In re RYAN

In re RYAN. (District Court, N. D. Illinois, N. D. July 26, 1900.) No. 2,657. 1. Bankruptcy — Preferences—Set-Off. Under Bankr. Act 1898, § 68a, providing that in cases of mutual debts or credits between the estate of a bankrupt and a creditor the account shall be stated between them, and only the balance allowed or paid, cash payments on account, made within four months of the filing of the petition, are not such debts or credits as entitle the creditor to state the account, and hold the bankrupt only for the balance found. 2. Same — New Credit. Bankr. Act 1898, § 60c, providing that if a creditor has been preferred, and afterwards in good faith gives the debtor further credit, without security, for property which becomes part of the bankrupt estate, the amount of such new credit, unpaid at the time of the adjudication, may be set off against the amount otherwise recoverable from such creditor, is not restricted to eases where the trustee sues the creditor to recover the amount of the preference, but the creditor may claim the set-off where the trustee merely refuses to allow the claim till the surrender of the preference. In Bankruptcy. Newman, Northrup & Levinson, for trustee. [MAJORITY — KOHLSAAT, District Judge.] KOHLSAAT, District Judge. I am of the opinion that the mutual debits and credits contemplated by section 68a, Bankr. Act, do not include cash payments on account within four months of the filing of the-petition against the bankrupt, and that the referee’s finding herein that creditors should be permitted to have an accounting of all transactions between them and the bankrupt, both prior to and during such four months, and to have their claims allowed for the balance shown by such Accounting, is not sustainable. With reference to section 60c, I do not think that the word “recoverable,” in the last line thereof, should be held to dominate the meaning of the entire section. The whole paragraph, until this word is reached, covers as well the creditor who receives a preference without, as one who receives a preference with, reasonable cause to believe it to be intended as such. Reasoning from general business experience, it is extremely difficult to imagine a case in which a creditor would give a debtor further credit “in good faith” after a knowledge of the latter’s insolvency. Giving the word “recoverable” its strict legal signification, the decision of Judge Shiras in Re Christensen (D. C.) 101 Red. 802, is undoubtedly correct; but the wording, of the entire section is so general and untechnical that I am impressed with the belief that the word “recoverable” therein was intended to convey its lay meaning, and was not used in its strict legal sense. The injustice which would follow a construction differentiating between creditors who voluntarily surrender their preferences, in favor of the one who. would be compelled to do so at the end of a lawsuit if he did not make the surrender voluntarily, should certainly have weight in the mind of the court in aiding it to arrive at the meaning of congress as embraced in the entire section. The ruling of the referee is reversed, with directions to proceed in the matters in question herein in accordance with the above construction of section 60c.