assignment of date August 18, 1953, was delivered to the Bank * * * and the assignment together with the

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