Court Opinion

ID: 6408846
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:51:03.475477+00
Date Added: 2024-06-11T15:51:18.266889
License: Public Domain

Dewey, J.
By the principles of the common law, a payment made by an insolvent debtor to his creditor might legally be received and retained, although, at the time of receiving such payment, the creditor had reason to believe the debtor insolvent and unable to pay all his debts. Such payment could not be recalled for the purpose of restoring the amount thus paid to the general fund for distribution among all the creditors. It is incumbent upon the plaintiff, therefore, if he would sustain the present actions, to establish his right to reclaim the money, paid to the defendants, by some statute enactment. The St. of 1838, c. 163, it is conceded by the plaintiff’s counsel, does not embrace the present case; the facts here found being wholly insufficient to bring the case *170within the provisions of the 10th section of that statute. To do so, it would be necessary to show that the payment was made by the debtor in contemplation of becoming an insolvent debtor, and of obtaining a discharge under the provisions of that act. Gorham v. Stearns, 1 Met. 366. That section does, in direct terms, embrace the case of payment of a debt with a view of giving a preference to a creditor; and if the other fact, required' by that section, had existed, viz. that the payment, with a view to a preference, was made in contemplation of obtaining a discharge under that act, the present actions might have been sustained.
If any statute provision exists, authorizing the maintenance of these actions, it must be found in St. 1841, c. 124, § 3. This statute introduced some material modifications of the St. of 1838, c. 163. It enlarged the provisions of that statute, so as'to extend the same to any applicant whose debts exceeded two hundred dollars. It further declared (§ 3) that the debtor should not be entitled to a discharge “ if, within six months before the filing of the petition by or against him,” “ being insolvent or in contemplation of insolvency, he shall make any assignment, sale, transfer, or conveyance, either absolute or conditional, of any part of his estate, real or personal, intending to give a preference to a preexisting creditor, or to any person who is or may be liable as indorser or surety for such debtor, unless said debtor shall make it appear that, at the time of making such preference, he had reasonable cause to believe himself solvent; and all preferences, so made or intended to be made, shall, as to the other creditors, be void; and the assignees may recover the full value of the property so transferred, or the property itself, from the creditor so preferred, provided the creditor, when accepting such preference, had reasonable cause to believe such debtor was insolvent.” This section materially modifies the former statute as to the necessity of showing that the debtor, at the time of making the preference, had in contemplation the purpose of obtaining his discharge under the insolvent law. Actual insolvency, the creditor having reasonable cause to believe the *171debtor insolvent, is sufficient to authorize the assignee to recover the property transferred by way of preference. But the further inquiry is as to the cases embraced within the provisions of this third section. Does it embrace the case of a payment, in money, of a debt due to a creditor ? Upon an examination, there will be found, in St. 1841, c. 124, no provision declaring the payment of a debt by an insolvent, in money, to be illegal, or authorizing an action by the assignee against such creditor to recover back the same, for distribution among all the creditors. Either designedly, or otherwise, the case of such payment of a debt is wholly omitted in this statute. It was introduced into the St. 1838, c. 163, § 10, by direct words, and such payment of money, if made in contravention of that statute, was recoverable by the assignee.
In framing the St. of 1841, c. 124, the previous St. of 1838, c. 163, must have been fully known and understood. Indeed, to a great extent, it would seem to have been copied, in its language, in St. 1841, c. 124; but the clause found in St. 1838, as to “ payments ” by an insolvent debtor, is wholly omitted in the statute of 1841, and, under the circumstances of the case, we must suppose designedly omitted, as one of the cases which would authorize a recovery by the assignee, under that act; leaving in force the right to recover back money paid by an insolvent debtor in contemplation of insolvency, and obtaining a discharge under the act of 1838, if the creditor receiving such payment knows the purpose of the debtor.
It was strongly urged upon us, at the argument, that it was against the whole policy of the insolvent laws thus to allow a payment to an individual creditor to be retained by him to his own use. If we look merely at the principle of equitable distribution of the whole assets among all the creditors pro rata, it would seem to be in derogation of that principle. But there are other considerations favoring the construction we have given. A different rule might be found to operate with great practical inconvenience in its application to payments made in the usual course of business. Many cases occur, of *172traders and other persons, who do business, while there is a strong public impression, that if their debts were at once all demanded, there might not be assets sufficient to pay them; yet who continue to pay such debts as are most strongly pressed, hoping to survive their embarrassment, and by better success in business eventually to discharge their entire indebtedness. Whether it would be sound policy to disturb such payments may certainly be somewhat questionable.
We, however, place our decision, in the present case, upon the ground that the case of payment, in money, of an existing debt, by an insolvent debtor, is not among the cases embraced within the provisions of § 3 of St. 1841, c. 124. There is, therefore, no statute provision which will authorize us to sustain the present action.
Upon the other point raised in the defence, that all the acts done by the defendants were done in the State of New York, and therefore not to be affected,by our statutes, we give no opinion.
In the second of these cases, there is a fact not existing in the first, namely, that the defendants, when they received money in part payment of an existing .debt, also purchased a quantity of shoes, the price of which was allowed by them in further payment of their debt. This fact can have no tendency to charge the defendants in this action, which is instituted solely to recover the money paid by the debtor to them on account of his indebtedness.

Plaintiff nonsuit in both cases.