68 Neb. 624 | Neb. | 1903
Lead Opinion
This is an action by the plaintiff, as trustee in bankruptcy of one Erlenborn, to recover an alleged preference claimed to have been received by the defendant as a creditor of said Erlenborn. The transaction by reason whereof a preference is alleged to have resulted was, in substance, this: Erlenborn was a retail merchant, and was indebted to several wholesalers, among others, to the defendant. One Kettering bought out Erlenborn, and, as part of the purchase price of the latter’s stock, put in the account of the defendant against Erlenborn, which he had purchased at a discount of 25 per cent.. The principal issues were whether Erlenborn was insolvent at the time of this transaction; whether Kettering and the defendant had reasonable ground to believe him insolvent; and whether the transfer of the account from the defendant to Kettering was an absolute transfer, made in good faith, without any understanding that Kettering was to be protected, and without any agreement or understanding that the account was to be used as part of the purchase price in a contemplated purchase of Erlenbom’s stock, or was merely a colorable device for the purpose of evading the bankruptcy law and enabling the defendant to obtain a preference. The sale took place three months prior to the institution of bankruptcy proceedings, and consequently would be within the terms of the act in case we should hold the transaction amounted to a preference. There were two trials in the court below. At the first trial a verdict was rendered for the plaintiff. A new trial was granted, which resulted in a verdict and judgment for the defendant. The plaintiff has come to this court on error, and complains of the order of the district court granting a new trial after the first verdict, and of its rulings and judgment at the second trial.
A much stronger case is necessary to warrant this court
The principal controversy with respect to the second trial turns upon the instructions of the court. The plaintiff contended that the necessary effect of the sale of defendant’s claim against Erlenborn to Kettering was to prefer the defendant, while the defendant contended that it had a right to sell its claim to whom it pleased, the same as any other property, so long as it made an absolute trans
“Where an insolvent debtor transfers to one of his creditors, in payment of his debt, personal property sufficient in value to satisfy the debt in full, his 'intent- to prefer such creditor over his other creditors,’ necessary to make such transfer an act of bankruptcy, will be presumed; the preference being the natural result of the transfer.” Hence, in such cases, the crucial point is reasonable cause to believe the debtor insolvent. Whether a creditor had reasonable cause to believe his debtor insolvent within the purview of section 60 of the bankruptcy act, is a question of fact. In re Eggert, 102 Fed. 735, 43*629 C. C. A. 1. In determining this question, it is not necessary to find that the creditor actually knew or believed that the debtor was insolvent. He is chargeable with notice of such facts as a reasonable inquiry, in view of the circumstances with respect to the debtor’s condition which were brought home to him, might fairly be expected to disclose. In re Eggert, supra. But a mere knowledege that the debtor has other liabilities, or of circumstances which could operate no further than to create a suspicion of possible insolvency, is not always sufficient. In the Eggert case the circuit court of appeals say:
“The resultant of all these decisions we take to be this: That the creditor is not to be charged with knowledge of his debtor’s financial condition from mere nonpayment of his debt, or from circumstances which give rise to mere suspicion in his mind of possible insolvency; that it is not essential that the creditor shall have actual knowledge of, or belief in, his debtor’s insolvency, but that he should have reasonable cause to believe his debtor to be insolvent; that if facts and circumstances with respect to the debtor’s financial condition are brought home to him, such as would put an ordinarily prudent man upon inquiry, the creditor is chargeable with knowledge of the facts which such inquiry should reasonably be expected to disclose. * * * The only fact brought home to the creditor, and which it is claimed should have aroused inquiry, is that he was somewhat behind in the prompt payment of his obligations. We can not say, as a conclusion of law, that knowledge of that fact standing alone was sufficient to put the creditor upon inquiry. Indeed, it may be said that a majority of merchants absolutely solvent, in the sense in which the term is employed in the bankruptcy act, are not at ail times able to promptly meet their obligations as they mature.”
