Case ID: h-j_5/html/0403-01.html
Source: Caselaw Access Project
Author: {"author": "Eaule, J. Chase, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

COURT OF APPEALS, JUNE TERM, 1822,
    Kennedy vs. Boggs.
    There is no .aa^ quate provision ua, the s«>erei msoi-' sS/‘a„dHl p™pér¡‘fromthe «Son &rraUe8h'
    trnsfeefappoiuted under the act of 3816, ch. 221, s. 2. _ , , , , m to take possession of the insolvent’s property; but no power is given him to recover such property from third persons; where that is to he done; (there being no permanent trustee,) the name of the insolvent must be used.
    • The possession only,passes to the provisional trustee, and the absolute property remains with the insolvent, until a peumment trustee is appointed, in whom, by operation of ¿he insolvent acts, tiie title of the property vests, * ' ' - 5
    The provisional trustee has only power to possess and preserve the insolvent’s property for the bene» fit of his ert dito«*$; and for the protection of that right he may sue if his possession is invaded.
    To avoid a deed or assignment by an insolvent debtor, it must be made with a v^ew and under the expectation of becom.np an insolvent debtor, and with an intent thereby to give &n undue and improper preference- rer Chase, Ch. J. *
    The time when a person becomes an insolvent debtor, under the insolvent laws, is when he files hia petition for the benefit of those laws. Ibid. ' * *
    An assignment made by an insolvent through coercion of the law, is not ail undue and. improper preference. Ibid. e *
    
    Before a final release can he obtained by an insolvent, the trustee must certify tp the court that he has received all the property contained in the insolvent’s schedule Ibid
    
    Where there i no final discharge the petition of the insolvent, and all the proceedings under it, are Snefft ctual and void, and the property will be divested out of the trustee, and revei t to the petitioner-pud vest in him by operation of law, as a re,-»u.ting trust, (.the original object of the trust having failed;) and will be liable to J^e operated on and affected under the general laws as ¿the property of the petitioner, IbiiJ,
    
    Appeal from Baltimore countv court. This was an ac- . * tion of trover brought on the 10th of March 1818 by the appellant, as provisional trustee of F. A. Abbott, an in"solvent debtor, against the appellee, for two promissory notes. The general issue was pleaded; and at the trial the plaintiff gave in evidence, that the said Abbott, on the ' ’ " * • ' * ‘ 29th of November 1817, sold to W. Bromwell all his geoda and stock of merchandize, for about the sum of $3000, to be paid $500 in cash, and the residue in notes endorsed by Jlosea Johns; and that the notes which this action is brought to recover, were two of the notes so given. On. or about the first of December 1817, a few days after Abbott closed his stoi’e, he delivered to D. Bosley, of the house of Bosley and Jarrett, all the notes drawn by Brorawell, with instructions to pay himself the amount due to, the firm of Bosley and Jarrett, (which was admitted to have been about §447,) and to hold the rest subject to his, Abbott's, order. On the 4th of December following, on the petition of the defendant, (now appellee,) a writ of ne exeat issued against Abbott from Baltimore county court, on an allegation that he was indebted to the defendant, and his copartner, 7J. Leche, in a sum of money equal to the amount of the notes for which this action was instituted. Abbott was taken on said writ on the fifth day of the month, and called with the sheriff’s officer, and in company with the defendant, on Bosley, and directed him to deliver to the defendant the notes in question, which was accordingly done. On the same day, but after his release from tlie writ of ne exeat, Abbott was committed to prison at the suit of Mary Butler, for a claim of $47 50, and remained in prison until the 19th of December 1817, when he applied to the chief judge of Baltimore county court for the benefit of the insolvent laws of this state;, the proceedings under which application were offered in evidence by the plaintiff. By these proceedings it appeared that his application was referred to the commissioners of insolvent debtors for the city and county of Baltimore, and proceedings had thereon according to the act of assembly “relating to insolvent debtors in the city and county of Baltimore." On the 19tl\ of December ¿§17, he received his personal discharge as an insolvent debtor, and at the same time the plaintiff was appointed his provisional trustee. The 7th of January 1818 was appointed by the commissioners for Abbott's appearance before thepi; and on the lfith pf April 1818, he was finally released under his said application. The plaintiff further gave in evidence, that Abbott had no other visible property than the stock of goods assigned- as aforesaid to Bromwell, and that no. othqr property was returned in his sokedufe. At the time when the said notes were delivered to the defendant, the debts of Abbott far' exceeded the amount of his property. The defendant then gave in evidence, that the writ of ne exeat was issued to prevent Abbott from leaving tins state, he being bona fide indebted to the defendant in the sum of £878 08, upon two notes, both dated cn the COth pf September 1817, and drawn one at four months and the other at ninety days, and that the two notes in the declaration mentioned were delivered over to the defendant in discharge of said debt, and were so delivered in consequence of Abbott’s arrest under the writ of ne excat, and while Abbott was in the custody of the sheriff in virtue of that arrest. On this evidence the plaintiff prayed the court to direct the jury, 'that if they believed that the notes in controversy were delivered to the defendant by Abbott yvith a view or under an expectation of being or becoming an insolvent debtor, that then the plaintiff' was entitled to recover. Which direction the court, [ Dorsey, Ch. J. Hanson and Ward, A. J.] refused to' give. The plaintiff excepted; and the verdict and judgment being against him, he appealed to this court.
    The cause was argued before Chase, Ch. J. Eakle and Stephen, J. • -1
    
