Gorham v. Stearns

Dewey, J.

The plaintiffs’ claim arises under St. 1838, e. 163, § 10, wherein it is (inter alia) provided, that any assignment, by any debtor, of any part of his estate, which he shall make with a view to give a preference to any creditor, &c. if made in contemplation of becoming insolvent and of obtaining a discharge under the provisions of said statute, shall, as to his other creditors, be void, in like manner and to the same effect as conveyances made by any debtor to the intent or whereby his creditors may be delayed, hindered or defrauded, are now by law void as to such creditors ; and the assignees, in such ease, may by an action in their own names recover from the creditor, so preferred, the property so assigned, or the value thereof, for the use of the other creditors.

It is for the plaintiffs- to bring their case within the provisions of this statute, if they would avoid this assignment, and receive the avails of it from the defendant. The burden is on the plaintiffs to show that the transfer wras made by Belden in contemplation of his becoming insolvent and of obtaining a discharge under the statute.

It is conceded by the defendant, that Belden was in fact iníolvent and unable to pay all his debts, at the time of making the transfer to the defendant. But mere insolvency and inability to pay one’s debts, do not render void a transfer of property to secure a particular creditor. It must have been made by the debtor in contemplation of his becoming an insolvent debtor, under St. 1838, c. 163, and of obtaining a discharge under the provisions of that statute. While the debtor, in the ordinary course of business, and without any purpose existing in his mind to avail himself of the statue just referred to, is paying debts due to any of his creditors, or giving them collateral security for the same, such transactions are valid between the parties, and not liable to be set aside as in violation of this statute, although it may eventually be made to appear that, at the time of making such payments, or transfer as collateral security for his debts, the debtor was in fact insolvent and unable to pay his debts. It is the intentional unjust preference of one creditor to the other, after the debtor .has the purpose of availing himself of the benefits of the statute, that renders such preference void. The inquiry will therefore necessarily be, in cases like the present, was the transfer in contemplation of insolvency and the obtaining of a discharge under the act of 1838, c. 163.

Upon the case stated by the parties, we cannot say this fact is shown affirmatively. The fact of an actual insolvency, and the other circumstances under which this assignment was made, are certainly calculated to excite suspicion as to the purposes of the debtor; but the testimony of the debtor is direct and full to the point that he did not, at the time of making the transfer to the defendant, intend to become an insolvent and obtain a discharge under the insolvent act; and that in truth he had no knowledge of the existence of any such statute. If this testimony be true, it is quite certain that the assignment to the defendant was not made by the debtor in contemplation of obtaining a discharge under the provisions of the statute, and the case therefore does not fall with'n it.^*

In deciding upon a case stated by the parties, as the present one is, the court must take the testimony of the witnesses to be true, and deal with it as such. If the plaintiffs would have the benefit of the other facts and circumstances disclosed in the case, to control the testimony of the debtor and discredit him, the case should have been submitted to the jury to weigh all the evidence and find the fact. But the case being presented to us upon this testimony, if we give it the full and proper effect which attaches to it, it negatives the unlawful intent to prefer one creditor under those circumstances which this statute prohibits and restrains. Such being the state of the case, the plaintiffs canot maintain their action.

Plaintiffs nonsuit.

* New provisions on this subject have been made by St. 1841. c. 134, § 3,