
    Frank A. Taylor, as Trustee in Bankruptcy of William H. Nichols, Bankrupt, Respondent, v. Jesse M. Nichols, Appellant.
    Third Department,
    November 10, 1909.
    Bankruptcy — proof necessary to show unlawful .preference — evidence — declarations of bankrupt — hearsay—impeaching witness.
    A trustee in bankruptcy suing to recover moneys paid by an insolvent within four months of his insolvency and alleged to have been received by the defendant with knowledge of the fact that it was intended to give him a preference must prove, first, that at the time of the transfer the bankrupt was insolvent; and, second, that the transferee had reasonable grounds to believe that the transfer was made with an intent to give a preference.
    In such action the insolvent’s petition for a discharge in bankruptcy, his schedules and testimony as to his financial condition given by him in the proceeding are inadmissible against the defendant to prove the insolvency of the bankrupt at the time of the transfer, being hearsay.
    Such evidence is not admissible to contradict the bankrupt called as a witness for the plaintiff, for one cannot impeach his own witness or prove contradictory statements as to matters upon which he has examined him.
    Kellogg, J., dissented, with opinion.
    Appeal by the defendant, Jesse M. Nichols, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Delaware on the 24th day of August, 1908, upon the decision of the court rendered after a trial at the Delaware Trial Term before the court without a jury.
    
      F. W. Welsh, for the appellant.
    
      Wesley Gould [C. L. Andrus of counsel], for the respondent.
   Smith, P. J.:

This action is apparently brought under section 60 of the Bankruptcy Act (30 U. S. Stat. at Large, 862, as amd. by 32 id. 799,800, § 13) to recover from the defendant the sum of $500, as having been paid to him by one William H. Nichols, an insolvent, within four months before the filing of his petition in bankruptcy, and as having been' received by the said defendant with knowledge of the fact that it was intended to give to him a preference as a creditor. Two facts were required to be proven in order to justify the judgment rendered ; First, that at the time of the transfer W illiam H. Nichois was insolvent; and, second, that this defendant had reasonable ground to believe that the transfer was made with intent to give him a preference. Both facts have been found by the learned trial judge, and upon them he has directed the judgment against the defendant from which this appeal has been taken.

The judgment is challenged by the defendant for various reasons. Among others, it is'claimed that illegal evidence was received over his objection to establish the insolvency of William H. Nichols at the time of the transfer. With the petition filed by the said Nichols to obtain his discharge from bankruptcy, he filed certain schedules of his assets and liabilities, and in the proceedings which resulted in his discharge he gave certain evidence as to his condition upon January twenty-sixth, when it is claimed the fraudulent preference was given. These schedules and part of the evidence so given by him in the bankruptcy proceeding were offered in evidence by the plaintiff upon this trial for the purpose of establishing the insolvency of the said Nichols at that time. To this offer the defendant objected, that as to him they were hearsay and that he was not bound by these declarations. The objections were overruled, the evidence was admitted, and the defendant excepted to the ruling.

We are unable to see upon what ground this evidence was competent. It was the declaration of a bankrupt in a proceeding in which it does not appear that this defendant was a party. As to this defendant the evidence would seem clearly to be hearsay and inadmissible. (Burnham, v. Brennan, 74 N. Y. 597; Schreyer v. Citizens' National Bank, 74 App. Div. 478; Kain v. Larkin, 131 N. Y. 300; Lent v. Shear, 160 id. 462.) Upon the record it appears that the plaintiff’s counsel contended that this was proper evidence in contradiction of the witness William H. Nichols, who had been upon the stand. This witness had been called by the plaintiff and testified in behalf of the plaintiff. It is elementary that you cannot impeach your own witness or prove contradictory statements as to matters upon which yon have examined him. It follows that the judgment must be reversed and a new trial granted, with costs to appellant to abide the event.

All concurred, except Kellogg, J., dissenting in opinion, and Sewell, J., not voting.

Kellogg, J.

(dissenting):

The testimony of the bankrupt given upon the trial fixes his assets on the 17th of April, 1907, at $145,000 and his liabilities at $147,000, and shows that upon the twenty-sixth day of January when the defendant withdrew the money the assets and liabilities were each about $60,000 more. The introduction of his schedules in bankruptcy showing these same facts was entirely immaterial and not prejudicial to the defendant. The appraisers in bankruptcy as witnesses swore that a fair appraisal of all the bankrupt’s assets was $49,655.99, which includes $6,000 as the total value of his real estate.

The deposition of the bankrupt contained no statement prejudicial to the defendant which was not found in the evidence of the bankrupt or of the defendant upon the trial. The schedules as evidence were, therefore, harmless.

The testimony of the bankrupt shows that his bank held his notes for $53,339.69, and that he owned no property outside of the bank except his real estate and the stock of goods in the store. The real estate was sold at public auction, after due notice, for $5,865; the stock of goods sold for $1,000. Therefore, the total assets of the bankrupt, outside of the bank itself, was $6,865, in addition to which the bankrupt says that he had an equitable interest of about $12,000 or $13,000 with his brokers in New York, and the defendant understood that his father had $12,000 paper profit with his New York broker. Besides the notes of the bankrupt in the bank he had an overdraft of $2,771.36 before the defendant, as cashier, at his direction canceled the notes of his sister, his brother and his brother-in-law, aggregating $7,381, and charged the same to the bankrupt, making his overdraft $10,152.36, so that upon the day in ' question the bankrupt carried upon the bank books as assets his obligations of $63,492.05, and his total property as we have seen was of the value of $6,865, besides some apparent paper profits with a speculative broker’s office in New York. If he had ordinary intelligence he must have known of his insolvency.

The defendant, his son, .thirty-four years of age, had always worked for his father, lived in the same village, and for the last thirteen years had been cashier of his bank and knew generally the value of property. _ He drew the $500 in question from the bank upon the same day that he, as cashier, extinguished the liabilities of the other members of the family to the bank. He says he received his money perhaps an hour before he canceled their notes. It was practically one transaction. On the twenty-first day of March he withdrew from the bank about $1,500 which stood to his credit as treasurer of the village of Hancock, and thereafter kept the money in his pocket, and he says : “ I don’t think that this transaction of the 26th day of January had anything to do with my making np my mind that I wanted to withdraw those funds. There had been no practical change in my father’s condition down to the 31st of March.” If he had ordinary intelligence he must have known that his father was insolvent. It is incredible that either the bankrupt or the defendant was ignorant of the financial situation of the father, and the defendant must have realized that the withdrawal of these moneys gave him a preference over other creditors.

The judgment is clearly right. If the schedules in bankruptcy, the deposition of the bankrupt in the bankruptcy proceedings and the appraisal in bankruptcy were stricken from the record, the remaining evidence does not leave the liability of the defendant in doubt. It would be a miscarriage of justice to reverse this judgment for technical errors in the receipt of evidence when the facts shown by such evidence have been fully proven by witnesses in court and are substantially uncontradicted. I favor an affirmance of the judgment.

Judgment reversed and new trial granted, with costs to appellant to abide event.  