      Murray, Kennedy and Mayer, for the appellant.
    1. The, transfer of the notes to the defendant by Abbott, was void, as an undue transfer to a creditor within the meaning of the insolvent laws of this state. 2. The plaintiff’ was competent to institute this action. On the first point they referred to the acts of assembly of 1804,' ch. 110; 1805,, ch. 110, s. 8; 1807, ch. 55; 1812, ch. 77, and 1816, ch. 221, s. 6. To show that every coutract against law was void, although the act declaring it void also inflicted a penalty, they cited Bartlett vs'. Vinor., Carthgio, 252. Devon vs. Waits, Dougl. 89, (note.) Mitchell vs. Smith, 1 Binny’s Rep. 110. As soon as a debtor has it in view of becoming insolvent, all his property belongs to his creditors, and he can make no preference. Iiis power of alienation is gone. Doe vs. Gulliers, 2 T. É. 133. Tout eng vs. Hubbard, 8 Ros. 4; Bull. 291. Butler vs. Rhodes, 1 Esp. Rep. 286. Neioton vs. Chantler, 7 East, 143. 1 Com. Cont. %57. 1 Bae. Ab. tit. Bankrupt, 359. Manro vs. Git-tings &r Smith, 1 Harr. $• Johns. 497. The doctrine of threat of legal process, &c. grew up under the bankrupt laws of England, and is not applicable to our insolvent laws. There fraud annulled the transfer; here it might be improper against the policy of the law, and yet not fraudulent. Small vs. Oudley, 2 P. Wms. 429. Rust el al. vs. Cooper, 2 Coup. 629. Harman vs. Fishar, 1 Coup. 117. As the debt was not due, the writ of ne exeat could not be supported. Cox vs. Scott, ante 384. On the second point they referred to the acts of 1816, ch. 221, and 1820, ch. 182.' 3 Bac. Ab. tit. Executors and. Administrators, (B. 2.) 14, and Co. Lilt. 52, b.
    
      Williams for the appellee.
    1. By the provisions of the insolvent laws, a provisional trustee cannot sue in his own name—1st. Because he is only temporarily appointed, and a mere depository of the estate and effects of the applicant; and 2d. He is not specially authorised by the statute which creates him, and by which alone he was recognised. lie referred to the act of 1816, ch. 221, s. 2, and 1 Bac. A5, tit.- Bankrupt, (D.) 40.
    2. The powers and duties of the provisional trustee ar$ presumed to have ceased before this action was brought; they were superseded by the appointment of a permanent’ trustee; and if the same person was appointed permanent trustee, who had acted as provisional trustee, still this docs not enable him to sue as provisional trustee—1st. Because-he lias declared as a provisional trustee; and 2d. Because he has never entered into a bond as permanent trustee. He referred to the acts of 1805, ch. 110, s. 2, 4, 8, and 1816, ch. 221, s. 2', 3, 6. ‘ ' .....
    3. The transfer of the notes to Boggs by Abbott was not an undue and improper preference, within the meaning of the insolvent laws. To render it so it was necessary that the transfer should be shown to be made both “with a view or under an expectation of being or becoming an insolvent debtor,” and also “with an intent thereby to give an undue and improper preference to the creditor.” He referred to the acts of 1805, ch. 110, s. 9; .1807 ch. 55; and contended that the act of 1812, ch. 77, was superseded by the act of 1816, ch. 221, and repealed a part of the 9th section of the act of 1805, ch. 110; and that there was no penalty attached to a preference under the act of 1.816, ch. 221. The-legislative construction given by the act of 1807, ch. 55, of that of 1805, ch. 110, s. 9. has ne beáring on the act of 1816, ch. 221, s. 6, and the construction of the 6th section of that act is to be determined by reference to the principles of the common law,' or to eases analogous to it. .
    
      4. The provisions of the act of 1816, ch. 221, s. 6, are closely analogous, if not exactly similar to the provisions or constructions under the English bankrupt laws, as to voluntary preferences. He cited Paul’s Dig. 78. 1 Due.
    
