Bloodgood v. Beecher , 35 Conn. 469 ( 1868 )

Park, J.

The principal questions in this case arise from the following paragraph in the report of the committee :—

“ Said mortgage was made by the respondent, Beecher, knowing that he was then insolvent; not with the intention of stopping payment or closing his business, but to prevent interruption, and to avoid a suit and an assignment for the benefit of his creditors, in the hope, on his part, that by making large profits and by some turn of good fortune he should be extricated from his embarrassments. He also gave said mortgage to the petitioners because of their urgency, and the representations made by them and their counsel that the official duty of said Bloodgood required him to insist upon security of real estate. But the said Beecher then knew that, if placed upon record, it would operate as a preference to them unless assailed within sixty days after it should be recorded. He did not expect that the mortgage would be immediately recorded, and believed that if recorded it would cause a pressure from other creditors which would compel him to suspend his business .and prevent his making payments. He continued his business and did not abandon the same till the 20th day of February, 1867, when he suspended business and made án assignment for the benefit of his creditors to Henry B. Glover, one of the respondents.”

In the late case of Utley v. Smith, 24 Conn., 290, the court say : — “ Three things are necessary in order to make the deed of an insolvent debtor fraudulent and void under the statute of 1851. First, the grantor must be in failing circumstances; second, the deed must be made with a view to insolvency; and third, the deed must be made with intent to prefer one creditor to another.” In regard to the second and third of these essential elements, the court, after reviewing the American and late English authorities upon the subject say, “ We derive this rule, and we think it is the true one, that the quo animo is the important and decisive characteristic,” and hold that the quo animo must be proved to exist as a fact, and cannot be inferred, or presumed to exist, by inference of law contrary to the fact.

In the more recent case of Quinebaug Bank v. Brewster, 30 Conn., 559, the court say, that a question of intent is always a question of fact, and that the rule that a man is presumed to have intended the probable consequences of his own acts, is merely a rule of evidence, to be applied by the triers in determining the quo animo.

The same doctrine is held in other cases. Arnold v. Maynard, 2 Story R., 358 ; Matter of Pearce, 21 Verm., 611; Gorham v. Stearns, 1 Met., 366; Jones v. Howland, 8 id., 377.

Now, was this mortgage made with a view to insolvency? The finding on this subject is as follows : “ Said mortgage was made by him knowing that he was then insolvent, not with the intention of stopping payment or closing his business, but to prevent interruption, and to avoid a suit and an assignment for the benefit of his creditors, in the hope on his part that by making large profits and by some turn of good fortune he should be extricated from his embarrassments.” There is no finding here that the mortgage was made with a view to insolvency, as the cases cited require, and how can this court find the fact ? There is no evidence even, tending to show the fact, except that Beecher knew that he was then insolvent. But it is' obvious that insolvency known to a party is not enough, as matter of law, to bring a case within the purview of the statute, for insolvency is there qualified by the phrases, “ failing circumstances,” and “ with a view to insolvency,” and having an “ intent to prefer one creditor to another.” These terms are important, and show clearly what class of conveyances made by an insolvent were intended to be reached by the statute. It is well known that prior to the passage of this act the last transactions of an insolvent, when on the eve of making a general assignment for the benefit of his creditors, consisted in executing conveyances to preferred creditors, who were generally relatives of the insolvent, and took all his -property. The statute is aimed at such conveyances as these and others of a like character, although made somewhat more remotely with a view to insolvency. But this question has been directly decided. Judge Ellsworth, in Utley v. Smith before referred to, says, “ Actual insolvency is not enough, for this does not necessarily prove any particular view of the insolvent in. an ordinary sale or mortgage; his insolvency may have nothing at all to do with it, and be neither the cause nor the occasion of it. It is but a circumstance to be taken into the account in weighing motives.” In Quinebaug Bank v. Brewster, before cited, Judge Sanford says, “ Now, had it been shown that Rose actually knew or supposed himself unable to pay all his debts and consequently that actual insolvency impended over him, that fact would have authorized an inference to be taken into the account and weighed by the triers in determining the question whether he made the mortgage with an intention to evade the operation of the statute and prefer the mortgagee or not. Even then, however, no conclusive inference or presumption of such intention could have been made. It would still have been a question of fact to be determined upon all of the evidence.” In Jones v. Howland, supra, Judge Hubbard says : — “ If a party who fears or believes himself insolvent, but does not contemplate stoppage or failure and intends to keep on and make his payments and transact his business, hoping that his affairs may be thereafter retrieved, and in that state of mind makes a sale or payment without intending to give a preference, and as a measure connected with going on with his business, and not as a measure preparatory to or connected with a stoppage in business, such sale or payment is not void as made in contemplation of bankruptcy.”- The facts of that case as stated by Judge Hubbard are substantially the facts found here.

