The Federal Reporter (Annotated), Volume 167: Cases Argued and Determined in the Circuit Courts of Appeals and Circuit and District Courts of the United States. April-May, 1909. Page: 996
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996 167 FEDERAL REPORTER.
him a check for $283 40, whidh was all that he had in bank. On May 27th,
two days afterwards, the voluntary petition was filed and an adjudication was
entered. The schedules filed showed indebtedness by the bankrupt of $54 for
wages, $200 for rent, and $9,728.72 to general creditors, including the $8,000
principal of the judgment of Mrs. Wintersteen. The assets of the bankrupt
are valued at $75.
"It is clear from the above statement that James Kearney was insolvent at
the timb when he gave thel check to his brother, and that the effect of that
payment was to enable John A. Kearney to obtain a larger percentage of his
debt than other general creditors. The claimant alleges that he did not know
that his brother was insolvent; that his brother never confessed insolvency to
him, and never told him of Mrs. Wintersteen's judgment. The question, how-
ever, before the referee, is whether the circumstances known to the claimant
were such as to put him upon inquiry. James Kearney told his brother he
did not know what was going to become of the place; that he was going to let
it go. John A. Kearney knew that his brother was unable to raise the $1,100
necessary to renew his license, and that he must lose the place on the 1st of
June. He knew that he was in trouble about his wife, and had lent him sev-
eral sums on that account already. He was undoubtedly put upon inquiry as
to his brother's financial condition, and the slightest examination into it would
have revealed the existence of the Wintersteen judgment, and of the current
indebtedness afterwards set forth in the schedules.
"It is argued on behalf of the claimant that the $200 was in the nature of
a trust fund, and was not an ordinary indebtedness; but the fund was not ear-
marked and apparently not deposited in bank. The last deposit made in the
bankrupt's account prior to the adjudication was on April 28, 1908, and the
$200 was not lent until May 4th, or 5th. It appears to have been used to pay
"The referee orders John A. Kearney to repay to the trustee in bankruptcy
the sum of $233.40, paid by the bankrupt to him on May 25, 1908."
James B. Given, for claimant.
Charles B. Harding, for trustee.
J. B. McPHERSON, District Judge. Upon the foregoing facts, it
is clear, I think, that the payment on May 25th to the bankrupt's
brother was preferential. Even if it was intended, at the time when
the loan was made, that the money should be used for the specific pur-
pose of paying for the license, and, if not so used, that it should be re-
turned, the testimony seems to show plainly that this intention was not
carried out, but that the bankrupt used the money for some other pur-
pose. No effort was made on his behalf to prove what he had done
with it. He was not even asked the obvious question whether the de-
posit of $200 that appears in his bank book under date of April 28th
was the money that he had received from his brother; and, as he must
have known what became of it, his failure to say anything upon the
subject is probably significant. Since, therefore, the money was not
traced into a particular fund or deposit, or earmarked in any other
way, the inevitable inference is that the check of May 25th was drawn
against the general funds of the bankrupt, and was intended to prefer
the payee. Except that the burden of proof was in the first instance
on the trustee to prove the statutory elements of a preferential pay-
ment, the situation is essentially such as was presented in Plow Co. v.
McDavid, 14 Am. Bankr. Rep. 653, 137 Fed. 802, 70 C. C. A. 422.
See, also, Hosmer v. Jewett, Fed. Cas. No. 6,713; Re Richard, 4 Am.
Bankr. Rep. 700; Loveland (3d Ed.) 173; Collier (6th Ed.) p. 594;
Brandenburg (3d Ed.) 1 1187. After the trustee had established a pri-
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The Federal Reporter (Annotated), Volume 167: Cases Argued and Determined in the Circuit Courts of Appeals and Circuit and District Courts of the United States. April-May, 1909., legislative document, 1909; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38213/m1/1006/?q=%22English%22: accessed March 23, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.