In re Miller

Citations

• 221 F. 471
• 1915 U.S. Dist. LEXIS 1598

Syllabus

<p>Bankruptcy <@=165—Prewerknces—Teanskebs Constituting.</p> <p>A debtor, who was hopelessly insolvent and owed more than $1,000, sold a stock of goods, his principal asset, for $1,500, and from the proceeds paid the claims of three creditors, aggregating about S900, which were in the hands of attorneys for collection, paid such attorneys and other attorneys S200 to retain them as counsel in possible proceedings growing out of the transaction, and claimed the balance for his exemptions. The attorneys in question had had the claim of one of the creditors for some weeks, and had taken a cognovit note, signed by the debtor's wife as surety, and secured by the assignment of book accounts. Shortly before the sale a representative of another of such creditors visited the debtor with regard to protested checks, and the debtor at that time, to the attorney’s knowledge, made a statement of his financial condition showing that he was solvent, valuing the stock of goods at $3,000, and stating his debts at about one-fourth of the real amount. Shortly before the sale the attorneys notified their clients of the imminence of such sale and received the claims in question for collection. Held that, as the evidence indicated that the transaction was on the part of the bankrupt in conscious fraud of his creditors, the creditors in question received voidable preferences under Bankr. Act July 1, 1898, c. 511, §§ COa, 60b, 30 Stat. 562, providing that a transfer by a bankrupt while insolvent and within four months before the filing of the petition, which will enable one creditor to obtain a greater percentage of his debt than other creditors of the same class, constitutes a preference, and that if a bankrupt shall have made a transfer while insolvent which operates as a preference, and if the person receiving it shall have reasonable cause to believe that its enforcement will effect a preference, it shall be voidable, since the circumstances known to the creditors and their attorneys wer