Court Opinion

ID: 8189327
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:12:11.245013+00
Date Added: 2024-06-11T16:40:32.853586
License: Public Domain

- TimxiN, J.
(dissenting). “If a bankrupt shall have given a preference within four months . . . and the person receiving it or to be benefited thereby . . . shall have had reasonable cause to believe that it was intended thereby to give a preference it shall be voidable by the trustee, and he may recover,” etc. Subd. b, sec. 60, Bankr. Act July 1, 1898 (ch. 541, 30 U. S. Stats, at Large, 562, U. S. Comp. Stats. 1901, p. 3445). The trial court in its instructions to the jury construed this statute with reference to its words and with reference to pre-existing rules of law to mean that' neither suspicion that a preference was intended, or doubt on this point, was sufficient to create liability; that the party *76sought to be charged must have had reasonable cause to believe' that a preference was intended, but this reasonable ■cause to believe might be inferred from facts which came to the knowledge of such party and which were sufficient to put him upon inquiry, which, if made, would result in knowledge. It will thus be seen that a federal question is presented, the trustee claiming the right to recover upon the bankruptcy act so construed, which right is denied by the reversal of the judgment of the court below, and it will be further seen that the whole controversy turns upon whether ■or not the ultimate fact of reasonable cause to believe that it was intended to give a preference can be proven by the old •and well-settled mode of proving the larger concept of actual knowledge or 'the equal concept of notice. This mode of proof and its effect was recognized in Oliver v. Piatt, 3 How. 333, 410; Wollensak v. Reiher, 115 U. S. 96, 5 Sup. Ct. 1137; McClure v. Oxford, 94 U. S. 429, 432; The Lulu, 10 Wall. 192, 201; Angle v. N. W. Mut. L. Ins. Co. 92 U. S. 330, and other similar cases, none of them involving the construction of this statute, but all cases where one was sought to he charged, not merely with having reasonable cause to believe, but with having actual knowledge or with having notice.
Furthermore, it is a rule of construction of statutes that, “in all doubtful matters and when- the statute is in general terms, it is subject to the principles of the common law. It is to receive such a construction as is agreeable to that law in cases of the same nature.” 2 Lewis’ Suth. Stat. Constr. (2d ed.) § 455, and cases. The words “common law” in this respect do not mean the English common law, or common law as distinguished from equity jurisprudence, but the general case law of the forum. “Equality is equity” is also a maxim having some weight in the construction of this statute. Next, this statute has never been construed by the supreme court of tire United States as understood in the ma*77jority opinion. Tbe cases of Merchants’ Nat. Bank v. Cook, 95 U. S. 342; Grant v. Nat. Bank, 97 U. S. 80; Barbour v. Priest, 103 U. S. 293; and Stucky v. Masonic Sav. Bank, 108 U. S. 74, 2 Sup. Ct. 219, deal with a different question and with a different statute. In none of these cases was it considered or decided what evidence was proper or sufficient to make a case against one as “having reasonable cause to believe such person insolvent.” It is firmly established that mere doubt or suspicion does not constitute such reasonable cause; but as I read the cases it is nowhere decided that reasonable cause to believe one insolvent could not be established by proof that the party to be charged had brought home to him knowledge of facts and circumstances sufficient to put him on inquiry, but tinreasonably refrained from inquiry. Besides,, reasonable cause to believe that a person is insolvent is a different proposition from reasonable cause to believe that it was intended thereby to give a preference. The former is reasonable cause to believe in the existence of a condition of inadequacy of asáets or inability to pay. The latter is reasonable cause to believe in the existence of a mental condition. The latter could only be established by inference from facts and circumstances, except, perhaps, in those impossible cases where the payer would make express confession of his mental condition. The only case that I know of that has reached the supreme court of the United States involving the construction of the identical statute here -under consideration is Bau Claire Nat. Banlc v. Jaclcman, 204 U. S. 522, 27 Sup. Ct. 391. In the decision of that case in this court, reported in 125 Wis. 465, 104 N. W. 98, this court said:
“Whether defendant had reasonable cause to believe that Young was insolvent within the meaning of the bankrupt act was a question of fact, and it was chargeable with notice of such fact as reasonable inquiry in view of the circumstances with respect to the debtor’s condition, which were brought home to it, might fairly be expected to disclose.”