These cases decide that the question whether a conveyance 'was made with a view to insolvency is one of fact; and that insolvency known to a party making a conveyance is only evidence to be considered by the triers in determining the quo animo. Now this court has repeatedly -held that it cannot find facts from evidence reported to it, and for this reason a majority of the court are unable to discover how this conveyance can be. regarded as fraudulent and void under the statute of 1858.

Again, the committee has not only not found that this mortgage was made with a view to insolvency, but on the contrary has substantially found that it was not so made. The finding states that the mortgage was not made “ with the intention of stopping payment or closing his business.” This substantially negates its being done with a view to insolvency, for stopping payment and closing business would be insolvency in a person in Beecher’s condition. In Utley v. Smith the court say: — “ ‘ Failing circumstances ’ seems to imply that the insolvent is about failing and closing his affairs, knowing his inability to continue in business and meet his payments.” Now if a person is in failing circumstances when in the condition described by the court, he certainly has failed when those events transpire. The finding says that Beecher did not make the mortgage with the intention of stopping his payments or closing his business. He then did not make it with a view to insolvency. This alone would seem to be conclusive of the case.

But, again, the finding is that the mortgage was made to prevent 'interruption, and to avoid a suit and an assignment for the benefit of his creditors. So far as any purpose or object is shown to have existed in the mind of Beecher moving him to make the mortgage this is all. He knew that he was then insolvent, but he saw his way out of his embarrassments if he could be permitted to go on with his business for a time. The petitioners were urgent to be secured. They and their counsel represented that the official duty of Bloodgood required him to obtain security. Beecher feared that he would be broken up in business unless he complied, and the hope he entertained of extricating himself from his embarrassments induced him to do it for the reasons stated. Whether that hope was a well grounded or vain one is of no importance. Neither is it of any importance how other men would have regarded his financial affairs at that time. The question is, how did Beecher himself look upon his condition, and what motive had he in making the conveyance ? All the motive shown is in conflict with the claim of the respondents. A conveyance made with a view to insolvency has in contemplation a closing of the affairs of the insolvent. This conveyance was made to enable Beecher, in his opinion, to go on with his business.

A conveyance made with a view to insolvency is a part, at east, of the preparation made for that event, as a man realizing that death is at hand prepares his will. This conveyance was made as a sick man takes medicine to prolong his life. Was this conveyance made to keep this property from the general fund of creditors, and to prefer the petitioners to the other creditors of the mortgagor ?' Who can read this finding and believe that, had Beecher known on the 5th day of February, 1867, when this conveyance was made, that all his hopes of continuing business were vain, and that he would be compelled to make an assignment for the benefit of all his creditors within fifteen days, this conveyance would ever have been made ? The finding represents Beecher as exceedingly loth to make it. The petitioners had to be earnest in their demands to be secured. The official duty of Bloodgood had to be urged by them and their counsel. The fears of Beecher had to be excited that he would be broken up in business and compelled to go into insolvency unless he complied. And above all, the hope of Beecher that he could extricate himself from his embarrassed condition, could he be permitted to go on in business, had to operate upon his mind before he could be induced to do it.