    
      Jib. tit. Bankrupt, (F.) 486. Conveyances are rendered void which are affected by these ingredients, 1 st. That they are made voluntarily. 2d. That they are made with an expectation, or in contemplation of bankruptcy, and thereby to give a preference. Whenever there is the absence of either of‘these circumstances in point of fact, the common law principle, which justifies a bona ficíe creditor in obtaining payment of his just debt, prevails and protected him. Alderson vs. Temple, 4 Burr. £335. Harman vs. tishar, 1 Cowp. 117. 123. Rust et al. vs. Cooper, 2 Cowp. ¿29. Thompson vs. Freeman, 1 T. R. Í55, 156, (note.) Smith vs. Payne, 6 T. R. 152. Hartshorn vs. Slodden, 2 Bos. fy Pull. 582. 'Dixon vs. Baldwen, 5 East, 178. Thornton vs. Hargreaves, 7 East, 544. Small vs. Oudlcy, 2 P. Wms. 427. Wheelwright vs. Jackson, 5 Taunt. 109. Singleton vs. Butler, 2 Bos. fy Pull. 283. Ogden <f Thomas vs. Jackson, 1 Johns. Rep. 370. M-Menony vs. Ferrers, 3 Johns. Rep. 71. Loche vs. Winning, 3 Afass. Rep. 325. Phoenix vs. Ingraham’s assignees, 5 Johns. Rep. 412. Al’Mechen’s Lessee vs. Thornburgh &? Grundy, in this court December 1810. To render a payment of a transfer over from one in insolvent circumstances, to a bona fide creditor, the act done must be, 1st. wholly voluntary and unsolicited, and 2d. under an expectation of bankruptcy or insolvency, and to give an undue preference—The quo animó of both must be considered. He cited Thompson vs. Freéman, 1 T. R. 15¿, and Hartshorn vs. Slodden, 2 Bos, Pull. 585.
   Eaule, J.

delivered the opinion of the court.- It has been a complaint against the general insolvent laws of this state, ever since the year 1805, that no adequate provision was made for dispossessing the insolvent of his property, from the time of his application for relief. This provision is not supplied, as has been mistakenly supposed, by the act of 1808, ch. 71, sect. 3. There must be a petition depending, according the terms of this section, before thd court, or even the judge, can go into the appointment of a trustee; and by far the greater part of the applications for relief are made by persons, actually imprisoned during the recess of the county coui'ts. This inconvenience, i¡ ap*» peárs to have been one of the objects of the act of 1816, ch. 221, sect. 2, tt) remove, in the city and county of Baltimore.

By this law a provisional trustee is for the first time mentioned, and to the act we must look for a description of his powers. By the words and terms of if, this trustee is to take possession, for the benefit of the creditors of the insolvent, applying to the judges for relief, “of all propei’ty, estate, and effects, books, papers; áccounts, bonds, note's and evidences of debts,” and until he is possessed of them, and the trustee’s possession is reported by the commissioners to the judge, the insolvent cannot obtain even a personal discharge from imprisonment. The provisional trustee is thus to receive all the property, &c. of the insolvent, of which he is possessed, and.mention is no where made in the law, of a power in him to wrest the property, &c. of the insolvent, out of the hands of third persons. Where this is to be done, and no further trustee has been appointed, the court think the name of the insolvent must be used for the purpose. The possession only passes' to the provisional trustee, and the absolute property remains with the insolvent until a permanent trustee is appointed, in whom, by the operation of the acts, the title to the property vests. It does not vest at all, according to our ideas, in the provisional trustee, and therefore he can sustain no-suit, which involves the right of property. The action brought on this occasion is an action of trover, and to maintain it, the plaintiff must have a general or special property in the chattel contended for. If a general property, the legal possession follows it, and need not be shown, but ifa special property is relied on, the plaintiff must prove the" actual possession of the article converted by the defendant to his use. The last, the special property, is not here pretended, and the first, the general property, we have said, remains with the insolvent.

Neither .is the power to possess himself by suit against third persons, of the insolvent’s effects, incidental, in the Opinion of the court, to the office of this trustee, nor doés it grow out of the nature of his triist.

The trust is to continue’, it is admitted, until a permanent trustee is chosen, which the act contemplates to be done, and which ought to be doné, iii a short time after the application of the insolvent for the benefit of the lav/, but while it continues, it is a power 'only to possess and preserve for the benefit of the creditors;

For the protection of these rights* he may sue, if his possession.is invaded* but his action would bé grounded on his possession, derived from the insolvent, and on his special property consequent thereon, and may be prosecuted by him, without naming himself trustee. Very different is the action brought on this occasion. It must be supported on the general property of the plaintiff, which is always followed up by the legal possession, and agreeably to the opinion of the court already expressed, it is not iti this Case in the provisional trustee, or the plaintiff* who was only appointed provisional trustee. In this it is Unlike the cause of the administrator durante minoritatv. The title of the property of the intestate vests in him* and he may bring suits in relation thereto, or may be sued, as the intestate himself could have been, although his office is continued for a limited time only.