The same position is taken in Lyon v. Clark, 129 Mich. 381, 88 N. W. 1046. Under these authorities, with which we fully agree, the court was right in refusing to direct a verdict for the plaintiff. The mere fact that defendant’s
With respect to the nature of the transactions between defendant and Kettering on the one hand, and between Kettering and Erlenborn on the other hand, we think the question was peculiarly one for the jury. A creditor will not be permitted to obtain a preference indirectly by transfer of his account, procuring a-third party to loan money to the debtor for payment of such creditor, or other color-able device or transaction intended to evade the provisions of the bankruptcy act. As was said in the case of In re Beerman, 112 Fed. 663, 666. “If transactions of this sort are to be permitted, then, instead of a creditor taking a mortgage himself, when a debtor is in failing circumstances he will get some one else to advance the money, agreeing that the person advancing the money shall suffer no loss, and thereby obtain by indirection a preference Avhich he would be unable to get if he had acted directly Avith the debtor.”
But an absolute transfer of an account against the insolvent debtor, in good faith, to one who afterwards buys the latter’s stock of goods and obtains credit for such account on the purchase price without any agreement or understanding that such use was to be made thereof, or that the purchaser of the account was to be protected by the creditor in any way does not constitute a preference of the creditor to the extent of the money he received on sale of his claim. To construe the bankruptcy act as preventing creditors from disposing of their claims absolutely in good faith, as they undoubtedly may do where the debtor is solvent, would, as the court well expressed it in In re Eggert, supra, “put at hazard many business transactions and make the act oppressive.” In the somewhat similar case of North v. Taylor, 61 App. Div. (N. Y.) 253, 70 N. Y. Supp. 339, a husband gave his own note to his wife for a note which she held against the bankrupt, and then turned
A number of errors are assigned upon rulings on evidence. A schedule of liabilities filed by Erlenborn in the bankruptcy proceedings Avas offered on behalf of the plaintiff, and excluded by the court. This ruling was right. It is not perceived how the schedule could b'e competent evidence on an issue betAveen the trustee and a third person as to the financial condition of the bankrupt three months before. Complaint is made, also, that one of the officers of the defendant Avas permitted to testify as to his intention in making the transfer of the account to Kettering. While a person’s intention is to be determined pri
Many other assignments of error are referred to in the brief, but they are not argued in such manner as to malee it necessary for us to take them up in detail. This court is not bound to examine questions not so raised in the briefs as to state specifically what is complained of, the reason and basis of the complaint, and the exact portions of the record material thereto. Such, we think, is the fair import of the numerous decisions of this court to the effect that it wall not consider errors not argued in the briefs. We come to the conclusion that these several assignments of error need not be gone over in detail, the more readily, because, from examination of the record, we are of opinion that the instructions of the court and its rulings on evidence were more than usually careful and
We therefore recommend that tbe judgment be affirmed.
By tbe Court: For tbe reasons stated in tbe foregoing opinion, tbe judgment of tbe district court is
Affirmed.
Rehearing
Tbe following opinion on rebearing in Hackney, Trustee, v. Hargreaves Bros., 3 Neb. (Unof.) 676, and in Hackney, Trustee, v. Raymond Bros. Clarke Co., ante, p. 624, was filed May 5, 1904. Judgment of reversal in Hackney, Trustee, v. Hargreaves Bros. adhered to; judgment of affirmance in Hackney, Trustee, v. Raymond Bros. Clarke Co. vacated. Both cases remanded:
What is here said regarding the two cases as above entitled is to be considered in connection with the two opinions heretofore announced: Hackney v. Hargreaves Bros., 3 Neb. (Unof.) 676, and Hackney v. Raymond Bros. Clarke Co., ante, p. 624. The facts as disclosed by the two records in all material respects are essentially the same, so much so that the conclusion as to the ultimate fact in controversy, properly deducible in one case, must necessarily be the same in the other, and the principles of law applicable are identical in each case. We have therefore deemed it proper and a lessening- of labor to consider both cases together. A thorough consideration of the two records convinces us that the conclusion reached and announced in the opinion heretofore rendered in the first-mentioned case is correct and should be adhered to, and that the second opinion; in so far as it conflicts with the first, must give way to that extent. Counsel in both cases have very ingeniously, and with more or less plausibility, argued that the controlling proposition and question for determination is with respect to the right of a creditor in good faith to sell and dispose of an account or other