166 Mass. 323 | Mass. | 1896
This is a bill in equity, brought by the assignee in insolvency of Mrs. Clark to set aside an assignment of certain credits made by the insolvent as security for a debt due to the defendants, and in order to obtain further credit from them. The case comes here on report. In form, the only question reserved is the correctness of a ruling that the bill cannot be maintained on the facts found by the judge who tried the case. But as one of the findings is that the assignment was not made in fraud of the insolvent laws, and as the evidence is reported, we assume with some hesitation, as the counsel have assumed in their arguments, that it was intended to open the correctness of this finding, as matter of law, in view of the facts subject to which it was made.
It is found that Mrs. Clark was insolvent at the time of the assignment, and that the assignment was not made in the ordinary course of business of Mrs. Clark. There was evidence tending to show that Mrs. Clark had reasonable cause to believe that she was insolvent, and there is no question that the evidence warranted a finding for the plaintiff. On the other hand, it is not found that Mrs. Clark knew or had reasonable cause to
We suppose that it is with reference to such a case as that that all the later decisions have emphasized the necessity of finding an intent to create a preference, or to effect some other fraud on the insolvent law as a fact, before a conveyance can be set aside. Bridges v. Miles, 152 Mass. 249. Sartwell v. North, 144 Mass. 188, 192. Rice v. Grafton Mills, 117 Mass. 228, 232. It would be very hard to declare a conveyance void if at the time the grantor had property unquestionably sufficient to pay his debts, but owing to a cause like that mentioned, or to its being invested in land, he had not ready money enough to pay on demand and therefore appropriated assets to pay or to secure one which was pressing, knowing that thereby the continuance of his business would be facilitated, and not doubting that his course was at least harmless to his other creditors. The evidence warranted a finding that Mrs. Clark supposed that to be her situation, and that her only motive was to get more credit. If she did suppose so, and in fact had no other motive, the tendency of her conduct to create a preference was not manifest to her because the tendency would not have existed if the facts believed by her were true, and therefore it would be a mere fiction to say that she acted “ with a view to give a preference.” It cannot be said that as matter of law, every conveyance to secure a past debt is voidable when the grantor is insolvent and knows that he cannot pay his debts in the regular course of business as they fall due, even if his creditor has reason to believe that a fraud on the insolvent law is intended, and therefore it cannot be said, as matter of law, that the decree was wrong.
Decree affirmed.
It seems to me so manifest that the decision of the judge of the Superior Court was founded on an error of law, that, notwithstanding a doubt in regard to the meaning of the reservation, I think that the decree should be set aside and the law applicable to cases of this kind more fully stated.
To avoid a conveyance under Pub. Sts. c. 157, § 96, it must be proved that at the time of making it the debtor was insolvent or in contemplation of insolvency, that it was made within six months before the filing of the petition by or against him, that it was made with a view to give a preference, that the person receiving it had reasonable cause to believe that the debtor was insolvent or in contemplation of insolvency,, and that the conveyance was made in fraud of the laws relating to insolvency. If the transaction was not in the usual and ordinary course of business of the debtor, a prima facie case of reasonable cause to believe on the part of the person receiving the conveyance is made out. Pub. Sts. c. 157, § 98. Stevens v. Pierce, 147 Mass. 510.
The judge found that the debtor was insolvent at the time of making the conveyance in question, that the conveyance was made within six months prior to the commencement of the proceedings in insolvency, that it was not made in the usual and ordinary course of business of the debtor, that the defendants then had reasonable cause to believe that she was insolvent, but only in the sense of not being able to pay her debts as thej'- accrued in the ordinary course of business, that she did not then contemplate going into insolvency, and that the defendants did "not have reasonable cause to believe that the conveyance was made in fraud of the laws relating to insolvency. The defendants were creditors, and the case is governed by the provisions of § 96 above referred to. If the debtor was insolvent, it is not necessary to show that she was in contemplation of insolvency, and no fraud need be proved other than making a conveyance when insolvent with a view to give a preference to a creditor. The judge in his findings seems to make a distinction in legal effect between insolvency in the sense of not being able to pay one’s debts as they fall due in the ordinary course of business, and insolvency in the sense of not having sufficient property ultimately to pay one’s debts if they are not enforced at maturity and if time is given to enable the owner to dispose of the prop
A trader unable to pay his debts in the ordinary course of business may speculate upon the chances of being able to induce his creditors to wait, and of finally getting the means to pay them all in full; but in my opinion he and any creditor dealing with him with knowledge of his condition speculates at the risk of having a payment or conveyance set aside, and an equal distribution made if insolvency proceedings are commenced within six months. It seems to me that the enforcement of this rule is the only practicable way of securing justice to creditors who are outstripped in the race for payment or security. When a trader is unable to pay his debts in the ordinary course of business, there is risk, not only that creditors will not receive the money due them when they are entitled to have it, but that they will finally lose some part of it. To pay or secure a creditor under such circumstances is to give him a preference over others who have no security. In my opinion, all the preference that a trader, knowing himself to be insolvent, need intend in order to bring the case within the statute is security against the risk of delay and loss which necessarily results from his condition, and it is none the less a preference if, when such security is given, the debtor hopes and expects that the other creditors will ultimately be paid in full. It is not necessarily security against an expected loss, but against the risk of loss when the debtor is in fact insolvent, that constitutes the preference.
In the present case the judge finds that the debtor, who bought and sold goods in the prosecution of her business as a dressmaker, was insolvent at the time of making the assignment. He finds that the defendants had reasonable cause to believe that she was insolvent. He finds facts which, under the statute, make a prima
I am authorized to say that the Chief Justice and Mr. Justice Lathrop concur in this opinion.