Citations
- 68 F.2d 864
Full opinion text
SWAN, Circuit Judge.
Prior to adjudication upon an involuntary petition in bankruptcy filed April 20, 1931, Nathan & Cohen Company, Inc., was an oíd and favorably known silk and cotton converter doing business at 60 Leonard street, New York City. Its business consisted in purchasing greize goods from various mills, sending them to dyers and finishers for processing, which is known as “converting,” and selling the finished goods. The business was financed by Commercial Factors Corporation under a factoring’ agreement dated August 16, 1926. In the latter part of March, 1931, when the bankrupt was concedodly insolvent and when, as the trustee in bankruptcy contends, the factor knew or had reasonable cause to know of its insolvency, certain merchandise of the bankrupt was transferred to the factor as security for or payment of an indebtedness for prior advances. Such merchandise, or accounts receivable resulting from its sale, the trustee seeks to recover. Its bill of complaint contains two counts; one based on section 00b of the Bankruptcy Act (.11 DSC A § 96 (b), the other on section 15 of the New York Stock Corporation Law (Consol! Laws N. Y. e. 59'). Only the former is relied upon on this appeal. After trial the District Court dismissed the bill, stating in its opinion that the factor had a valid lien upon much of the merchandise in question and that knowledge of the bankrupt’s insolvency was not chargeable to the factor until after March 18th, the critical date now asserted by the plaintiff, although at the trial an earlier date was claimed.
As to the main part of the goods there was no preference because the factor proved a valid lien under section 45' of the New York Personal Property Law (Consol. Laws N. Y. c. 41). This section provides that liens upon merchandise, or the proceeds thereof, “created by agreement” for the purpose of securing advanees made npon the security of the merchandise,' shall be valid without delivery