Schuette v. Swank

Citations

• 265 Pa. 576
• 109 A. 531
• 1920 Pa. LEXIS 484

Syllabus

<p>Bankruptcy — Federal Act — Unlawful preference — Opinion witness — Belief of creditor as to solvency — Suspicion.</p> <p>1. The provision in the Federal Bankrupt Act that if a creditor of a bankrupt “should have reasonable cause to believe” that a transfer of property to himself would effect a preference, such transfer shall be voidable, does not demand actual knowledge or actual belief, nor does a mere suspicion in the creditor’s mind charge him with having “reasonable cause.” In determining whether the creditor had reasonable cause to believe that a preference was intended, facts which are sufficient to put an ordinarily prudent man upon inquiry charge the creditor with all the knowledge he could have acquired by the exercise of reasonable diligence.</p> <p>2. In such a ease inquiry of the debtor alone is not sufficient, nor can the creditor testify as to his personal belief that the debtor was solvent when the transfer was made; nor is testimony admissible as to what the creditor learned a month or so later as to the financial condition of the debtor at the time of the transfer.</p> <p>3. Accepted orders given within the four months constitute an assignment of the fund, but voidable only as a preferential transfer when the assignor was insolvent and the transfer was for an existing indebtedness and operated as a preference, of which fact the assignee had at the time reasonable cause to believe. The mere giving of the orders by the bankrupt does not of itself constitute a voidable transfer.</p> <p>4. Under the present bankruptcy law a debtor is insolvent when the aggregate of his property shall not, at a fair valuation, be sufficient in amount to pay his debts and not when he is unable to meet his obligations as they mature in the ordinary course of business.</p> <p>5. It cannot be affirmed as a matter of law that, because a debt- or’s business is bad and it is necessary to continually press him for payment, the creditor has reasonable cause to believe him inso