In re United States Hair Co.

Second Circuit

In re United States Hair Co.

239 F. 703, 152 C.C.A. 537, 1917 U.S. App. LEXIS 2262

CourtCourt of Appeals for the Second Circuit

DecidedJanuary 9, 1917

DocketNo. 111

StatusPublished

Cited by6 cases

This text of 239 F. 703 (In re United States Hair Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

In re United States Hair Co., 239 F. 703, 152 C.C.A. 537, 1917 U.S. App. LEXIS 2262 (2d Cir. 1917).

Pincite

Opinion

HOUGH, Circuit Judge

(after stating the facts as above). Much argument has been devoted to matters considered by us unnecessary to decision; it being our opinion that this case lies within narrow limits.

[705]*705[1] The existing indebtedness (irrespective of that caused by P. M. Musica’s embezzlement) of Musica & Son to the Hair Company constituted a valuable consideration for the transfer of Seligman & Co.’s check to the bankrupt. In Holly v. Domestic, etc., Missionary Society, 92 Fed. 747, 34 C. C. A. 651, Wallace, J., thus summarized the law as recognized in the federal courts on this question:

“He who receives money or acquires negotiable paper in payment of a debt is a holder for value, and if he receives the money innocently, or acquires the commercial paper before its maturity, and without notice of any infirmity, has a perfect title, which cannot be subordinated to the equities of any third person.”

[2] There is, to be sure, no direct evidence that P. M. Música caused Seligman & Co.’s check to be transferred to the Hair Company and the proceeds deposited in its bank account “in payment of” any part of the then existing indebtedness of Música & Son. But there is nothing to rebut the presumption arising from what was admittedly done. “It is undoubtedly the .general rule that, in the absence of explanation, the presumption arising from the delivery of a check is that it was delivered in payment of a debt. * * * The law does not presume a gift.” Nay v. Curley, 113 N. Y. 575, 21 N. E. 698, and cases cited. Neither, it may be added, does it presume a fraud. Therefore, since indebtedness at date of transfer is shown beyond doubt, “we must presume that a payment made * * * after such debt accrued was made on account of the debt. If it was really made on some other account, we must have some evidence of this before we can change the presumption.” Masser v. Bowen, 29 Pa. 128, 72 Am. Dec. 619.

[3] The question remains whether the Hair Company received what the law presumes to have been a payment, innocently and without notice of any infirmity. This depends upon whether Musica’s own knowledge of his own evil intent, and especially of the fraud which as a member of Música & Son he had worked on Seligman & Co., is to be imputed to the bankrupt corporation because he was the president thereof; no other officer or director having any knowledge in the premises or any reason to suspect fraud or falsehood. On this point American National Bank v. Miller, 229 U. S. 521, 33 Sup. Ct. 883, 57 L. Ed. 1310, is conclusive. Changing to Música the name of the corporation president who in that case occupied the rascal’s position, a quotation from the decision is apt; for—

“the evidence before us presents another phase of the recurring question as to when and how far notice to an agent is notice to his principal. In view of the many decisions on the subject it is unnecessary to do more than to apply them to the facts of this case. If [Música] within the scope of his office had knowledge of a fact which it was his duty to declare and not to his interest to conceal, then his knowledge is to be treated as that of the bank; for he is then presumed to have done what he ought to have done, and to have actually given the information to his principal.”

See Carlisle v. Norris, 215 N. Y. 414, 109 N. E. 564; Stallo v. Wagner, 233 Fed. 383, 147 C. C. A. 315; also citations in Wilson v. Pauly, 72 Fed. 134, 18 C. C. A. 475.

[706]*706It is obvious that Música was in duty bound to declare the origin oí the check whose proceeds he caused to be added to the funds of the Hair Company; but it is equally plain that, if he was to carry through for even a little longer the elaborate scheme to defraud of which the Hair Company was an innocent party, his interest was to conceal that which he knew.

[4] It follows from the foregoing that the Hair Company became a holder for value, in good faith, and without notice, of Seligman’s check before its maturity; i. e., before its presentation to the bank upon which it was drawn.

Since the Hair Company, and therefore its trustee in bankruptcy, occupies the favored position of bona fide holder for value of commercial paper, the maker of such paper cannot be creditor of such holder, by reason of the way in which the paper originated.

