Summary
In Coombs v. Merchants Bank, 161 F.2d 858 (2d Cir. 1947), the evidence showed that the debtor was hopelessly insolvent on January 23, 1943, when an involuntary petition was filed against it. Through a scheme of detailed figures outlined in its briefs, the debtor purported to show it was solvent on both December 7, 1942, and December 26, 1942.
Summary of this case from Lancaster v. City Bank of Washington County (In re Tuggle Pontiac-Buick-GMC, Inc.)Opinion
No. 220, Docket 20527.
June 3, 1947.
Appeal from the District Court of the United States for the Southern District of New York.
Action by Samuel M. Coombs, Jr., as trustee in bankruptcy of the estate of Spier Aircraft Corporation, bankrupt, against the Merchants Bank of New York to recover alleged preferential payments. Judgment for plaintiff and defendant appeals.
Affirmed.
Weisman, Celler, Quinn, Allan Spett, of New York City (Milton C. Weisman and Lester Samuels, both of New York City, of counsel), for appellee.
Israel H. Zinovoy, of New York City (David Haar, of New York City, of counsel), for appellant.
Before SWAN, AUGUSTUS N. HAND and FRANK, Circuit Judges.
This is a suit by the trustee in bankruptcy of Spier Aircraft Corporation against the defendant to recover alleged preferential payments. The trial judge made the following Findings of Fact:
"1. The bankrupt was a New York corporation engaged in the manufacture of aeronautical parts and equipment. 2. On October 2, 1942, the defendant loaned the bankrupt $25,000, for which the bankrupt gave the defendant its collateral promissory note, payable 90 days thereafter, secured by accounts receivable of Hayes Manufacturing Company and Ford Motor Company, aggregating $27,362.03. 3. The defendant made the loan on the security of the receivables, and it was the intention of the parties that the loan would be repaid out of collections from the receivables. 4. At the time of making the loan nothing was due or owing on the invoices representing the receivables, but the defendant had no knowledge of these facts. 5. On December 2, 1942, the bankrupt paid the defendant $5,000 on account of the loan. 6. On December 7, 1942, the bankrupt made a second payment of $10,000 to the defendant on the loan. 7. On December 14 and December 26, 1942, the bankrupt made payments to the defendant on the loan of $5,605.81 and $4,394.19, respectively, completing payment of the loan in full. 8. The involuntary petition was filed on or about January 22, 1943, and adjudication followed on or about that date. 9. The bankrupt was insolvent on December 1, 1942, and at all times thereafter to the filing of the petition, at least to the extent of $30,337.45. 10. The defendant did not have reasonable cause to believe that the bankrupt was insolvent on December 2, 1942, at the time the first payment of $5,000 on the loan was made. 11. The defendant had reasonable cause to believe that the bankrupt was insolvent on December 7, 1942, December 14, 1942, and December 26, 1942, at the times when the payments of $10,000, $5,605.81 and $4,394.19 were made on the loan, respectively."
The judge reached the following Conclusions of Law: "1. The plaintiff is not entitled to recover the payment of $5,000 made by the bankrupt on December 2, 1942. 2. The payments made by the bankrupt on December 7, 1942, December 14, 1942, and December 26, 1942, amounting in the aggregate to $20,000, constituted preferential transfers which the plaintiff is entitled to recover, with interest from the dates of the respective payments. 3. The plaintiff is entitled to judgment against the defendant in the sum of $20,000, with interest on $10,000 from December 7, 1942; on $5,605.81 from December 14, 1942, and on $4,394.19 from December 26, 1942, together with costs."
Judgment was accordingly entered against the defendant from which it appeals.
The evidence amply shows that the debtor company was hopelessly insolvent on January 23, 1943, when the involuntary petition in bankruptcy was filed against it. Appellant, in its briefs, by using elaborate figures, purports to show that the debtor was solvent on December 7, 1942 and up to December 26, 1942. This argument proves too much. For defendant does not explain why, if its contention is sound, the debtor's condition changed so astonishingly in the succeeding month. Absent such an explanation, we are unable to regard the trial judge's findings as clearly erroneous with respect to the insolvency in December. We think the evidence sufficiently sustains the other findings. Defendant, citing Wingert v. Hagerstown Bank, 4 Cir., 41 F.2d 660, 662, argues that, in considering the debtor's solvency, the judge erroneously failed to take into consideration the solvency of the co-makers with debtor of certain notes. We cannot agree. This argument ignores the fact that here the co-makers were accommodation parties. We think that the trial judge reasonably exercised his discretion in refusing to reopen the case.
Affirmed.