Opinion
No. BK 75-75/76ND
November 1, 1978
Preferences — Avoidance — Principal-Agent Relationship — Imputed Knowledge
A transfer is a voidable preference under Section 60b if the creditor's counsel on a secured debt arising out of the loan transaction in question was also counsel for the bankrupt on the transaction and had actual knowledge of the insolvency of the bankrupt at the time of the transaction.
The counsel for the creditor in the loan transaction at issue had represented the bankrupt throughout its pre-bankruptcy existence and, so far as the record discloses, continued to serve as its clerk thereafter. The counsel represented the bankrupt in the subject loan transaction with the creditor, during which time he represented the creditor in other matters. After bankruptcy, the counsel formally represented the creditor in bankruptcy court proceedings for more than a year in connection with the same loan transaction as to which he had earlier represented the bankrupt. The creditor himself believed that the counsel was representing both parties in their loan transaction with the Bank.
It was held that under these circumstances, the principal (the creditor) cannot be heard to deny the agency relationship he himself asserts merely because his agent fails to make full disclosure. There is no question that the counsel had knowledge which would establish that the bankrupt was insolvent on the date of the subject loan transaction. The actual knowledge of the agent is imputable, whether or not communicated, to the principal. Therefore, the loan constitutes a voidable preference under Section 60b of the Bankruptcy Act. See Sec. 60b at ¶ 2563 and Sec. 547(b) at ¶ 9529.