obligation held against a bankrupt debtor, regardless of the question of insolvency or notice thereof, and that in such a transaction none of the provisions of the bankruptcy law are infringed upon. The soundness of the proposition is readily conceded, but its applicability to the facts as disclosed by the records in the two cases at bar is seriously questioned.. The arguments thus advanced to sustain the transactions under investigation are beside the mark. While an attempt is made to clothe the transactions out of which the controversies arise in the garb of a legitimate contract of bargain and sale of an account wholly independent of and free from any of the provisions of the bankruptcy law, yet when they are stripped of the covering thus sought to be thrown around them, and exposed to view
It is equally patent from the record in the other case that Kettering offered, to pay 7.5 cents on the dollar for the account held by Raymond Bros. Clarke Company against Erlenborn, provided he succeeded in buying the stock, and that his offer was accepted with this understanding. It is vain to talk about Kettering buying these two accounts unqualifiedly and unconditionally, as such accounts might, in the ordinary course of business, be sold and transferred from one person to another. The fundamental basis of the negotiations between Kettering and the defendants was the successful conclusion of the contemplated purchase of the grocery stock of the bankrupt. The antecedent agreement in each case was made to depend on the consummation of the negotiations then in progress with Erlenborn. Kettering was not buying stale demands or bad debts as such, but was desiring to purchase a stock of groceries, the owner of which was indebted to these defendants, and as a part of the transaction, entered into the negotiations with the defendants with a view to the satisfaction of their demands against the seller, in the event a purchase was effectuated. This was obviously known to all the parties to the transaction, and herein lies the determining factor which takes the transaction out of the class which involves only a simple business proposition of buying and selling a book account against a third party, or other similar subjects of bargain and sale. But what followed? After Kettering and the defendants had agreed upon the terms by which he could satisfy the accounts of thé defendant against Erlenborn, and which agreements were contingent upon his purchase of the Erlenborn stock of groceries, he reaches an agreement with Erlenborn concerning the terms of the sale
One other question seems to require consideration. This refers to the ruling of the trial court in excluding as evidence the schedule of liabilities filed by the bankrupt in bankruptcy proceedings. In the former opinion in the Raymond case this ruling was approved. The authorities hold such evidence admissible, not as conclusive of the alleged insolvency, but as tending to prove that issue. The schedule was a part of the pleadings in the bankruptcy proceedings, and defendants in these, actions are sought to be charged by the trustee as having been given an unlaAvful preference as creditors of the bankrupt. All the creditors of the. bankrupt were parties to the bankruptcy proceeding. In re Pekin Plow Co., 112 Fed., 308, 50 C. C. A. 257; In re Frasier, 117 Fed. 746; In re Beerman, 112 Fed. 662; Logan v. Nebraska Moline Plow Co., 3 Neb. (Unof.) 516.
“The books of a bankrupt are competent evidence on the question of his insolvency within four months of the date of the filing of the petition, and AAdiile not conclusive are ordinarily important evidence entitled to much weight;
See, also, Martin-Brown Co. v. Henderson, 9 Tex. Civ. App. 130, 28 S.W. 695; Ball v. Bowe, 49 Wis. 495; Von Sachs v. Kretz, 72 N. Y. 548; Lowell, Bankruptcy, sec. 98. The adjudication of bankruptcy is manifestly admissible in evidence for the purpose of establishing the fact of insolvency, and it can scarcely be doubted that the schedule of liabilities, as against the parties to the controversy, and upon Avhich the adjudication is based, are likeAvise admissible, not only as evidence of the same class or character as the books of the bankrupt but also for the purpose of shoAving the grounds upon Avhich the judgment of bankruptcy Avas rendered. The defendants in the actions are not third parties in the sense that they are in no Avise connected Avith the bankruptcy proceedings, because, for the purpose of these controversies, and in determining their liability, they are sought to be charged as creditors of the bankrupt having received unlaAvful preferences, and for such purposes Avere necessarily parties to the bankruptcy proceedings. The schedule of liabilities of the bankrupt should have been, on the issue of insolvency, admitted in evidence.
It folloAVS from Avhat has been said that the opinion and judgment announced in the first above mentioned case should be adhered to, and that the judgment in the case of Hackney, Trustee, v. Raymond Bros. Clarke Co., heretofore entered, should be vacated, and a judgment rendered reversing the judgment of the trial court, and both causes remanded for further proceedings not inconsistent with the views herein expressed.
Judgment accordingly.