Walter J. Hempy, as Trustee of the Estate of Mechanix, Inc., a Corporation, Bankrupt v. John Howard Sims and Marvin D. Morrow

This is an appeal by Hempy as trustee, suing the two defendants for $1,500 each, from a judgment denying him the recovery from the defendants of the said sums. His contention is that the court erred in not finding that the defendants preferred themselves under Section 60 of the Bankruptcy Act by paying themselves such sums of money for their services to the bankrupt corporation, within four months of the filing of the petition for involuntary bankruptcy, at a time when they knew or had reasonable cause to believe their company was then insolvent.

It was agreed that the testimony of Sims, the secretary of the corporation, was to be deemed the same as that of Morrow, its president. Morrow testified as follows:

When asked by the court,

Morrow replied,

Since such a debt from the United States would make the company solvent we think this testimony amply sustains the finding of the court as follows:

Cf. C. A. Swanson & Sons Poultry Co. v. Wylie, 9 Cir., 1956, 237 F.2d 16, 17 .

The judgment is affirmed.

. “Sec. 60. Preferred Creditors.—a. (1) A preference is a transfer, as defined in this Act, of any of the property of a debtor to or for the benefit of a creditor for or on account…