Court Opinion

ID: 4936282
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:15:49.907967+00
Date Added: 2024-06-11T08:14:41.919558
License: Public Domain

Haskell, J.
One William Gould, on October 1,1895, filed his petition in insolvency. He had been possessed of a farm, subject to a mortgage given by him in 1876 upon which there was due about $800 on May 16, 1895, when be gave a second mortgage to the defendant to secure a pre-existing debt of $575, and also a lease of the farm for one year at a rental of interest on $1400 “that is on the place and pays the taxes of 1895,” reserving the house to live in and the right of keeping two cows and two horses.
This bill is brought by the assignee in insolvency of William against the mortgagee to vacate the $575 mortgage as taken with a view to prevent the property from coming to the plaintiff as assignee in insolvency.
The mortgage was given to secure a pre-existing debt, the mortgagor being insolvent as the mortgagee well knew, but the mortgage had been recorded more than four months before the mortgagor filed his petition to be adjudged an insolvent debtor, and therefore was not in fraud of the statute against preferences.
It is contended, however, that the mortgage was given in fraud of the six months clause of the insolvent law. The mortgage was a preference. For more than four months the creditors slept on their rights and allowed it to become valid as such under the law. To bring it within the six months clause it must be something more than a preference. It must be a fraud. If it merely works a preference it is not a fraud. Had it secured a fictitious debt, it would have appeared to have been a preference, but have been a *516fraud. It secures an actual debt and therefore has no element of dishonesty. To be sure, it prevents the property from coming to the assignee, but in a legal way. The defendant was a creditor. He knew of the debtor’s embarrassment, but wanted security and took it. The creditors allowed him to keep it for more than four months and now charge him with fraud in doing so. The evidence does not sustain the charge. When he took the mortgage, he also took a lease of the farm for a year, agreeing to pay interest and taxes, but allowing the mortgagor to live there and keep two cows and two horses. The purpose doubtless was to secure his interest and taxes and leave the debtor meantime a home. The assignee might have redeemed and got the benefit of any value in the farm above the mortgages, but cannot avoid them as fraudulent, for they are not.

Bill dismissed with costs.