In re Wright-Dana Hardware Co.

Citations

• 207 F. 636
• 1913 U.S. Dist. LEXIS 1334

Syllabus

<p>Bankruptcy (§ 165*)—Preferences-—Bank Deposit—Set-Oee.</p> <p>Prior to January 1, 1912, the bankrupt and claimant bank did business in the ordinary way; the bank receiving the bankrupt’s deposits and discounting its paper with knowledge of the bankrupt’s insolvency, applying deposits from time to time on the indebtedness by direction and consent of the bankrupt. On that date, however, the bankrupt’s treasurer ceased actively to engage in the business, and the person in charge was told by the bank’s attorney, who was also attorney for the bankrupt and vice president of the bank, that he should sell the goods of the bankrupt as fast as possible, even at cost, placing the proceeds on deposit in the bank for a space of 10 days which would be consumed in making an application for bankruptcy adjudication, which was 'filed January 17th. No checks were paid by the bank during this period with the exception of one for $14.35 for new goods, which it was necessary for the bankrupt to have and the drawing of which was consented to by the bank. On January 10, 1912, the bank transferred to one of the clerks in the office of its attorney two notes of the bankrupt aggregating $5,200, with interest, taking the clerk’s note therefor with the notes of the bankrupt as collateral; the transferee testifying that he did not expect the bank would claim to hold him on his note for an amount larger than he could collect from the bankrupt’s estate. Held, that the bank was entitled to the benefit of the set-off of deposits against the bankrupt’s indebtedness made prior to January 1, 1912, but that the deposits applied after that date constituted a preference, and that the claims of the bank and of the transferee of the notes were not entitled to allowance except on surrender of the amount so applied.</p> <p>[Ed. Note.—For other cases, see Bankruptcy, Cent. Dig. §§ 259, 2G0, 266; Dec. Dig. § 165.*]</p>