Miller v. Shriver , 197 Pa. 191 ( 1900 )

Opinion by

Mb. Justice Fell,

The conveyance which the court was asked to set aside on the ground that it was invalid under the law of this state and under the federal bankruptcy act of 1898 was made by a debtor to his creditor for. an admittedly adequate consideration, and without an intent to hinder or defraud other creditors. The good faith of the transaction was not attacked. The only ground of invalidity alleged in the bill is that the conveyance was made with the intent to prefer certain creditors. '

Under our decisions the preference was lawful. The Act of April 17, 1843, P. L. 273, forbids preferences in assignments only. An insolvent debtor may prefer a creditor in any manner except by a conveyance in trust. He may do it by a conveyance of real estate to the creditor, by the transfer of personal property or the confession of judgment to him, as well as by the payment of money. He may convey his whole property to a creditor in consideration of the satisfaction of the creditor’s claim and the assumption by him to pay the balance of the purchase money in discharge of the claims of other creditors. Although the effect of such a conveyance may be to delay a creditor not preferred, or to prevent his obtaining payment at all, it is valid if at the time the debtor liad dominion over his property and the transaction was in good faith, for a fair price and with the intent to pay creditors: Covanhovan v. Hart, 21 Pa. 495; Uhler v. Maulfair, 23 Pa. 481; York County Bank v. Carter, 38 Pa. 446 ; Reihling v. Byers, 94 Pa. 316; Lake Shore Banking Co. v. Fuller, 110 Pa. 156; Werner v. Zierfuss, 162 Pa. 360.

The contention that the conveyance was in effect an assignment for the benefit of creditors, and void because of the failure to record it in time, is without merit. The grantee in the deed was a judgment creditor, and he was liable as indorser or surety on a number of notes made by the grantor. The conveyance was subject to the payment of fixed liens on the real estate and to the payment of these notes and of other debts of the grantor within three years. Whether this limitation of time was in anticipation or postponement of payment does not appear. The deed is absolute on its face, and by it the grantor parted with his whole interest, legal and equitable, and no one but the grantee took any interest. It does not create a trust; and neither in the facts alleged in the bill nor in the writings, is there any indication of an intention to create a trust for anyone. The grantee extinguished the debt due him, and assumed a personal liability to apply the balance of the purchase money to the payment of liens against the property and certain other debts of his grantor. On the facts presented the case cannot be distinguished from York County Bank v. Carter, supra.

As the plaintiffs are trustees in bankruptcy, the question of the validity of the conveyance under the bankruptcy acts arises. The deed was executed and delivered more than six months before a petition in bankruptcy was filed against E. A. Weaver, the grantor, but it was recorded only one month before. The transfer was preferential, and it would be voidable at the suit of the trustees if the petition in bankruptcy had been filed within four months of the delivery of the deed. Is it voidable, the petition having been filed within four months of the recording of the deed ? This question is to be determined by the construction of the act. If the limitation as to time, fixed by section 8 (b) within which a petition may be filed after an act of bankruptcy has been committed applies in proceedings to invalidate preferential transfers, the decree in this case is wrong. If in such proceedings the limitation is four months from the filing of the petition as fixed by section 60 (b) and by section 67 (e) the demurrer was properly sustained. The question is new and important, and has not been authoritatively decided. The only decision of a federal court which has been brought to our attention is the one on which the learned judge of the common pleas relied, In re Wright, 2 Am. Bankruptcy Rep. 364, decided by the district court for the northern district of Georgia, in which the validity of a mortgage executed and delivered by an insolvent debtor more than four months before the filing of a petition in bankruptcy, but not recorded within the statutory period, was upheld. This decision is approved in a learned note by Mr. Collier, in which the construction of the sections of the bankruptcy act relating to the subject is considered.

We see no reason which should lead us to doubt the correctness of the conclusion reached. The construction given is strict and literal, but apparently the only one of which the words of the act admit. If the spirit and policy of the act warrant a more liberal construction in order to make it effective, it should be left to the courts directly charged with its administration to take the initiative.

The decree is affirmed at the cost of the appellant.