Court Opinion

ID: 6689421
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:36:22.041509+00
Date Added: 2024-06-11T16:01:04.033686
License: Public Domain

iS'MITH, J.
(concurring specially). I concur in the conclusion that the giving of the mortgage within four months of the filing of -the petition in bankruptcy constituted a preference of plaintiff bank as a creditor which would enable plaintiff to obtain a greater percentage of its debt than other creditors of the same class, and that plaintiff had reasonable cause to believe that it was intended to give such preference. The mortgage is- therefore voidable under the federal statute, at the suit of the trustee in bankruptcy. But I am' not able to concur in the view, announced in' the majority opinion, that the mortgage was given with an actual intent to hinder or delay the other creditors of the mortgagor. It may be, as suggested, that the manner in which the mortgaged property was handled after the giving of the mortgage could properly be considered in determining whether the mortgage was originally intended to hinder or delay other creditors. But this was a question of fact to be 'determined under all the evidence. Under the laws of this state, the giving of preferential security to any creditor is not unlawful, and is not in itself evidence of an intent to hinder, delay, or defraud other creditors. There is no evidence of a secret trust in this case. The mere *459fact that the mortgage covered the entire stock is not in itself prima facie evidence of fraud or of an intent to 'hinder .or delay creditors. Houck v. Christy, 152 Fed. 612, 81 C. C. A. 602. The part of the majority opinion with which I do not agree proceeds on the theory that the hank cannot concede that the giving of the mortgage constituted a preference, and at the same -time deny an intent to hinder and delay other creditors — for the reason that persons must be held to have intended the natural result of their acts. Giving lawful preference with a dishonest intent might be, as stated in some decisions, evidence of an intent to hinder, delay, or defraud other creditors. But the question of intent still remains one of fact and not of law. The undisputed evidence in this case establishes the'fact that there was a bona fide indebtedness -to the plaintiff bank which was secured by the mortgage. There is no evidence whatever tending to show that Winkler was insolvent when the mortgage was given. Bankruptcy Act, July 1, 1898, c. 541, § 1, cl. 15 (U. S. Comp. St. 1916, § 9585); Pirie v. Chicago T. & T. Co., 182 U. S. 438, 21 Sup. Ct. 906, 45 L. Ed. 1171. Intent to hinder and delay creditors is not to be confused with intent to prefer creditors. McAtee v. Slade, 185 Fed. 442, 107 C. C. A. 512; Van Iderstine v. Nat. Dis. Co., 227 U. S. 575, 33 Sup. Ct. 343, 57 L. Ed. 652.
The intent to hinder and delay creditors is not conclusively shown when it is made to appear that the mortgagee was negligent in compelling- payment Qf his debt, even to the extent of permitting the mortgagor to deal with the mortgaged property as his own. The indebtedness secured is shown to have been an honest one, contracted by one not insolvent at the time, to enable him to carry on his usual business, and such facts strongly tend to disprove the existence of any wrongful intent. The law does not declare that a mortgagee is bound to foreclose his mortgage or otherwise assert his contract rights under the mortgage, under legal penalty of having a court or jury declare he intended to hinder or delay other creditors when he took the security. In this case there is no question about the bona fides of the indebtedness; it is undisputed that the money was> loaned to Winkler in good faith, to assist him in carrying on his. business; there was no attempt to show that he was then insolvent, nor had he done any aot from which insolvency might reasonably be inferred.
*460The trial court found as facts that the mortgage was not given with intent to hinder or delay the creditors of Winkler, but to -secure an honest and bona fide indebtedness, and the undisputed evidence shows that every dollar of the loans went into the business. This finding of the trial court cannot be said to- be against the preponderance of the evidence, and, under the well-settled rule in this jurisdiction, it should not be set aside or ignored, as the majority opinion appears to do. I think my view of this case is sustained by the decision of the - Circuit Court of Appeals, Sixth Circuit, concurred in by Justices Lurton, Severens, and Richards, in Lansing Boiler & Engine Works v. Ryerson, 128 Fed. 701, 63 C. C. A. 253, in which the court says:
“For it is well-settled law -that a conveyance made in good faith, whether for an antecedent or present consideration, is not forbidden by such statutes (subdivision 1, § 3, of the Bankruptcy Act), notwithstanding the effect may be that it hinders or delays creditors by removing from their reach assets of the debtor.”
The trial court in that case had held that,, because a mortgage covered the whole property of the debtor, it necessarily followed that a case was made out and that no- proof of good faith could prevail against that assumption. That holding was reversed. I think .the decisions- cited in the majority opinion are in error in holding, in substance, that the legal effect of such a mortgage is to: hinder and delay creditors. In the Platts case, however, it was shown that the mortgage was given on December 8, 1899, and the mortgagee, with knowledge that the mortgagor was disposing of the stock, withheld' the mortgage from- record until August 20, 1900. This-fact, together with the manner in which the mortgagor dealt with the stock and proceeds of the sales, was held sufficient to prove an original intent to 'hinder and 'delay creditors. I do not presume to criticize the decision o-n the facts, but I challenge the correctness of the decision when it says:
“It is not probable that Platts had any intention of defrauding his creditors by any dishonest act, but, when we are called upon to determine the intent of a debtor in this kind of a case, the debtor must be held to1 have intended the natural and legal result of his act; and, if his act ■in giving the mortgage in question did in fact oferate to hinder or delay Kis creditors, then he *461must be held to have intended this result.” (The italics are my own.)
This statement of the rule of law is in direct conflict with the Ryerson case, supra.