140 P. 1098 | Idaho | 1914
This action was brought in the trial court by H. W. Soule as trustee for the Ashton Hardware and Implement Company, a bankrupt, as plaintiff, against the First National Bank of Ashton, as defendant.
The complaint charges that certain notes and moneys of the property of the hardware and implement company were placed in the hands of defendant bank for safekeeping pending settlement and payment of the claims of the creditors of the hardware and implement company, and that within four months prior to the institution of the bankruptcy proceedings, the defendant bank conspired with the hardware and implement company and converted the notes and money to its
Instructions Nos. 3 and 6 were in part, and as objected to, as follows:
“3. You are therefore instructed that if you find that the notes in question in this case were not transferred and assigned by the bankrupt company to defendant in good faith and four months prior to the date of filing the petition in bankruptcy and that defendant refuses to account for them to plaintiff, then the plaintiff is entitled to recover their value in this action, and if you find that the money in question was not placed in. defendant bank in the regular course of business as hereinafter defined, but was placed therein for the benefit of all creditors, then the title to the same is also in 'the plaintiff and he is entitled to recover the same in this action.”
“6. You are further instructed that where a preference, as defined in the last instruction, is given by a bankrupt to one creditor over other creditors, that it is the duty of the trustee of the bankrupt to take such proceedings as may be necessary to set such preference aside, and any property that is taken by one creditor from the bankrupt which creates or will operate as a preference as defined in the last instruction, takes the same subject to the title of the trustee to recoven the property or its value to be taken back into the estate of the bankrupt and distributed as provided under the bankrupt act. And, if you find from the evidence that within four months before the filing of the petition in the bankruptcy proceedings the bankrupt made a transfer of the notes in*69 question to the defendant and the effect and force of such transfer would be to enable the bank to obtain a greater percentage of the debt due the bank than any other such creditor of the same class, then you are instructed that such transfer is void, and that the plaintiff is entitled to recover the said property, or its value from said defendants in this proceeding. ’ ’
It is objected by the' appellant that said two instructions are at fault in that they do not take into consideration the provisions of subdiv. “b” of see. 13 of chap. 487 of the Laws of the- 57th Congress, approved February 5, 1903 (32 U. S. Stats, at L. 797), amending sec. 60 of the old act and defining the conditions under which a preference shall be voidable by the trustee, said subdiv. “b” being in part as follows:
“b. If a bankrupt shall have given a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.....”
Appellant urges that instructions 3 and 6, supra, should, because of the provision last quoted, be qualified by requiring, before the trustee can recover, proof that the defendant bank “had reasonable cause to believe that it was intended thereby to give a preference,” and that such omission constitutes a fatal defect.
It is asserted by counsel for appellant, and conceded by counsel for respondent, that subdiv. “b” of sec. 13, supra, was the law at the time this action was instituted, but our investigation has led to the discovery that such was not the law, inasmuch as said subdiv. “b,” upon which counsel rely, was further amended by chap. 412 of the Laws of the 61st Congress, approved June 25, 1910 (36 U. S. Stats, at L. 838), -which amendment was in force a year prior to the institution of the bankruptcy proceedings involved herein, and almost three years prior to the trial of this action, and was a part of the law to be followed by the trial court in this action.
“If a bankrupt shall have procured or suffered a judgment to be entered against him in favor of any person or have made a transfer of any of his property, and if, at the time of the transfer, or of the entry of the judgment, or of the recording or registering of the transfer if by law recording or registering thereof is required, and being within four months before the filing of the petition in bankruptcy or after the filing thereof and before the adjudication, the bankrupt be insolvent and the judgment or transfer then operate as a preference, and the person receiving it or to be benefited thereby, or his agent acting therein, shall then have reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference,- it shall be voidable by the trustee and he may recover the property or its value from such person.....”
It will be noted that while the trial court in instructions 3 and 6 advised the jury under what circumstances the transfer in question would be void and the plaintiff entitled to recover, the statement is entirely omitted that before such transfer would be void and the plaintiff entitled to recover, that it must also be proven by plaintiff that the defendant bank “had reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference. ’ ’
“Prior to the amendment of 1910 the intent of the bankrupt to prefer was essential to a preference.
“The act as originally passed, and as amended in 1903, included as an element of voidable preference that the creditor ‘had reasonable cause to believe that it was intended thereby to give a preference.’ This language was held to imply that the debtor must intend the transfer to be a preference at the time it was made. The intent of the bankrupt might be presumed from the necessary result of the transaction.
“This language of section 60 of the act was changed by the amendment of 1910 to ‘had reasonable cause to believe the enforcement of such judgment or transfer would effect a preference.’ This makes the intent of the debtor immaterial. The test is clearly the effect of the transaction without regard to the intent of the debtor.”
*72 “The mere giving of a preference to a creditor of the bankrupt within four months of the filing of a petition in bankruptcy, or after the filing of a petition in bankruptcy, does not make the preference void, and it is not even voidable unless the creditor or his agent acting therein had reason to believe that it was intended thereby to give a preference. ’ ’
Counsel for respondent urge that this instruction is drawn in conformity with the amendment of 1903, supra, and read with instructions 3 and 6 makes a sufficient statement of the law.
A sufficient answer to such contention is that instruction No. 16 did not contain a correct statement of the law for the control of this ease, by reason of the amendment of said subdivision “b” made in 1910 and hereinbefore discussed.
Appellant assigns the giving of this instruction as error, maintaining that the answer sufficiently denied the value of said notes.
We have examined the pleadings and the instruction in question and find no error in the giving of the same.
Inasmuch as counsel for the parties hereto were each in error as to the law applicable to a case of this nature at the time of trial, it quite naturally followed that the trial court erred in the instructions given, and it appearing that such error is prejudicial to the rights of the appellant, this judgment must be reversed and the cause remanded for a new trial. Costs will be awarded to appellant.