US SUPREME COURT DECISIONS

Where a creditor, who had no knowledge of the debtor's insolvency, has a claim upon an open account for goods sold and delivered during the period of four months before the adjudication in bankruptcy, the account being made of debts and credits, leaving a net amount due from the bankrupt estate, the payments made under such circumstance do not constitute preferences which the creditor is bound to surrender before proving his claim. Yaple v. Dahl-Millikan Grocery Co., 193 U. S. 526, followed; Pirie v. Trust Co., 182 U. S. 438, distinguished.

153 F.5d 2 reversed.

The facts are stated in the opinion. chanrobles.com-red

Page 214 U. S. 296

MR. JUSTICE MOODY delivered the opinion of the Court.

The appellants, Joseph Wild & Company, offered for proof against the estate of George Watkinson & Company, who had been declared bankrupts, a claim of $2,565.92. The claim was allowed by the referee, but disallowed by the district court except upon a surrender of an alleged preference of $634.78 which was received within four months of the adjudication. The judgment of the district court was affirmed by the circuit court of appeals.

The facts of the case are simple. The bankrupt because insolvent on or before January 1, 1901, but the claimants had no knowledge of their insolvency during the running of the account hereafter referred to, and the merchandise therein specified was sold and delivered in the ordinary course of business. The appellants sold and delivered merchandise in various items, beginning February 14, 1901, and ending October 8, 1901. The total price of the merchandise thus delivered was $3,377.28. There were payments on account on June 29 and October 10, amounting to $811.36, leaving the net amount by which the bankrupt estate was enriched, $2,565.92. The last payment, on October 10, was $634.78, and was two days after the last sale and delivery of merchandise.

The single question in the case is whether that payment was a preference. It is conceded that it would not be a preference, in view of the other facts in the case, if it had been followed by a sale and delivery of goods of any value, however small. This concession is made necessary by the decision in Jaquith v. Alden, 189 U. S. 78, which is in all respects like the present case except that two days after the payment which was chanrobles.com-red

Page 214 U. S. 297

alleged to be a preference, merchandise of trifling value was sold and delivered to the bankrupt. But the decision in that case was not rested upon the fact of this slight sale subsequent to the last payment. It was rather put upon the broader principle that all the dealings between the creditor and the bankrupt were after the bankrupt's insolvency, and that their net effect was to enrich the bankrupt's estate by the total sales, less the total payments. The majority of the court thought these facts distinguished the case from Pirie v. Trust Company, 182 U. S. 438, though there was a difference of opinion upon that point. But all doubt was resolved in Yaple v. Dahl-Millikan Grocery Co., 193 U. S. 526, where the precise question which is now here was decided by the court, and it was held, where a creditor has a claim upon an open account for goods sold and delivered during the period of four months before the adjudication in bankruptcy, the account being made up of debits and credits, leaving a net amount due from the bankrupt estate, that payments made under such circumstances did not constitute preferences which the creditor was bound to surrender before proving his claim in bankruptcy.

It follows that the judgment of the circuit court of appeals was erroneous, and it must be

Reversed.