Court Opinion

ID: 8124858
Source: CourtListenerOpinion
Date Created: 2022-09-09 15:04:54.657481+00
Date Added: 2024-06-11T16:39:10.811619
License: Public Domain

Wheeler, J.
To avoid this transfer it must have been made after the commission of an act of insolvency, or in contemplation thereof, and with a view to prevent the application of the assets of the bank to the redemption of its circulating notes and ratable distribution among its creditors, or to the preference of the defendant’s intestate to other creditors. Rev. St. §§ 5242, 5236. There is no limitation of time within which the transfer must have been made; nor requirement of reasonable cause of the transferee to believe in the insolvency of the bank; nor provision that the fact that the transaction is out of the usual course of business, should b e prima facie evidence of fraud, applicable to this transaction, as there was to transfers of a bankrupt’s property under the late bankrupt act. Sections 5128, 5129, 5130. Insolvency is not enough; the statute does not make transfers after insolvency void. There must be an act of insolvency; or such a state of insolvency, as an existing fact, as to make it apparent that the creditors cannot be paid in full, and that a distribution of the assets among the creditors under the statute will take place. Less insolvency than this could not fairly be said to be capable of being contemplated and acted upon to prevent such distribution. There had been no act of insolvency at tho time of this transfer. The bank had met and sat* isfied all its creditors up to that time. The case must turn upon the *576fact of insolvency and its imminence. That the bank was, in fact, insolvent, appears very clearly. Whether it was so desperately insolvent that the officers could not help seeing that failure must come, and a distribution of assets follow, is to be determined upon the evidence. The reported cases do not furnish any very clear guide for a case like this. In none of them was there any doubt about the fact that all knew that the bank must go down.
In Bank v. Colby, 21 Wall. 609, the bank was already in the custody of the secretary of the treasury. In Case v. Citizens’ Bank, 2 Woods, 23, a sudden disaster by the failure of others had broken the bank at once, to the knowledge of all; and in Harvey v. Allen, 16 Blatchf. 29, the circulating notes of the bank had gone to protest, and this fact had been certified, and proceedings to close the bank taken upon it. There was no question, nor room for any, but that those whose acts were in question knew that they were not dealing with the assets of a bank in a continuing business, but with a wreck. Here the bank was doing a large business, which continued for months; its insolvent condition had come upon it gradually, without any striking thing happening to at once command attention, except the run upon it, which showed that its reputation for soundness was affected. When the condition that would avoid preferences once existed, it would avoid all payments in diminution of assets made afterwards as well; and such fact, reaching so far and so many, ought not to be found except upon signal proof, so clear as not to be liable to be found one way as to some to be affected, and in another way as to others, producing inequality where the -whole object is equality. Not that current business transactions, which would not affect the volume of assets, are necessarily to be opened; but all applications of the assets, either in reduction or security of existing debts, are placed by the statute upon the same footing of being utterly void.
The officers of this bank were largely interested in it as stockholders and otherwise, and were largely indebted to h personally. The insolvent condition of the bank rested largely up.m their own inability to pay what they owed it. x They were very anxious to save the bank, and put forth every effort to do so, and hoped to succeed. They transferred the note in question to the defendant’s intestate to quiet him, because he insisted upon security, and not because they had any desire to pay him in preference to others. They did this to save the bank, and not to prefer him. This was before thought to be decisive in favor of the validity of the transfer. Roberts v. Hill, 23 Fed. Rep. 311. But the available assets of the bank were so small in comparison with its liabilities that, had the officers stopped and considered its' situation, they must have seen that ultimate failure was inevitable. Impelled by their interest and desire to save the bank and themselves in standing and credit so long as they could, they bent all their efforts to that end. Still, the hopeless insolvency of the bank was within their contemplation, if they would contemplate it. That they *577did not, should not, it seems, take the case out of the statute. The insolvency of the bank was before them, and, with it before them, they gave this creditor a preference. This now' appears to be within the statute. I concur, therefore, in the entry of a decree for the plaintiff setting aside the transfer of this note.