Doyle v. Milwaukee Nat. Bank of Wisconsin

GROSSCUP, Circuit Judge, after making the foregoing statement, delivered the opinion of the court: The facts disclosed in the record fail to convince us that the appellee was without knowledge that the funds used by Riesen to pay off the three thousand dollar note had-been furnished by Harpke and Maier. It seems probable that appellee knew, or should have known, the source of this fund. But there is no convincing proof bringing to appellee knowledge or notice that Harpke and Maier were then insolvent. On this state of facts the question presented is this: Will appellee be debarred from proving its two thousand dollar claim because it received from the endorser payment of the three thousand dollar note, having reason to believe that the money therefor had come from the principal on the note, though in ignorance of such principal’s insolvency ? Section 57, par. g, of the Bankrupt Act is as follows: “The claim's of creditors, who have received preferences shall not be allowed unless such’creditors shall surrender their preferences.” Section 6o, par. a, is as follows: “A person shall be deemed to have [297] given a preference, if, being insolvent, he ha's * * * made a transfér of any of his property and the effect of the enforcement of such transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.” There can be no doubt that had Riesen paid off the three thousand dollars with his own funds, thereby becoming a creditor of Harpke and Maier, the transfer of the three thousand dollars to him by his debtor would have° been a preference within the meaning of the law. But appellee stood to Harpke and Maier in a different relation. Its claim was not against Harpke and Maier, alone, but against them with Riesen secondarily liable. The endorsement was an inseparable part of the value of the note. Without it the source out of which payment could be enforced was one thing; with it such source was quite another thing. In no sense can it be said that a note collectible only from the principal makers, is of the same class as a nóte that bears, in addition, the guaranty of a respectable endorser. The foregoing sections, read together, limit the bar created by a preference to transfers made to creditors of the “same class.” Nowhere in the act is “class” defined. The distinction is not necessarily marked by the line running between secured and unsecured creditors. To so hold would be to put workmen, clerks, or servants, having claims for earnings within three months before the date of the commencement of the suit, and others entitled by the law of the several states to priority, in the same class with general creditors, though the act provides that they shall, to a certain extent, be paid in full. In the absence of specific definition of these words in the act itself, we must adopt an interpretation that will give to it the meaning most probably intended. Its ordinary definition (Bouv. Law Diet.) is that of a number of persons or things ranked together for some common purpose, or as possessing 'some attribute in common. Now, a claim against B endorsed by A has an attribute—practical and not merely academic—not possessed by a claim against B alone. Two such claims are as distinct in kind as a claim secured upon property and a claim unsecured. In each case the distinction consists in the added source out of which the claim may be collected and the added probability of its payment. Nor can we conceive that Congress intended to put the appellee, or persons standing in like relations, in the situation that would follow an interpretation such a's is insisted upon by the trustee. Let us recall that situation, interpolating, only, that payment was offered at the maturity of the note instead of previous thereto—a change that does not affect the argument as to the intention of Congress. The appellee held the two notes, the one secured by an endorser; the other unsecured. It had no knowledge of Harpke and Maier’s insolvency. It had no knowledge that Riesen knew Harpke and Maier to be insolvent. It might well happen that though given the money with which to pay off the note, Riesen would have no knowledge of the principals’ financial condition. Had the endorser, acting in good faith, received the money without knowledge of the insolvency, and at maturity or afterwards offered therewith to pay off the debt, and had such [298] offer been refused by the appellee, clearly the endorser would have been discharged. On the other hand, the acceptance of the money and its application to the note would likewise result in his discharge. Accordingly—should the trustee’s contention be accepted—the appellee, whether it accepted or refused on maturity of the note the proffered money, ran the chance of discharging the endorser, with the possible result, too, of being compelled to repay the money received. No such situation of uncertainty could have been intended for creditors whose own conduct was in good faith. In our opinion, under theiacts stated, appellee was not in the same class as the creditors for whom the trustee complains, and, the order of the court below must be Affirmed.'