Court Opinion

ID: 9651228
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:10:39.749977+00
Date Added: 2024-06-11T13:25:36.461413
License: Public Domain

PHILLIPS, Circuit Judge
(dissenting).
11 U.S.C.A. § 21, in part reads:
“a. Acts of bankruptcy by a person shall consist of his having * * * (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; * *
Under the facts, it is clear that the assignment to Gotwals constituted an act of bankruptcy.
But 31 U.S.C.A. § 191, does not create any lien.1 It is a priority statute. It presupposes a distribution of the debtor’s property and does not apply while the property is in the hands of the debtor.2
The assignment was made on October 27, 1942. It was not a fraudulent transfer. It was made for a valuable consideration. True, it was an effort-to prefer one creditor over another and would have been voidable had bankruptcy ensued within four months after it was made.3 But bankruptcy did not ensue within four months or thereafter and the assignment was not a voidable preference when the United States instituted these, proceedings on April 27, 1945.
It is not unlawful for an insolvent debt- or to prefer a creditor.4
24 Okl.St.Ann. § 11, provides:
“Any person in this State indebted to other persons shall have the right to prefer one or 'more of such creditors in good faith to secure a valid debt, which preference may be manifested by payment, by mortgages, • either real or chattel, or by the transfer of personal property or real estate, and if received by the creditor in good faith, such conveyance or mortgage shall be valid in the hands of the mortgagee and constitute a preference to the extent thereof, subject to the laws relating to the filing and recording of mortgages.”
In Van Iderstine v. National Discount Co., 227 U.S. 575, 582, 583, 33 S.Ct. 343, 344, 57 L.Ed. 652, the court said:
“Conveyances may be fraudulent because the debtor intends to put the property and its proceeds beyond the reach of his creditors ; or because he intends to hinder and delay them as a class; or by preferring one who is favored above the others. There is no necessary connection between the intent to defraud and that to prefer, but inasmuch as one of the common incidents of a fraudulent conveyance is the purpose on the part of the grantor to apply the proceeds in such manner as to prefer his family or business connections, the existence of such intent to prefer is an important matter to be considered in determining whether there was also one to defraud. But two purposes are not of the same quality, either in conscience or in-law, and one may exist without the other. The statute recognizes the difference between the intent to defraud and the intent to prefer, and also the difference between a fraudulent and a preferential conveyance. One is inherently and always-vicious; the other innocent and valid, except when made in violation of the express provisions of a -statute. One is malum per se and the other malum prohibitum,— and then only to the extent that it is forbidden. A fraudulent conveyance is void regardless of its date; a preference is valid. unless made within the prohibited period. *697It is therefore not in itself unlawful to prefer, nor fraululent for one, though insolvent, to borrow in order to use the money in making a preference. So that, even if the Discount Company knew that Fellerman borrowed the money in order to pay off an honest debt, the transfer would not have been subject to attack by the trustee, except for the fact that a petition in bankruptcy was filed within four months thereafter. But the institution of such proceedings did not relate back and convert a lawful transfer into a fraudulent conveyance. * * * ”
In Conard v. Atlantic Insurance Co., 26 U.S. 386, 439, 440, 1 Pet. 386, 439, 440, 7 L.Ed. 189, the court said:
“What, then, is the nature of the priority, thus limited and established in favor of the United States? Is it a right, which supersedes and overrules the assignment of the debtor, as to any property which the United States may afterwards elect to take in execution, so as to prevent such property from passing, by virtue of such assignment, to the assignees? Or, is it a mere right of prior payment, out of the general funds of the debtor, in the hands of the assignees? We are of opinion, that it clearly falls within the latter description. * * *
“If the legislature had intended to defeat the passing of the property to the assignees, as against debts due to the United States, the natural language in which such an intention would be clothed, would be to declare, that so far, such assignment should be void. * * *
“If, then, the property of the debtor passes to the assignees; if debts due to the United States constitute no lien on such properly; if the preference or privilege of the United States be no more than a priority of satisfaction or payment out of a common fund; it would seem to follow, as a necessary consequence, that even if the teas in controversy were the property of Edward Thomson, they passed by his general assignment, in November 1825 (which is not denied to have been a bona fide and valid transaction), to his assignees, and became their property, for distribution among his creditors, and were not liable to the levy under the execution of the United States.”
Since the assignment was a valid transfer, it could not be set aside by the proceedings here instituted by the United States and the priority provisions of § 191, supra, could only apply had bankruptcy or some other proceeding for the liquidation of House’s property for the benefit of his creditors ensued.
Accordingly, it is my view that the judgment below should be affirmed.

 Brent v. Bank of Washington, 35 U.S. 596, 610, 611, 10 Pet. 596, 610, 611, 9 L.Ed. 547; Beaston v. Farmers’ Bank, 37 U.S. 102, 132, 12 Pet. 102, 132, 9 L.Ed. 1017; United States v. Wilkinson, 28 Fed.Cas. pages 605, 606, No. 16.695; Ernst v. Guarantee Millwork, 200 Wash. 195, 93 P.2d 404, 408; In re C. J. Rowe & Bros., Inc., D.C.Pa., 18 F.2d 658, 660.

 Beaston v. Farmers’ Bank, 37 U.S. 102, 103, 12 Pet. 102, 103, 9 L.Ed. 1017; United States v. Clark, 25 Fed.Cas. pages 447, 450, No. 14,807; United States v. Wilkinson, 28 Fed.Cas. page 605, No. 16,695; In re C. J. Rowe & Bros., Inc., D.C.Pa., 18 F.2d 658, 660.
Cf. United States v. Texas, 314 U.S. 480, 62 S.Ct. 350, 86 L.Ed. 356.

 11 U.S.C.A. § 96; Remington on Bankruptcy (5th Ed.), Vol. 4 A, §§ 1657, 1693.

 Riedell v. Lydick, 176 Okl. 204, 55 P.2d 465, 466; Lynn v. Brenner, 145 Okl. 188, 291 P. 509, 511; Van Iderstine v. National Discount Co., 227 U.S. 575, 582, 33 S.Ct. 343, 57 L.Ed. 652.