Tumlin v. Bryan

• Decision Date: 10 November 1908
• Docket Number: 1,836.
• Citation: 165 F. 166
• Parties: TUMLIN v. BRYAN.
• Court: U.S. Court of Appeals — Fifth Circuit

165 F. 166

TUMLIN v. BRYAN.

No. 1,836.

United States Court of Appeals, Fifth Circuit.

November 10, 1908

Victor Lamar Smith (Janes & Hutchens and Smith, Hammond & Smith, on the brief), for appellant.

William P. Hill and J. L. Mayson, for appellee.

Before PARDEE and SHELBY, Circuit Judges, and BURNS, District Judge.

SHELBY Circuit Judge.

This is a suit by T. J. Bryan, as trustee in bankruptcy of A. B Tumlin Company, a partnership composed of A. B. Tumlin and M K. Pounds, against W. L. Tumlin, to recover $3,430, the amount of six payments made by the bankrupts within four months of bankruptcy. The first of the payments was made July 26, 1906, and an involuntary petition was filed against the firm October 5, 1906. The payments were made to discharge a debt of the firm, shown by its note and a chattel mortgage. The bill contained the usual averments seeking to recover the payments as voidable preferences under the bankruptcy act. The defendant answered, denying the material averments of the bill. There was an order of reference and a report in favor of the complainant. The defendant excepted to the report, and his exceptions were overruled by the District Court, and a decree entered in favor of the trustee for the aggregate amount of the payments and interest.

The defendant, by exceptions to the report and by assignments of error here, contends that the report and decree are not sustained by evidence, because (1) it was not proved that at the time the payments were made the debtors were insolvent and (2) that at the time the payments were made the defendant did not have reasonable cause to believe that the debtors intended thereby to give him a preference.

The burden of proof is on the complainant, and, unless he shows by sufficient evidence the elements of a voidable preference, he is not entitled to recover. He must prove that the bankrupts (1) while insolvent, (2) within four months of the bankruptcy, (3) made a transfer of their property, i.e., a payment of money, (4) and that the creditor receiving the payment was thereby enabled to obtain a greater percentage of his debt than other creditors of the same class; and it must also be proved (5) that the person receiving the payment, or to be benefited thereby, had reasonable cause to believe that it was thereby intended to give a preference. Bankr. Act, Sec. 60, cls. 'a' and 'b' (Act July 1, 1898, c. 541, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3445)).

There is no denial that the payments alleged were made, and that they were made within four months of the bankruptcy.

The case turns on the contention of the defendant that there is no sufficient evidence to sustain the decree showing that the bankrupts were insolvent at the time the payments were made, and that the evidence does not show that the defendant had reasonable cause to believe that the payment was intended to give a preference. A person is deemed insolvent within the meaning of the act 'whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, with intent to defraud, hinder, or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts. ' Bankruptcy Act, Sec. 1a (15). The complainant, as a witness for himself, in answer to a question which assumed that he had 'gone through the books and familiarized himself with the condition of the affairs of A. B. Tumlin Company,' testified that 'they were insolvent, in my opinion'; the answer referring to their condition on July 1, 1906, about the time the payments in question were made. He was not asked what property the firm owned, nor its value, nor the amount of the firm's debts. The schedules filed by the bankrupt firm December 27, 1906, are relied on as showing insolvency of the firm in July, 1906. If from these schedules and the dates of accounts listed it be conceded that the firm's indebtedness in July, 1906, may be ascertained, and that other schedules show the property owned by the firm at the time of the bankruptcy, this is not sufficient. It is not shown what property was owned by the firm in July, 1906, at the date of the payments, nor is the value of the property then owned by it proved.

And, besides, we find no evidence showing what property was owned by the individual members of the bankrupt firm in July, 1906. In a claim for exemptions filed by the attorneys for the members of the firm there is a statement that they owned no property except the partnership property. That petition is sworn to October 23, 1906. If that affidavit is admissible against the defendant in this suit, it is insufficient to show the pecuniary condition of the members of the bankrupt firm in July, 1906.

As each member of the partnership is liable individually for...