For this reason the order appealed from is affirmed, with costs.

Free access — add to your briefcase to read the full text and ask questions with AI

HOUGH, Circuit Judge

(after stating the facts as above). Much argument has been devoted to matters considered by us unnecessary to decision; it being our opinion that this case lies within narrow limits.

[705]*705[1] The existing indebtedness (irrespective of that caused by P. M. Musica’s embezzlement) of Musica & Son to the Hair Company constituted a valuable consideration for the transfer of Seligman & Co.’s check to the bankrupt. In Holly v. Domestic, etc., Missionary Society, 92 Fed. 747, 34 C. C. A. 651, Wallace, J., thus summarized the law as recognized in the federal courts on this question:

“He who receives money or acquires negotiable paper in payment of a debt is a holder for value, and if he receives the money innocently, or acquires the commercial paper before its maturity, and without notice of any infirmity, has a perfect title, which cannot be subordinated to the equities of any third person.”

[2] There is, to be sure, no direct evidence that P. M. Música caused Seligman & Co.’s check to be transferred to the Hair Company and the proceeds deposited in its bank account “in payment of” any part of the then existing indebtedness of Música & Son. But there is nothing to rebut the presumption arising from what was admittedly done. “It is undoubtedly the .general rule that, in the absence of explanation, the presumption arising from the delivery of a check is that it was delivered in payment of a debt. * * * The law does not presume a gift.” Nay v. Curley, 113 N. Y. 575, 21 N. E. 698, and cases cited. Neither, it may be added, does it presume a fraud. Therefore, since indebtedness at date of transfer is shown beyond doubt, “we must presume that a payment made * * * after such debt accrued was made on account of the debt. If it was really made on some other account, we must have some evidence of this before we can change the presumption.” Masser v. Bowen, 29 Pa. 128, 72 Am. Dec. 619.

[3] The question remains whether the Hair Company received what the law presumes to have been a payment, innocently and without notice of any infirmity. This depends upon whether Musica’s own knowledge of his own evil intent, and especially of the fraud which as a member of Música & Son he had worked on Seligman & Co., is to be imputed to the bankrupt corporation because he was the president thereof; no other officer or director having any knowledge in the premises or any reason to suspect fraud or falsehood. On this point American National Bank v. Miller, 229 U. S. 521, 33 Sup. Ct. 883, 57 L. Ed. 1310, is conclusive. Changing to Música the name of the corporation president who in that case occupied the rascal’s position, a quotation from the decision is apt; for—

“the evidence before us presents another phase of the recurring question as to when and how far notice to an agent is notice to his principal. In view of the many decisions on the subject it is unnecessary to do more than to apply them to the facts of this case. If [Música] within the scope of his office had knowledge of a fact which it was his duty to declare and not to his interest to conceal, then his knowledge is to be treated as that of the bank; for he is then presumed to have done what he ought to have done, and to have actually given the information to his principal.”

See Carlisle v. Norris, 215 N. Y. 414, 109 N. E. 564; Stallo v. Wagner, 233 Fed. 383, 147 C. C. A. 315; also citations in Wilson v. Pauly, 72 Fed. 134, 18 C. C. A. 475.

[706]*706It is obvious that Música was in duty bound to declare the origin oí the check whose proceeds he caused to be added to the funds of the Hair Company; but it is equally plain that, if he was to carry through for even a little longer the elaborate scheme to defraud of which the Hair Company was an innocent party, his interest was to conceal that which he knew.

[4] It follows from the foregoing that the Hair Company became a holder for value, in good faith, and without notice, of Seligman’s check before its maturity; i. e., before its presentation to the bank upon which it was drawn.

Since the Hair Company, and therefore its trustee in bankruptcy, occupies the favored position of bona fide holder for value of commercial paper, the maker of such paper cannot be creditor of such holder, by reason of the way in which the paper originated.

For this reason the order appealed from is affirmed, with costs.

Cite This Page — Counsel Stack

Bluebook (online)

239 F. 703, 152 C.C.A. 537, 1917 U.S. App. LEXIS 2262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-united-states-hair-co-ca2-1917.

Opinion

Related

Cite This Page — Counsel Stack