Baumann v. Cunningham

48 Minn. 292 | Minn. | 1892

Collins, J.

The only finding of fact assailed by the assignments of error herein is that whereby the court below found that the insolvent, Wohlin, did not make the notes and mortgage in question with a view of giving a- preference to the defendant, Cunningham, but with a view to being enabled to continue his business, which was that of a merchant tailor, at retail. It therefore stands admitted that on the day of the execution and delivery of the notes and mortgage — March 16, 1891 — by Wohlin to defendant, Cunningham, and to whom he was indebted in the sum of $470.74 for goods sold, Wohlin was simply technically insolvent, because unable to pay his debts as they matured in the ordinary course of business. It also stands admitted that Cunningham had good reason to believe that Wohlin was insolvent in this technical sense, but that he also had reason to believe, and did believe, that the insolvent had assets which in value exceeded the amount of his liabilities; that with this knowledge, for the purpose of enabling Wohlin to continue in business, as well as to save what was owing to him and to retain him as a customer, defendant proposed to Wohlin that, if he would give to him the notes and mortgage, he would become responsible to another creditor — Friedlander & Co. — for the payment of the amount of their bill, — $432,—which was past due, and being pressed for payment, and would make further advances in goods and money as needed; that Wohlin accepted the proposition, and executed and delivered the notes in the sum of $1,000, and the mortgage securing the same; that defendant became responsible by indorsement for the claim of Friedlander & Co., as agreed, advanced $25 in cash to the insolvent, and afterwards paid $150 of the Friedlander indebtedness. Following these findings was the one complained of by the assignment of error as not supported by the evidence. The claim is, as stated in appellant’s brief, that when the two integral facts appear, namely, insolvency, and reasonable cause on the part of the creditor to believe the debtor insolvent, the intent to prefer is a necessary deduction in case of a conveyance. To put this claim in another form, it is that, where the debtor is insolvent, and the creditor has reasonable cause to believe him to be so, a conveyance must necessarily be regarded as having been executed with a view to giving a preference, if it so happens that a preference results. To adopt such a construction of the language found in section four (4) of the insolvency act would be to completely disregard and exclude from consideration an essential portion of the statute in respect to fraudulent preferences by insolvent debtors. In express terms it is provided, in the section referred to, not only that insolvency must exist, and that the creditor must have reasonable cause to believe it to so exist, but, in addition, that the assailed conveyance must have been made with a view of giving a preference. That each of these’ things be in existence is positively required in order to invoke the aid of the statute. The language is similar to that found on the same subject in the English bankruptcy act of 1883, and the section appears to have been modeled after Mass. 1882 Pub. St. ch. 157, § 96. It has been held frequently that, personal intention on the part of the debtor — though the intention is intention to prefer, not to defraud, in the popular sense of that word — is required under bankruptcy and insolvency statutes which speak of acts done with a view of giving a preference. The mere fact of preference, therefore, is not enough under such statutes. This is the language in which the substance of the decisions is summed up in 2 Bigelow on Frauds,' 579, and it is fully justified by the authorities collected in note three (3.) The court below correctly construed the law applicable to the case.

While it seems unnecessary, a brief statement of some of the facts, not included in those found by the court, but going to support its views, will make clearer the assertion that the finding complained of was supported by the evidence.. Wohlin had been a customer of Cunningham for several years, paying his bills about as he chose. Friedlander & Co. were demanding payment. Collections could not be successfully made by their debtor. He was unable t.o pay Fried-lander & Co., and hence insolvent, under the statute. In this sitúation, he called on defendant for advice and assistance, making a statement of the debts he had incurred. There was nothing to suggest to a prudent man that he could not continue his business with a little immediate assistance, and for this purpose, evidently, Cunningham made the proposition which has been referred to. Wohlin accepted, giving the mortgage upon an undivided interest in some town lots, and also upon his statutory homestead. When an insolvent is executing a conveyance with the view of giving a fraudulent preference, he is not apt to include property which is lawfully beyond the reach of his creditors. That it might not become publicly known, and, as he expressed it, affect his credit, Wohlin requested that the mortgage be kept from the records. This request was acquiesced in, and the mortgage was not recorded until after the assignment. During this period of time the mortgaged property was at the mercy of attaching or judgment creditors, or could have been conveyed or incumbered by the debtor. Had a preference been intended, the mortgage would have naturally gone upon record with promptitude. There was no testimony offered or received upon the trial tending to show the real condition of the debtor, and it cannot be presumed that he did not have an abundance of property out of which, and ultimately, his indebtedness might be paid. There was no testimony at all on this subject, and hence the finding that he was simply technically insolvent. While this fact would not prevent a finding that a conveyance was made with a view of giving a preference, in a -proper case, it is a circumstance which might well have weight with a court when determining the fact; for a creditor assisting a debtor only nominally insolvent, with assets sufficient to meet his liabilities if time could be had, could be justified much more easily than one whose efforts were in behalf of an irretrievably insolvent debtor. The intent to prefer would not be so easily deducible from the attendant circumstances, all of which are to be scrutinized when attempting to discover with what view the conveyance was made. We think that- the testimony fell far short of showing that defendant’s mortgage was made with a view of. giving a preference over other creditors, or with an intent to circumvent any of the provisions of the insolvency statutes.

Order affirmed.

(Opinion published 51 N. W. Rep. 611.)