Court Opinion

ID: 6415648
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:55:58.067143+00
Date Added: 2024-06-11T15:51:32.567794
License: Public Domain

Ames, J.
The case finds that there was evidence tending to show that the mortgagors were insolvent or in contemplation of insolvency at the time when the mortgage was made, and that the defendant when he took the mortgage had reasonable cause *265to believe them to be insolvent or in contemplation of insolvency. ' This evidence was submitted to the jury with instructions which were substantially correct as far as they went; and the only question is, whether anything was omitted which the plaintiff was entitled to have included in the instructions.
The rulings and explanations on the subject of actual insolvency were correct, and are not objected to. So far as the plaintiff’s case depended upon proof that the Keoghs were insolvent in fact at the time of the conveyance, the learned judge was entirely right in saying that it is not enough to show that their course of life was such that there was danger of insolvency as a coming result. But, as the case was finally put to the jury, they were told that the plaintiff, in order to recover, must satisfy them that the Keoghs were insolvent when the mortgage was made, and also that the defendant had reasonable cause to believe them to be then insolvent, and that he took the mortgage to prevent an equal distribution under the bankrupt law, and to prevent its having its free course. We think that the effect of this ruling was to confine the plaintiff to somewhat narrower limits than the statute contemplates. The question for the jury, in the actual posture of the case, was not merely whether the Keoghs were insolvent and the defendant had reasonable cause to believe them so. It is true that, if the plaintiff had succeeded in satisfying the jury of that state of facts, he would have been entitled to a verdict in his favor. But suppose the plaintiff had succeeded in proving somewhat less than that, namely, that the Keoghs were insolvent in fact, and also that the defendant had reasonable cause to believe that they were acting “ in contemplation of insolvency ” when the mortgage was given, the plaintiff would have proved, on the subject of reasonable cause of belief, all that he was bound to prove in order to be entitled to a verdict in his favor. The debtors might be insolvent in fact, and the defendant might be found to have no such information about their financial position as to amount to reasonable cause of belief on his part that they were insolvent at the time. Yet he might have such information as would induce a reasonable man to believe that their business was not profitable, that they *266themselves must have so understood it, and that they had it in contemplation to go into bankruptcy. Suppose the debtors had distinctly told him, at the time of the mortgage, “ We are not insolvent now; our property exceeds our debts; but our business is small, our expenses are large, and we expect to find ourselves in a few weeks in such a situation that we shall petition for the benefit of the bankrupt act.” Certainly in such a state of things the defendant could be said to have had reasonable cause to believe that the debtors were acting in contemplation of insolvency, in making the mortgage, though the evidence would fall short of proving that he had reasonable cause for b’elief that they were then insolvent in fact. The instructions actually given to the jury confined the plaintiff to proof of reasonable cause of belief as to the debtors’ actual financial position, instead of permitting him to prove reasonable cause of belief on the defendant’s part as to the debtors’ purposes and ultimate intentions. In other words, the plaintiff was required to prove somewhat more than the law requires him to prove, in order to make out his case.
It is undoubtedly true that in cases of this kind the distinction here pointed out is usually of not much practical importance. The question usually submitted to the jury as the turning point in the trial is, as to the preferred creditor’s “ reasonable cause to believe” the debtor to be insolvent in fact at the time of making the payment or giving the security complained of as constituting an unlawful preference. But, in the trial of the present case, evidence was offered by the plaintiff having a tendency to show that there were apparent indications that insolvency was a probable and approaching event, and in our judgment it became material to instruct the jury that the plaintiff was entitled to recover if his proof as to the defendant’s “ reasonable cause of belief” went no further than cause to believe that the debtor made the conveyance “ in contemplation of insolvency,” that is to say, with a view, or under an expectation, of petitioning for the benefit of the act. Buckingham v McLean, 13 How. 167. As this instruction was not given, the plaintiff is entitled to a new trial. Exceptions sustained.