Dobbs-Binswanger, Inc. v. Medwedeff

Bond, C. J., delivered the opinion of the Court. An attachment was laid in the hands of a garnishee at the suit of a trustee in bankruptcy to recover money alleged to have been paid to a creditor of the bankrupt as a preference, within four months of the bankruptcy proceeding, and from a judgment in the trustee’s favor the garnishee, defending for the creditor, appeals. The principal question is whether the evidence at the trial was legally sufficient to enable a jury to find that the creditor, when receiving the payment, had, in the words of the Bankruptcy Act, reasonable cause to believe that the payment would effect a preference, so as to empower the trustee to avoid it. Bankruptcy Act. secs. 60a, 60b, as amended by Acts Cong.

Feb. 5th, 1903, sec. 13, June 25th, 1910, secs. 11, May 27th, 1926, sec. 14; 11 U. S, C. A. sec. 96 (a, b). There is also a question of the ¡admissibility in evidence of a statement of the debtor’s condition, made up from its books, and not previously brought to the creditor’s notice. The Jullien-Feldhaus Company purchased from the Price Battery Company goods to the amount of $438.15, ²⁶ later reduced by freight allowances to $423.56, and payment was due on January 26th, 1936. Payment having been, delayed, the claim was, in February, placed in the hands of an attorney for the creditor, Mr. Sagner.

In the latter part of that month Mr. Feldhaus, president of the debtor corporation, reported to Mr. Sagner that it was unable to pay, as collections were bad and business slow, that it could do nothing then, and that the creditor could crack its whip. At the same time Mr. Sagner reported to his client that the debtor’s liabilities, according to Mr. Feldhaus’ report, amounted to about $3,000, and it had assets of an equal amount, the largest part of which was in accounts receivable. Mr. Sagner, during the negotiations, warned Mr. Feldhaus that the matter must be taken care of, or the creditor would sue or apply for a receivership. Later, in March, Mr. Feldhaus announced that he was trying to effectuate a merger of the corporation, or to sell the business out, and asked for the creditor’s co-operation by an allowance of the necessary time.

He added that the company did not have money in the bank for payment. The allowance of time was not agreed to. The negotiations resulted in the delivery by Mr. Feldhaus of a postdated check of the corporation, to be replaced a week later by the corporation’s regular voucher check, secured by a note of his own with'power for the entry of a judgment by confession, and an agreement expressed in a letter from Mr. Sagner, reciting that “the consideration for taking this security is my refraining from filing a Bill for Receiver against you or filing suit.” Mr. Sagner, in his testimony, said he would have proceeded with a suit for appointment of a receiver if payment had not been made. The debtor corporation executed a deed for