This question is intimately connected with the one we have considered, and much that has been said in regard to that has an important bearing upon this. Here, as there, the case has to do with the mind of Beecher in making the conveyance, and we are to inquire with what intent it was done. Here, as there, the committee has left the question of fact undecided and given us evidence bearing upon both sides of it. The respondents rely upon the following finding, taken in connection with the fact that Beecher knew that he was then insolvent. “ But Beecher then knew that if the mortgage was placed upon record it would operate as a preference to them unless assailed within sixty days after it should be recorded. He did not expect that the mortgage would be immediately recorded, and believed that, if recorded, it would cause a pressure from other creditors which would compel him to suspend his business and prevent his making payments.” It is true that this is evidence tending to show that the mortgage was made with intent to prefer the petitioners to the other creditors of the mortgagor; but is it conclusive upon the subject, so that it can be said as matter of law, to be applied not only in this case but in all others where like facts appear, that such was the intention ? It must be conceded that there was no active intent in the mind of Beecher to prefer the ¡petitioners; and no intent, unless his assent to make the mortgage can be so construed, which was forced from him by pressure of circumstances. Beecher felt himself in the condition of one about to be ruined unless he executed the mortgage. He had no desire to favor the petitioners. There was no reason why lie should. Bloodgood was a stranger to him. The most that can be said is, that he assented to execute the mortgage, knowing that it would operate as a preference should certain events happen. But is this sufficient, when it clearly appears that there was no intent in fact to prefer the petitioners ? Assent is the cold act of the understanding. An intent to prefer is the warm act of the affections. They have hut little in common. This finding is drawn with great care, and shows a design to exclude from the case all intent in fast to prefer the petitioners ; so much so that the words “ would operate as a preference” are guardedly used ; and unless the respondents can show an intent in law to prefer the petitioners, arising from these facts, and contrary to the truth, they derive no benefit from this finding.

The eases referred to, and many more that might be cited, make this question depend upon the quo animo in fact, and if any case can be found where a° contrary doctrine has been held, it has escaped our notice.

Again, it is not found that Beecher knew that the law required that the mortgage should be recorded ; and if he did not know the fact then there is no foundation for the claim of the respondents, for their claim involves the necessity of such knowledge; but it seems from what is found on the subject that he did not know that it was necessary ; for it is stated that he did not expect that it would be recorded immediately, and that he hoped to extricate himself from his embarrassments by making large profits thereafter in his business, and further, that he gave the mortgage to prevent interruption, and to avoid a suit and an assignment for the benefit of his creditors. How could these things be if he knew that the mortgage in all probability would be recorded in a few days, and that insolvency would follow ? He made the mortgage “ to prevent interruption,” and “ to avoid an assignment. ” But the respondents say that he gave it knowing it would bring interruption and would cause an assignment. This seems to me absurd. Whatever other men might have thought in like circumstances with Beecher, it is clear that he was anxious to go on with his business, and expected to do so should he give the mortgage, and gave it for that purpose only. This is the sole object that he is found by the committee to have had in view, and if so, then it follows conclusively that this mortgage was not made with intent to prefer the petitioners to the other creditors of the mortgagor, for it is utterly inconsistent with these facts that he could have had such intent. We must take the facts as they are. It is not for us to say how we should have found them if we had been the triers. They have been found, and our duty is to apply the law to the facts as they appear.

On the trial before the committee the respondents objected to the admission of the mortgage and notes in evidence, on the ground of a variance between them. The claim was, that a mortgage and the debt secured by it are so connected together, and each dependent upon the other to lay the foundation for a decree of foreclosure, that neither without the other can be admissible in 'evidence; and that therefore a substantial variance between two such items of evidence will render each inadmissible, because it shows that the debt offered in evidence was not the debt secured by the mortgage. However valid the objection may have been if the facts of the case had supported the claim, it is clear that there was no necessary conflict between the mortgage and the notes offered in evidence in this case. The mortgage description of the debt secured by it, is “ an indebtedness to Bloodgood as receiver, and to Fleischliauer, in the sum of seven thousand, seven hundred sixty-one dollars and nineteen cents secured by certain promissory notes of the mortgagor now held by them. ” The notes are not otherwise described, and it is manifest that this description does not necessarily conflict with the notes offered in evidence, unless it be in the amount of the indebtedness, a small error in which the petition lays the foundation for correcting. It does not necessarily follow that these notes were the individual property of Fleischliauer because they appear to be so upon their face. They may have been partnership property notwithstanding, as the petitioners claim. Whether evidence tending to show such fact could be received under the allegations of the petition is another question. If objection had been made upon that ground, it would have, been made to the evidence tending to show such fact, and then the petitioners might have amended their petition; but the objection that was made is clearly untenable.

Again, the petition sets forth that the notes offered in evidence are the identical notes secured by the mortgage, and it makes them a part of the petition. It further sets forth the mortgage, and makes that also a part of the petition. To prove these allegations the mortgage and notes were offered in evidence. They were clearly admissible for that purpose, and whatever claim could have been made to a disagreement between the mortgage and the notes, should have been mad to the effect of the evidence, and not as an objection to its admissibility.

A majority of the court therefore advise the Superior Court to accept the report of the committee, and grant the prayer of the petitioner.

In this opinion Hinman, C. J., concurred.