BANKRUPTCY - VOIDABLE PREFERENCES - TRANSFER PERFECTED WITHIN FOUR MONTHS OF BANKRUPTCY

Two recent cases, Adams v. City Bank & Trust Co., and In re Quaker City Sheet Metal Co., both involving section 60 of the Chandler Act, bring to the fore a question of interpretation of that section which has bothered Congress and courts and lawyers for some forty years. The bankrupt executes a mortgage to secure repayment of a present loan, but the recording of the mortgage is withheld until a later date, and finally takes place within four months of bankruptcy. Or, as in the Quaker City case, he assigns a chose in action to the creditor in a state requiring notice to the obligor in order to cut off the rights of subsequent assignees, and such notice is given after the assignment and within the four-month period. Both situations present the same problem. For the sake of simplicity, however, this comment will be confined to the case of recording. The transfer, of course, is good as between the parties, and after the recording it is good as to the rest of the world (with certain exceptions immaterial for our purposes) unless section 60 of the Chandler Act makes it a voidable preference