Mr. Charles J. Biddle, of Philadelphia, Pa., for petitioners.
Mr. Bertram Bennett, of Philadelphia, Pa., for respondent.
Mr. Justice JACKSON delivered the opinion of the Court.
This case requires us to determine the application of the preference provisions of 60, sub. a of the Bankruptcy Act as amended by the Chandler Act of June 22, 1938,1 to loans made on assignments of accounts receivable. [318 U.S. 434, 435] The Quaker City Sheet Metal Company became embarrassed for want of working capital in 1938. Creditors representing a large percentage of claims later proved in bankruptcy agreed to subordinate their claims to those which might be incurred for new working capital. A creditor's committee took supervision of the business and in 1938 arranged with the petitioner Bank to advance from time to time money for payroll and other needs on concurrently made assignments of accounts receivable. At the time of bankruptcy the Company was indebted to the Bank for loans so made on contemporary assignments between January 19, 1940, and April 5, 1940. On April 12, 1940, petitioner Dearden made a loan on similar security. An involuntary petition in bankruptcy was filed against the Company on April 18, 1940, followed by adjudication on May 7, 1940. When the assignments were made they were recorded on the Company's books, but neither petitioner had ever given notice of assignment to the debtors whose obligations had been taken as security. Because of this omission the trustee challenged their right to the benefits of their security. He was overruled by the referee and the District Court, but his position was sustained by the Circuit Court of Appeals for the Third Circuit,2 on an interpretation of 60, sub. a which conflicts with an interpretation by the Circuit Court of Appeals for the Fifth Circuit. 3 Hence we granted certiorari. 4
Section 60, sub. a as amended and applicable reads: