Court Opinion

ID: 6578838
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:36:38.726152+00
Date Added: 2024-06-11T15:57:11.359929
License: Public Domain

Carpenter J.
(Dissenting.) I do not deem it necessary to consider the question whether this conveyance is protected by the 97th section of the statute relating to the settlement of estates. The opinion of the majority proceeds upon the idea, not that the mortgage was received in good faith, but that it was given in good faith. The motives and purposes of Beecher alone seem to be important, and the case is treated as though the 87th section of the act only was applicable to it. That section invalidates a conveyance if made by a party “ in failing circumstances, with a view to insolvency.”
The proposition which I shall attempt to maintain is this,— that this mortgage cannot be sustained, so far as its validity is made to depend upon the motives and intention of the mortgagor.
*488According to the case of Utley v. Smith, 24 Conn., 290, three things are essential to my purpose. 1. That the mortgagor was in failing circumstances. 2. That the mortgage was made with a view to insolvency. 3. That it was made with intent to prefer certain creditors.
Before proceeding to examine separately the several questions' thus raised, I wish to call attention to the nature and design of the statute. It is not in the nature of a penal statute, to be construed strictly, but on the contrary is in the nature of a statute for the prevention of fraud and injustice, and ought to bo liberally and beneficially expounded; and must be so exipounded in order that it may accomplish the object intended by the legislature. Hence, if the case is fairly within the spirit of the act, it ought to be governed by it, whether it is strictly within its letter or not; at least, its efficacy ought not to be impaired by a narrow and technical interpretation of the language used. Its design is not to punish either party to a conveyance by way of a penalty or forfeiture, but to effect an equal and just distribution of the insolvent’s effects, pro rata, among all his creditors. Now it cannot be denied that sustaining this conveyance defeats the object of the statute, and exposes the creditors of this estate to all the mischiefs intended to be avoided by the legislature.
Keeping these suggestions in view let us examine carefully the case before us.
1. It is not denied that the mortgagor was in failing circumstances. He was deeply insolvent. Many of his debts were past due, his creditors were pressing, and his affairs were so critical that an attachment or a mortgage put on record was sure to be followed by proceedings in insolvency. -
2. "Was this mortgage made with a view to insolvency ? It becomes important to understand precisely what this expression means. I apprehend that it does not necessarily mean, as tlie opinion of the majority seems to suppose, an intention on the part of the mortgagor that the mortgage should be followed up by an assignment, or other proceedings in insolvency: If that, and that alone, is the meaning, then the fact *489found by the committee, that the mortgage was made, “ not with the intention of stopping payment or closing his business, but to prevent interruption, and to avoid a suit and an assignment for the benefit of his creditors, &c, ” would control the decision. But if the expression means, as I think it does, much more than this, then this part of the finding should have but little weight in determining this question. This expression is equivalent, in its legal significance, to the expression found in the English and American bankrupt acts, “ in contemplation of bankruptcy,” and should receive the same interpretation. That expression cannot refer solely, nor principally, to voluntary bankruptcy, for such a thing is hardly known to the English statutes where it originated. That it is not limited to cases where the bankrupt intended to have proceedings instituted against him, is apparent from the decisions. In Fidgeon v. Sharpe, 5 Taunt., 539, Lord Chief Justice Gibbs says, “ With respect to this doctrine of contemplation in cases of bankruptcy, we have nothing, either in the common or statute law, to show what it is. The cases in which this doctrine was introduced make it depend upon the quo animo ; if a trader thought he should not have .enough to pay all his creditors, it must be presumed that, if he gives full payment to one, he does it in contemplation of bankruptcy. ” In Arnold v. Maynard, 2 Story R., 357, Judge Story, after reviewing the English decisions on this subject, says, “ I should deduce the general conclusion from the English cases to be, that a conveyance by a person, knowing himself to be insolvent, to one creditor, with a design of giving him a preference over the other creditors, in the event of his own expected bankruptcy and stoppage of business, was of itself an act of bankruptcy, as a fraud upon the bankrupt laws. ” And again, on page 353-4, “ If the question meant to be asked was, whether, if the mortgagor, at the time of executing the mortgage, knowing his own insolvency and inability further to carry on his business, but having no 'immediate intention on his part to seek by petition the benefit of the bankrupt act, or thereby to enable his other creditors to proceed against him in invitum, to have him declared a bank* *490rupt under that act, but actually designing and intending thereby to give a preference to the mortgagee over all his other creditors, it was such a security, conveyance or transfer as was fraudulent and in contemplation of bankruptcy within the meaning of the bankrupt act, then I say, that his mere private intention cannot overcome the legal intention and purport of the act; and it is to be treated, in the sense of the statute, as made in contemplation of bankruptcy, although it was not done by him with the intention of being declared a bankrupt. When the statute speaks of a conveyance or transfer in contemplation of bankruptcy, it does not necessarily mean, in contemplation of being declared a bankrupt under thé statute, but in contemplation of actually stopping his business because he is insolvent and ritterly incapable of carrying it on. ”
My investigation of this subject has satisfied me that the construction now virtually given to this statute by the majority is altogether too narrow. The language used, the nature of the case, the object of the statute, all the circumstances, combine to show that it cannot depend entirely upon the wishes or intention of the party. The act of mortgaging may be under such circumstances as to have a “ legal intention and purport, ” which cannot be controlled by the mere private intention of the mortgagor. Hence, if a party intends, expects or fears insolvency as an impending event, and, influenced by such intention, expectation or fear, makes a conveyance or transfer of his property, or pays a debt, with a design to prefer one creditor to another, he does the act with a view to insolvency within the meaning of the statute. The fact that he does so with the hope that insolvency will thereby be postponed, or entirely prevented, will make no difference, provided insolvency follows, and a preference of creditors is the result; for it is to be borne in mind that the object aimed at is to avoid a preference and secure an equal distribution among creditors. .
The question now returns, was this mortgage made with a view to insolvency ? He was so badly insolvent, that his estate.in any event would pay less than thirty cents on the dol*491lar. With all the property at his command he had nearly ceased working his own stock of materials, and was working the stock of another. • To secure this debt required one quarter of his entire property, and one third of his property after paying prior incumbrances, which still further embarrassed him by materially reducing the means at his command. Other debts were then due, and he was fully aware of his situation. But this is not all; for he knew that insolvency was sure to follow the mortgage as a consequence thereof. It is expressly found that he “ then knew that if placed upon record it would operate as a preference to them unless assailed within sixty days after it should be recorded. ”
It is true he did not expect that it would be immediately recorded, but there was no agreement to that effect, and no facts found that would justify such an expectation. He must have known that the law required it to be recorded, and therefore must have known that it would have been done in the ordinary course of business, in the absence of any arrangement to the contrary, and that it must very soon result in breaking up his business. He was in this dilemma; a suit by attachment, with which he was threatened, would break him up and precipitate insolvency; a mortgage would in all probability have the same result, but there was a possibility that it might be postponed for a while, and that in the meantime large profits or some unexpected turn of fortune would extricate him from his embarrassment. He was forced to submit to the one or the other. He chose the latter, as a means of preventing immediate insolvency. He intended thereby to prevent interruption by a suit, and an assignment as a necessary consequence, but with a moral certainty that the mortgage would have the same result after a brief interval.
I cannot assent to the proposition that this was done for the purpose of continuing his business, within the meaning of Utley v. Smith, and other cases cited. On the contrary it is quite clear to me that it was done with a view to insolvency. He feared and expected insolvency ; and that fear and expectation entered into and formed a part of the act of mortgag*492ing. His critical situation, financially, was both the cause and occasion of the mortgage, and it was so understood by him. The act, therefore, had a “ legal intention and purport, ” which ought to stand, notwithstanding his hopes and wishes to the contrary.
I am not troubled with the suggestion that this is a question of fact, and that the committee has not found, in terms, that this was done with a view to insolvency. All the facts which characterize the transaction, and which are necessary to show that it is within the statute, have been found, and it only remains for the court to apply the law. There is nothing, as it seems to me, in the case of Utley v. Smith, inconsistent with this view. There, the only fact found was, that the mortgagor was insolvent; and the court was asked to infer, as matter of law, from that naked fact, that the mortgage was within the statute. The court very properly held that it could not be done. Here, many other facts are before us, and I see no legal difficulty in disposing of the case. But my views on this point are more fully stated under the nest head, and I will not enlarge.
3. The third and last question is, did the mortgagor intend to prefer the mortgagee to his other creditors ?
This is purely a question of intention. In this respect it differs somewhat from the question just considered.