*78Tbe supreme court of tbe. United States in affirming tbis judgment did not expressly notice tbe matter covered by tbe foregoing quotation, but it was passed in silence, and neither tbis court nor tbe eminent counsel engaged, nor tbe supreme court of tbe United States, seem to tbink it subject to criticism.
I see nothing in tbe case of Suffel v. McCartney Nat. Bank, 127 Wis. 208, 106 N. W. 837, in conflict with tbis view. In tbe last-mentioned case tbe situation presented by tbe findings of tbe court below was first an absolute negation of tbe condition of liability mentioned in that section of tbe banlcruptey act in question; second, an additional finding that there was evidence which might naturally produce, not belief, but a doubt or suspicion, and that doubt or suspicion was such that under the rule of law applicable to fraudulent grantees it would put a reasonably prudent man upon inquiry. Tbe utmost, then, that tbe case presented to tbis court was a condition in which it was settled by the findings •of tbe court below that there was evidence in tbe case of facts which would or might have put an ordinary, reasonable person upon inquiry; but notwithstanding tbis, tbe person sought to- be charged did not have reasonable cause to believe that it was intended to give a preference. These two findings are not inconsistent. Tbe conclusion arrived at in tbe majority opinion assumes that they are always inconsistent and antagonistic. Still I think it quite obvious that in all that large class of cases, of which tbis is one, where evidence of facts sufficient to suggest inquiry is only an item of evidence, tentative and rebuttable as regards tbe final inquiry, it may be and frequently is true that, although tbe jury may from proof of facts sufficient to suggest inquiry infer a reasonable cause to believe that a preference was intended, still they are not bound to do so, but may find, notwithstanding such evidence, from other evidential facts and circumstances that there was no such reasonable cause to believe. Tbe whole subject is very thoroughly and learnedly *79discussed in 2 Pom. Eq. Tur. (3d ed.) §§ 597, 598 ei seq. TTow can we consider these subsidiary and recognized modes of proving notice or knowledge of tbe intentions or of the rights of another abrogated by a statute of the United States in the form quoted ? The very nature of the inquiry necessary under the bankruptcy statute in this particular brings us within those rules. They are the result of wisdom and experience, and were established to facilitate just such investigations. Bankruptcy cases in which this mode of proof was recognized as proper: In re Eggert, 102 Fed. 735, 43 C. C. A. 1; Allen v. McMannes, 156 Fed. 615; Thomas v. Adelman, 136 Fed. 973; Dokken v. Page, 147 Fed. 438, 77 C. C. A. 674.
To reiterate: Well-established rules permit knowledge or notice of the right of another or of the intention of another to be inferred as matter of fact in most instances, but as a-legal conclusion in some few instances from evidence that the party sought to be charged had knowledge of such facts and circumstances as would put a reasonably prudent person upon inquiry. The majority opinion holds that a proper construction of the bankruptcy act forbids such mode of proving the cognate fact that one had reasonable cause to believe a preference was intended, and for this reason reverses the judgment of the court below. I consider this •construction of the bankruptcy act erroneous, and see nothing in the act itself or in the federal decisions to warrant it. The excerpt from the charge of the court below quoted in the majority opinion is rather incomplete, but, taking the whole charge of the court below, it is in substantial conformity with these rules of evidence, hence the judgment of the court below should be affirmed.
KeRwiht, T. I concur in the foregoing opinion of Mr. Justice Timlin-.
A motion for a rehearing was denied November 27, 1908.