198 F. 947 | S.D.N.Y. | 1912
I think it quite clear that the earnings of the respondent were exempt to the extent necessary for the use of his family, wholly or partly supported by his labor. Code Civ. Proc. N. Y. §§ 1879, 2463. It must be remembered that these earnings were at the time, in a bank account, and therefore were not, under the New York law, subject to execution. Carroll v. Cone, 40 Barb. (N. Y.) 220, said in Baker v. Kenworthy, 41 N. Y. 216, to have been affirmed by the Court of Appeals; Meagher v. Campbell, 12 Misc. Rep. 426, 33 N. Y. Supp. 700; Duffy v. Dawson, 2 Misc. Rep. 401, 21 N. Y. Supp. 978. It could be reached only by-creditors’ bill (sections 1871-1879) or by its more summary substitute (Lynch v. Johnson, 48 N. Y. at page 33), “proceedings supplementary to execution” (Code Civ. Proc. §§ 2432-2471). Earnings within 60 days are specifically made exempt from such proceedings, to the extent mentioned. Moreover, the debtor is. not compelled to wait until the proper amount is set off to him, but may use it as he thinks best, at the peril of being found later to have used more than he should. Hancock v. Sears, 93 N. Y. 79. There can be no doubt that, under the law of New York, the respondent could take so much of his earnings as was in his bank account, and as was necessary to his family’s support, and use it for that purpose. It will not be necessary, therefore, to- determine whether, if those earnings had ever got into the form in which they were subject to levy by execution, they would have remained ,exr empt.
However, it does not, of course, necessarily follow that an adult son may not be a member of the “family,” because the father owed him no legal duty of support. There are cases in other states which hold that a legal duty to support others is not essential to make them members of the “family” of the debtor under such statutes ; but in all these cases they were living under one roof. Rolator v. King, 13 Old. 37, 73 Pac. 291; Tyson v. Reynolds, 52 Iowa, 431, 3 N. W. 469; Barry v. Hale, 2 Tex. Civ. App. 668, 21 S. W. 783; Bell v. Keach 80 Ky. 42 (obiter). It is not necessary that this should be the case, where a legal duty exists to support the dependents; but I can find no case where there was neither legal duty nor communal living. In New York there seems to be no construction of
I conclude, therefore, that the payments to Altman, to the son, and to Mrs. Condon were either preferential payments, or transfers which in fact did hinder the respondent’s creditors, and the remaining question is only of the intent. As to the transfers as distinct from the preference, there is no dispute that the respondent knew that the property so transferred and the money so paid was his own, and that he intended to put it beyond the powers of his creditors to reach. That would in most cases leave nothing open to controversy; but here it is urged that he had no intent, because he had taken legal advice which assured him of his right to do what he did. It is, of course, well settled that there must be proof in some form of an actual intent, as distinct from the knowledge of the facts from which the consequences of the debtor’s act will arise. Coder v. Artz, 213 U. S. 223, 29 Sup. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008. That means only this: That although, in general, civil responsibility is imputed to a man for the usual results of his conduct, regardless of whether in the instance under consideration he "actually had those consequences in mind, in specific cases like this, the law requires proof of that added -element, his mental apprehension of those consequences, before it attaches to his conduct the result in question. This is such a case; but the fraudulent intent which the law requires need not necessarily involve moral obliquity. The ancient phrase “to hinder, delay, or defraud,” has always been in the disjunctive, and an intent to hinder or delay is adequate even if it be not an intent to defraud. Nicholson v. Leavitt, 6 N. Y. 510, 57 Am. Dec. 499; McConnell v. Sherwood, 84 N. Y. 522, 38 Am. Rep. 537; Dearing v. McKinnon Dash & Hardware Co., 165 N. Y. 78, 58 N. E. 773, 80 Am. St. Rep. 708; Buell v. Rope, 6 App. Div. 113, 39 N. Y. Supp. 475; Warner v. Lake, 14 N. Y. Supp. 10;
Certainly Mr. Justice Day, in Coder v. Artz, supra, meant only to insist upon the necessity of proof of the statutory intent, as gen
Mow here the respondent intended to hinder and delay his creditors, for that was the very purpose of his acts. He thought he had the right to do so, because he thought that the whole of the property was exempt. That was a mistake as to the extent of his rights, and I suppose it answers the claim that he intended to defraud them, for common usage would limit the word “fraud” to some act which was directed to depriving another of what the actor knew to be his rights. However, it would be a wholly new rule that a conveyance intended to prevent creditors from pursuing their legal remedies was not within the statute, because the debtor supposed he could do it. The case is no exception to the rule that the ignorance of the consequences in law of one’s conduct has no effect upon the results which the law attaches to it. The respondent intended the transfers to accomplish what they did accomplish, and the inquiry is irrelevant whether he supposed that the law would permit it to be done. The master was, therefore, quite right in disregarding his own finding of no immoral conduct.
It is, therefore, unnecessary to consider the law as laid down in New York, under which a voluntary conveyance by an insolvent, or by one who becomes such through the conveyance, is absolute proof of the statutory intent. Erickson v. Quinn, 47 N. Y. 410; Coleman v. Burr, 93 N. Y. 17, 45 Am. Rep. 160; Cole v. Tyler, 65 N. Y. 74; Smith v. Reid, 134 N. Y. 568, 31 N. E. 1082. If the suit were to set aside a transfer, the New York law would apply (Knapp v. Milwaukee Trust Co., 216 U. S. 545, 30 Sup. Ct. 412, 54 L. Ed. 610), even though no actual fraud was shown. I do not suppose that the same words in section 3 (1) are to have a different interpretation from what they have in section 67e, or that that conveyance would not be an act of bankruptcy which would be voidable by a trustee. Such an interpretation would, of course, violate the whole theory of bankruptcy, which designs to put into this court the administration of the insolvent estate as soon as the bankrupt has made a transfer which his creditors could unravel, and the proceeds of which they could apply to their debts in the state courts. It would contradict the theory-of bankruptcy that assets which formerly went to the more active should be administered for the equal advantage of all. That cannot he the law.
As to the preference, there is perhaps more doubt; for the master has not found that the respondent knew he was insolvent, deeming that fact immaterial. He certainly knew that his solvency was doubtful prior to April 5th; but he says he thought that, unless wasted, his
Upon the remaining questions of the amendment of the petition and the status of Brewster as petitioning creditor, the questions raised are irrelevant, because these three acts of bankruptcy occurred within four months of the amendment and of the intervention of Winter Russell.
The size of the payment and of the two transfers is quite ample to-allow them to serve as acts of bankruptcy. Size cannot be a material consideration, except in so far as it touches the question of intent; but, if it were, the only cases which suggest size as determinative do so when the payments are trivial. Here the total is $1,800. Certainly there can be no question that this is a large enough sum to justify action.
The respondent was unquestionably insolvent at the end of March. The contrary is barely suggested. As to the transfers, the burden of proof of solvency was in any case on him. As to the preference, the question was in any case one of fact, which the master has considered most carefully and fully, and nothing is suggested to justify me in disturbing his finding.
Report confirmed, and adjudication ordered.
Reported in full in the New York Supplement; reported, as a momoran.-.dum decision without opinion in 9 Mise. Rep. 714.
Reported, in full in the New York Supplement; reported as a memorandum decision without opinion in 59 Hun, 628.