In re Abraham Steers Lumber Co.

THOMAS, District Judge. This is a review of the decision of the referee respecting the claim of Robert R. Sizer. Petition in bankruptcy was filed October 22, 1900. On December 23, 1899, Sizer sold to the bankrupt merchandise of the value of $232.46, for which he received: January 24, 1900. Cash. $ 29 68 January 24, 1900. Note payable and paid April 23d. 200 00 January 31, 1900. Cash. 2 78 Total ...$232 46 At subsequent dates Sizer sold the bankrupt merchandise as follows: March 10. Merchandise . $357 80 August 16. Merchandise . 20 62 - $378 42 Upon which Sizer received the following payments: June 26. Cash ....$100 00 August 23. Cash . 50 00 August 28. Labor of bankrupt. 37 17 - $187 17 Leaving a balance of.'... . $191 25 [743] The sum of $232.46 need not be returned as a condition of proving debts arising on and after March 10, 1900, provided the note may be regarded as a payment at the date of its delivery; for in such case the payments ending January 31st could have no relation to the subsequent account, for before the indebtedness of March 10th accrued the relation of creditor and debtor would have ceased. It is considered that a full or partial discharge of the debt does not impair the right to prove a debt contracted subsequently. Thus, if A. owe B. $500 in January, and pay $500 or $250 thereon in February, this is not a preference as regards a debt contracted in March for $500. There is no reason for denying the right to prove the subsequent debt, inasmuch as the prior payment could not have any reference to or influence upon a debt contracted thereafter; nor could such payment be appropriated to the payment of a then nonexisting debt, either by the creditor or debtor, or both, unless there was some special collusion or arrangement for that purpose. But in the usual course of business a payment of money is appropriable only to an existing debt, and, in the nature of the case, can be related as a preference to such debt alone. In February a debtor cannot prefer a creditor on an indebtedness that is not contemplated and that will be nonexistent until March, and when the March debt arises the credit cannot be transposed from its whole or partial discharge of the first item of the indebtedness so as to discharge partially the second item of indebtedness. These views are expressed for the purpose of approving the referee’s holding that the full discharge of the items amounting to $232.46 before March 10th would not have been a preference. But it is considered that the referee erred in applying the note as a payment at the time that it was delivered; for it was not a payment, even if it may be deemed to have extended the time of payment of the account. Had Sizer transferred the note without indorsement, or done some other act from which it might be inferred that the note was accepted or regarded as payment, a different rule might apply. After the giving of the note, and before its maturity and payment, to wit, on March 10, 1900, the bankrupt bought goods amounting to $357.80, so that at such date the bankrupt owed Sizer the note representing an account for goods sold, and the additional sum of $357.80. While the payment was distinctly on the note, and for the purpose of extinguishing it, yet it was a partial payment of a portion of the whole amount of the indebtedness owing from the bankrupt to the creditor. Although the payment of the note was more than four months previous to the filing of the petition in bankruptcy, nevertheless it created a preference under sections 60a and 57g. It is also concluded that section 60c does not avail the claimant, as it has apparent reference to section 60b, and not to section 60a. The court is constrained to the conclusion that there is no time limit to the operation of section 60a. The suggestion of the supreme court in Carson, Pirie, Scott & Co. v. Chicago Title & Trust Co., 5 Am. Bankr. R. 814, 21 Sup. Ct. 906, 45 L. Ed. 1171, tends in such direction; and the discussion of Judge Lowell in Re Jones, 4 Am. Bankr. R. 563, 110 Fed. 736, states the view that may be adopted [744] most reasonably. Some limitation of time upon th<* operation of section 6oa may be advisable, but an examination of the act and of the different parts thereof fails to disclose that it exists. The labor, .credited August 28th, and amounting to $37.17, may be offset, as it cannot be regarded as a transfer of property. It results that the payments of $29.68 and $2.78, respectively, on January 24th and January 31st, were not preferences as to subsequent items of indebtedness, but the payments of the note on April 23d, and of $100 and $50, respectively, on June 26th and August 23d, were preferences as to all indebtedness preceding such several payments. Therefore it would seem that the only payments not creating .a preference were $29.68 and $2.78 and item for labor. The decision of the referee will be modified in accordance with the views here expressed.