The K. King & the G. Shuler Corporation v. Petitioning Creditors

This involuntary bankruptcy proceeding was commenced on December 27, 1963, by the unsecured creditors of the K. King & G. Shuler Corporation. They alleged in their petition that within four months of the filing of the petition, namely on October 30, 1963, the corporation, while insolvent, transferred cash in the sum of $4,138.95 to John P. Hanrahan on account of an antecedent debt. They further alleged that, as to all or part of this sum, Hanrahan was a general unsecured creditor. Therefore, these creditors contended, the transfer was preferential as to them and other unsecured creditors within the meaning of the Bankruptcy Act (Act), and constituted an act of bankruptcy. See sections 3(a) and 60(a) of the Act, 11 U. S.C. §§ 21(a) and 96(a).

The corporation conceded that it was insolvent at the time of the transfer and that the payment was made on account of an antecedent debt. It alleged, however, that Hanrahan was a secured creditor as to the entire $4,138.95 paid, under a chattel mortgage and a lien upon, or pledge of, a leasehold interest. A trial was had on this issue resulting in findings and conclusions to the effect that the transfer in question was preferential. The…