Court Opinion

ID: 6409042
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:51:13.26281+00
Date Added: 2024-06-11T15:51:18.671810
License: Public Domain

Shaw, C. J.
This was an action of trover, to recover for the value of certain articles of machinery, drugs, and dye stuffs enumerated in the writ. The plaintiff claims the property under a mortgage made to him by Daily & Battell, and the defendants claim as assignees of the property of the same firm, under insolvent proceedings commenced after the plaintiff’s mortgage was made. The defendants insist, that the plaintiff’s mortgage was void, under the statute of 1841, c. 124, <§> 3, because it was made within six months before the filing of the petition by the debtors, who were then insolvent, or in contemplation of insolvency, and who thereby intended to give the plaintiff a preference, as a preexisting creditor; and that the plaintiff, when accepting such preference, had reasonable cause to believe that the debtors were insolvent.
1. The ground of the first exception is, that the judge admitted evidence, to which the plaintiff objected, and which he now contends ought not to have been allowed. The object of the defendants, in offering the evidence, was to prove that Denny, the plaintiff, had reasonable cause to believe that the debtors were insolvent. Evidence had already been introduced to show, that the debtors were manufacturers; that they had been engaged in the manufacture of printed goods, and, amongst others, of mousselines de. laine; and that the plaintiff was a merchant dealing in dye stuffs, and trading with manufacturers, among whom were the debtors and others. One of the interrogatories, amongst others, put to a witness, was this: “ whether, previous to July, 1845, it ivas a fact known to the community, that the printing of mousselines de laine was a ruinous business to those engaged in it.” This was objected to, but admitted. It appears to us, that this question was not wholly irrelevant, though perhaps not very important. The question was, whether the plaintiff had cause to believe the debtors insolvent; and whether he had such cause or not depended upon the credit of the debtors, and upon the manner in which they were regarded and estimated; and if they had been doing an *170unprofitable or losing business, and that was generally known in the community, it might have some tendency to prove them to be insolvent, and that the plaintiff had the means of knowing that they were so.
2. The counsel for' the plaintiff requested the presiding judge to charge the jury, that if the mortgage was involuntary, induced by the pressure of civil process, and in consequence of the attachment mentioned, that is, an attachment by the plaintiff of all their goods, and made to relieve themselves therefrom, and enable them to go on with their business, it was not a preference within the intent of the statute, and therefore was not void. This direction the judge declined to give. The counsel for the plaintiff now maintains, that he ought to have given it; and has supported this proposition in a very full and ingenious argument, and a very free citation of English authorities. The court are of opinion, that the adoption of such a direction would have been opposed to the policy and spirit of our insolvent law. The effect of such a doctrine would be, that if a creditor should adopt the old expedient of an attachment on mesne process, and should thereby acquire a lien on the debtor’s whole property, and an inchoate right to appropriate it entirely to himself, he might do so, provided the debtor would confirm it by a more permanent lien; if his motive was thereby to acquire a future advantage to himself, by being assured of the hope of further advances ; whereas the insolvent law provides, (St. 1841, c. 124, § 3,) that such attachment itself, if made in collusion with the debtor, shall be void; and, whether collusive or not, shall be void (St. 1838, c. 163, <§> 19) in favor of the general creditors, as soon as a proceeding in insolvency commences. The very fact, therefore, of having attached all the debtor’s property for a preexisting debt, is one indication that the plaintiff had cause to know and did know that the debtors were insolvent.
But further; the English bankrupt laws are so different from our insolvent system, that the decisions under the one do not apply with much force to the other. The English bank. *171rupt law avoids all transactions, with some slight exceptions, after an act of bankruptcy, though secret, and though considerable time elapses before the issuing of a commission under it. No attachment on mesne process is admissible, and what the effect of such an attachment would be, as an act of coercion on a debtor, cannot appear. Here such an attachment, not dissolved within a short limited time, is itself an act of insolvency, on which creditors may proceed adversely.
But the more material consideration is, that the English bankrupt law looks only to acts of preference, done in contemplation of bankruptcy, and before any act of bankruptcy committed. If the act is not in contemplation of bankruptcy, and is before an act of bankruptcy, it is regarded as done in the ordinary course of business, and the bankrupt law does not reach it.
Under our insolvent law, according to the provisions of the statute of 1841, c. 124, <§, 3, the invalidity of a conveyance by a debtor is placed on other grounds, and made to depend upon a different test. That statute enacts, that no certificate of discharge shall be granted, or, if granted, shall have any effect, if the debtor, within six months before filing the petition, by or against him, shall procure, &c., or, being insolvent, or in contemplation of insolvency, shall make any assignment, &c., intending to give a preference to a preexisting creditor, unless he shall make it appear that he had reasonable cause to believe himself solvent, &c.; and that, in such case, the assignee shall recover and hold the property, provided the creditor had reasonable cause to believe that the debtor was insolvent.
Contemplation of insolvency is one of the cases in which a preference shall be avoided, but it is not the only one; the other is the being in fact insolvent, under the circumstances, and with the incidents mentioned. Actual insolvency of the debtor, and reasonable belief, on the part of the creditor, that he is so, without contemplation of insolvency, constitute a fraudulent preference; and the purpose may be, to prevent the institution of insolvent proceedings altogether, and thereby defeat the policy of a dissolution of the attachment and *172in equal distribution among the creditors. Such a purpose would rather tend to confirm and give effect to the attachment.
But the statute provides, that the acts which it prohibits must be done, with an intention to give a preference. The intent to prefer is essential, but every person is to be presumed to intend the natural and probable consequences of his own acts; and if such acts do, in fact, as this does, give a very large preference, it is competent for the jury to infer the intent. It does not rebut this intent, to show that the debtor has also another motive to the proceeding, namely, an expectation of pecuniary or other future benefit to himself, by means of further loans of money, and being enabled thereby to continue his business.
The court are therefore of opinion, that the presiding judge was not bound to give the first instruction asked for by the plaintiff, and that such instruction would have been erroneous.
3. 'As to the second instruction, we are of opinion, that, if the conveyance was void as to the preexisting debt, it was void as to the whole. Such is the general rule. The old insolvent assignments, under the law of Massachusetts, before the passage of the insolvent law, were, to a certain extent, an exception. But the rule, upon which those decisions were founded, stood upon a peculiar footing, which has often been explained, and it does not apply to the present case.
There is a sentence at the close of the instruction which was given, which, if it stood alone and unexplained, might seem incorrect. The judge, after alluding to the various circumstances and the conveyance made in consequence of the pressure of the plaintiff’s writ, stated that the conveyance would be void, if made for the purpose of enabling the debtors to remove the attachment and go on with their business, and not from any wish or design, on their part, to give the plaintiff a preference or advantage over their other creditors.
In saying it would be void, though the debtors had no wish or desire to give the plaintiff a preference, we think it is manifest, from the whole charge taken together, that what *173he -meant to say was, that such wish or desire need not be the only motive ; that the sole intent and purpose of the debtors need not be to benefit the creditor; but that if they secured the property exclusively or nearly so to one creditor, it was in fact a preference, and of course, that they must have intended a preference, as the natural consequence; and it would not the less avoid such conveyance, that they had benefits to themselves in prospect, and motives of their own, in giving such preference. Thus understood, as we think, from the whole tenor of the charge it was, it was correct, and had no tendency to mislead the jury.

Exceptions overruled.