But if it was concédéd* that the provisional trustee had power to sue third persons generally, for the purpose of possessing himself of the property of the insolvent, we Should nevertheless think the action in this case could not be maintained. It is a suit against a creditor of the insolvent, to recover damages for the wrongful conversion of certain promissory notes, which, it is admitted, were delivered by the insolvent himself, before his actual insolvency, to the defendant, to discharge a just debt due to him. Where a transfer of this kind is vacated, the property vests in the permanent trustee alone, by the act tof 1816, ch. 221, sect. 6, and he alone can maintain a suit for ii; Whatever then may be the power of the provisional trustee, over the property in the schedule of the insolvent, and this we have attempted to define, we can have no doubt, he is unable to sue for property which has been transferred to a creditor, as these promissory notes have been;

Many other points were pressed by counsel in the argilmeat of this case, upon which the court do not deem it ne3 1 ; cessary to express an opinion. We will, however, further barely state, that in our judgment, the question involving the invalidity of the assignment of the notes by Abbot to Boggs, cannot be regularly examined, until a permanent trustee is appointed, as he alone can assert the rights of the creditors of the insolvent in this particular-. We venture no opinion as to the character of this transaction, but if this assignment is to be considered null and void, it is to be vacated only for the purpose of vesting the property in the permanent trustee, to be distributed among all the creditors of the insolvent; and this cannot be done, where ho such trustee has been appointed.

The court below assigned no reasons for the opinion they gave; and we know not what views they took of this subject; We believe, however, they had ample ground to refuse the instruction to the jury prayed for by the plaintiff, and we therefore affirm their judgment.

Chase, Ch. J.

The facts stated in this case on which the prayer to the court below was founded, were not legally sufficient to warrant the court in giving the direction prayed, and the court did right in refusing to give the direction.

The prayer is, that the court should direct the jury that if they believed the above mentioned notes were delivered to the defendant by Abbot with a view or under an expectation of being or becoming an insolvent debtor, that the plaintiff was entitled to recover.

The material fact in the case is, that oh the 5th of December 1817, while under arrest and in the custody of the' sheriff on the ne exeat, Abbot directed Bosley to deliver to the defendant, in discharge of the debt due to him, the two promissory notes for which this suit-is brought. On the 29th of November 1817, Abbot had sold all his goods and stock in trade, and had given a preference to- Bosley and Jarrell, by depositing the promissory notes with them’ to pay themselves, and apply the residue as Abbot should direct.

The payment to the defendant was not a voluntary payinéiif, hut was made under the constraint and coercion of the law, and against the will of Abbot. • The cause of the ne exeat was the preference Abbot had given to Bosley and Jarreit in the preceding November, and Abbot’s unwillingness to pay or secure the debt due to the. defendant

So far from Abbot’s manifesting an intention to give am undue preference to the defendant, he evinced a strong desire to prevent his being paid, and was compelled to deliver the promissory notes by the proceeding under the ne. exeat.

The prayer is defective in not having inserted the words, ‘.‘and with intent thereby to give an undue and improper preference.” To avoid the deed or assignment it must be made with the view and under the expectation of becoming an insolvent debtor, and with an intent thereby to give an undue and improper preference. There must be -the concurrence'of-both circumstances to render the deed null-and; void, and-the jury must so find:

On the 19th' of December 1817, Abbot applied for the. benefit of the insolvent laws. When does a person become an insolvent debtor under th^insolvent law? I know1 no criterion by which it can be so well and certainly ascertained as the time of filing his petition. It is then he acknowledges his inability to pay his debts, and applies fon. relief.

The assignment was made 13 or 14 days prior to the. time of Abbot’s filing his petition, and when made it was not a voluntary but a compulsive act, produced by the coercion of the law5i which precludes the circumstances oF undue and improper preference.

It is stated in the case,, that on the 16th of April 1818, Abbot was finally released, and that on the 10th of March 1818, this suit was instituted-. This suit was brought be-, fore the final release was. obtained;.

Before a final release or discharge can be obtained, the-. trustee must certify to the court that he has received all the property contained in the schedule belonging to the insol-, vent debtor. No such certificate appears in this case.

If there wras no final discharge, which was admitted in. argument, (indeed there could not be without the certificate of the trustee that he had received all the property specified in the schedule,) then the petition of the insolvent debtor, and all the proceedings under it, became ineffectual and a nullity, and the property will be divested out of the trustee, and revert to the insolvent debtor, and vest' in him by operation of law as a resulting trust, the original object of the trust having failed, and the property will be liable to be operated on and affected under the general laws as the property of- the insolvent debtor.

I am of opinion that the judgment of the court below be affirmed.

JUDGMENT AFFIRMED.