In relation to this question, the majority say, “ The committee has left the question of fact undecided, and given us evidence bearing upon both sides of the case.” If this be so the duty of this court is manifest. A case of this importance ought not to be determined and finally disposed of, with an important and material question of fact undecided. The case is reserved for our advice. In such cases the usual course is, to remand it for a further finding of facts. Instead of doing so, a majority of the court, inconsistently as it seems to me, proceeds to determine the question by finding, as a fact, that he did not intend to prefer creditors; notwithstanding the effect of such finding will be to defeat the operation of one of the most important acts upon our statute book, the wisdom and propriety of which is questioned by no one.
*493This seems the more extraordinary, inasmuch as the corner stone of the decision is, that it is not competent for this court to draw an inference of fact.
But this is not all. Prominence is given in this part of the case to the fact that the committee has not found that the mortgagor knew of the law requiring mortgages to be recorded. It is then assumed that he was ignorant of it. This assumption rests on no other foundation than an inference of fact, drawn from the finding of the committee that Beecher “ did not expect that the mortgage would be immediately recorded.” It is to be presumed that Beecher knew the law. But without this presumption, there is hardly room for the inference that a business man, of ordinary intelligence, was ignorant of the plain requirements of a law so universally known.
The opinion of the majority further says: “Now this court has repeatedly held that it cannot find facts from evidence reported to it, and for this reason a majority of the court are unable to discover how this conveyance can be regarded as fraudulent and void under the statute of 1853.” I am not aware of any such decision. No authorities are cited, nor do I believe that the proposition as applicable to- a case like this has ever before been promulgated as law. There is a class of cases, of which this is one, involving questions of fraud, intention and the like, in which the main fact is not susceptible of direct proof, but can only be proved by way of inference from other facts. In these cases, when the other facts appear, this court has repeatedly drawn the inference. This was done in the case of Corbin v. The American Mills, 27 Conn., 278, also in Dimock v. Town of Suffield, 30 Conn., 129, and in many other cases which might be cited. That the court has the power to draw inferences of fact in such cases I cannot entertain a doubt. It may not always be advisable to exercise this power. When however a cas e has been argued upon its merits, and justice requires it, w& ought not to hesitate. At all events it is unwise to deny ourselves the power to do so. The cases of Utley v. Smith, and Quinebaug Bank v. Brewster, are not in conflict with *494this view. In each of these cases the gist of the decision, when carefully examined, will be found to be, that there were not facts enough found to enable the courts to draw the conclusion claimed.
But in this case I think sufficient facts are found to enable us to come to a right conclusion. The facts referred to under the preceding head must be borne in mind, as important to be considered also in this connection. Moi'eover, it is expressly found that “ Beecher then knew that if placed upon record the mortgage would operate as a preference to them, unless assailed within sixty days after it should be recorded.” That he must have known that it would be recorded I have already shown. The conclusion then is inevitable, that he knew the mortgage would operate as a preference, or be invalidated by proceedings in insolvency. In either event, the intention in a legal point of view exists. It will hardly do to say that a sane man can do an act which must inevitably have but one result, without intending that result.
I cannot avoid, in this connection, calling particular attention to one paragraph in my brother Park’s opinion. “Whatever other men might have thought in like circumstances with Beecher, it is clear - that he was anxious to go on with his business, and expected to do so should he give the mortgage, and gave it for that purpose only. This is the sole object found by the committee that he had in view, and it so, then it follows conclusively that this mortgage was not made with intent to prefer the petitioners to the other creditors of the mortgagor, for it is utterly inconsistent with these facts that he could have had such intent.” Thus Beecher is made to do an act, intending only a remote, and, under the circumstances, a very improbable consequence of the act; and the court is called upon to say, and a majority do say,.that having this object in view he could have no other, and therefore that he did not intend that this deed should operate to prefer creditors. I cannot assent to this process of reasoning. The object of a mortgage is security. A man may be induced to gave security against his will even, hoping thereby to derive some incidental advantage. That is precisely the case before *495us. Beecher intentionally gave security, as a means of postponing, for a short time, proceedings in insolvency. The argument that such a hope, whether well or ill founded, excludes from the mind of the mortgagor all intention of giving security is incomprehensible to me. He intended then to give security. If he intended that, then he intended a preference, as the deed, under the circumstances, could not secure the debt without preferring the creditors.
In conclusion I desire to say, that I have examined with some care the English and American decisions bearing upon this subject, and I believe that no case can be found which amounts so nearly to a judicial repeal of the statute as the present. The importance of this question, and the effect which the decision is likely to have upon the business interests of the state, have constrained me to give at length my reasons for dissenting from the views expressed by the majority.
In this opinion Butler, J., concurred.