Crawfords v. Taylor

Chambers, J.,

delivered the opinion of the court.

The appeal from the decision of the Chancellor in these cases, is prosecuted by three of the defendants below, Hugh and William Crawford, and James C. Sellman, and seeks to reverse the decree of the 2d of January, 1833, the report of the auditor, and the order ratifying that report.

The cases were consolidated by an order of the Chancellor, and so far as the decree affects the other parties, Ford, Franciscas, and the Commercial and Farmers' Bank, it has been acquiesced in. The only questions therefore for the decision of this court, are such as arise out of the transactions of H. and W. Crawford, and those of Sellman. The two cases are subject to the same consideratons, and the objections urged apply, if at all, with equal force to both. The slight variations in their history as detailed in the evidence, are not of a character to affect the legal principles-upon which they depend.

The transfers made by Ford to the appellants, are charged in the bills to have been made, “with a view, or under an expectation of being or becoming an insolvent debtor, and with an intent thereby to give an undue and improper preference,” and to be therefore void by the express provisions of the insolvent laws of this State.

The bills assert, and the argument has endeavored to establish as auxiliary propositions. That Ford at the date of the transfers was in fact unable to pay his debts. That he well knew his condition -, and that being thus insolvent in fact, and apprised of his condition, he made the transfer without solicitation, and of his own mere motion. The testimony in the cause is submitted as establishing these allegations, and as proving also, the knowledge by the appellants of Ford’s pecuniary situation when the property was received.

It may be conceded that the testimony does establish the fact of Ford’s inability to discharge his debts on the 17th of May, 1830, the date of the transfers. That his property at that time was insufficient in value for that purpose. That Ford was perfectly informed of his insolvent condition, and that the appellants, if they did not certainly know, had every reason to apprehend, and did apprehend his embarrassments and failure. There is no ground to contend from any foots in the case, that actual fraud has been committed by the appellants and Fordr which exclusive of the positive provisions of the insolvent laws, will vitiate the transfers. The effort which seems to have been at one time intended to prove a secret delivery of the property, at unusual hours of the day, so as to escape observation, has altogether failed, and the nature, and amount of the claims due the appellants from Ford, and the full and fair value at which the property was taken, negative all idea of that kind.

The court do not perceive any difficulty in the iact, that large purchases were made by Ford within a short period of the transfers. The articles purchased were in the way of his trade, and as is proved, were such as persons pursuing the same business kept in store, and such as at that period of the year were usually purchased by the particular class of customers to whom he principally sold.

The ground mainly relied upon in the argument, and upon which alone any semblance of exception can be urged against the transfers is, that they are in violation of the provisions and spirit of our insolvent laws. It has been justly remarked, that these provisions have been suggested by, and adopted from the English bankrupt system. The foundation upon which that system rests is, that a debtor has no right to prefer one creditor to another, when he is honestly and equally bound to pay all. The courts have therefore properly adjudged, that a debtor contemplating an act of bankruptcy shall not, to gratify his personal partialities, select a favorite creditor and secure him, by an assignment of a part of his property, leaving others to share a dividend of what remains, when that favorite creditor had no higher or better claim in law or equity, than the others. But the bankrupt laws, while thus prohibiting to the debt- or the voluntary preference of one creditor to another, never intended to deny to any, the advantage of an active pursuit of his claim. The maxim, Uvigilanlibus, non dormientibus serval lex," is as sound and as applicable since, as before the introduction of the bankrupt system. The voluntary assignment to a creditor has universally been considered, “an undue preference,” whilst an involuntary assignment is not so. Indeed, the very terms of the rule would seem to exclude from its operation an act not voluntary, for a party cannot be said to “prefer,” or “give a preference,” by doing an act not the result of his own volition.

The rule therefore, which may be regarded as running through all the cases on those laws is; that a voluntary assignment, or an assignment with an intent to give an undue preference to a creditor, by a debtor in contemplation of bankruptcy is void. Some difference may be found to exist in the facts to which the principle of voluntary, or involuntary assignments has been applied, but the rule is distinctly recognized in all the cases. This rule is incorporated in the acts of Assembly constituting the insolvent system of this State. The act of 1812, ch. 77, makes void any deed, assignment, &c, to a creditor, by any person,, “with a view, or under an expectation, of being or becoming an insolvent debtor, and with an intent thereby, to give an undue and improper preference to such creditor.”

Former decisions in this court have concluded the question, as to the meaning and construction of the words, “insolvent debtor,” here used. The case of Hickley vs. Farmers and Merchants’ Bank, 5 Gill and Johns. 377, decides, according to the settled construction to which it alludes, that they mean, “taking the benefit of the insolvent laws.”

If therefore, the intent to give' an undue preference, is to be received as subject to the distinctions which have obtained under the bankrupt laws, between a voluntary and involuntary transfer or assignment, as we think it should, it will be necessary to the appellees to establish, that Ford made the transfers with a view, or expectation of taking the benefit of the insolvent laws, and also that he voluntarily made these tranfers, to prefer the appellants. We do not. think either of these positions are established by the facts and circumstances in the case. There is no evidence to prove, that he had the expectation of being an insolvent petitioner in point of fact. He had before been embarrassed, and 'had failed, without resorting to such a means of relief. He surrendered to his creditors the property which remained in his hands, and acted as if he seriously desired and expected their acquiescence to his proposed arrangement with them. He knew that such an arrangement was usual, and .as his misfortunes were the result of accidents, over which he could exert no control; the failure of the fisheries on the Susquehanna for several successive years, and no dishonesty or extravagance appears to be chargeable to him, we cannot adopt the suggestion of the appellee’s counsel, that he could look to no other event, but to bo driven to the alternative of becoming an applicant for the benefit of the insolvent laws, or of lying in jail. His examination before the commissioners has been used as evidence in this case, by consent, and denies, as his several answers to the several bills in Chancery also denies, that he had such a view or expectation, nor do we find the testimony of any witness to impeach this statement.

While pursuing his effort to obtain a release by arrangement with his creditors, he was availing himself of every means in his power, and calling upon such friends as he could enlist, to avert the proceedings of his creditors at law, and did in fact, by adjusting the most pressing demands upon him, keep himself from being taken in execution until the 1st of January following, being more than seven months after it is supposed he indulged the view and expectation of petitioning, and being also after all hope of compromise with a large part of his creditors was at an end.

Nor do we regard the transfers as voluntarily made. In the case of the Crawfords, the advances were made under circumstances very peculiar. At a moment of most pressing necessity, when the immediate use of money was of the last importance to his credit, and when by the testimony of two of the witnesses he could not obtain it elsewhere, he received a loan from them on the most solemn pledge, which could bind his honor and his conscience, to secure this, and all their other advances, whenever, and however they might demand. They did afterwards demand it, and were urgent and pressing for payment, and prescribed the-particular mode, and the particular time for the redemption of his pledge; neither the time nor the mode, being inconsistent with his ability or his obligation. He paid them not all that he was indebted, but to the amount that he had pledged — the amount of their loans; and paid them in goods at a fair and full value, and indeed at a price of which they complained, and at which they were not able to sell them afterwards.

In Sellman’s case, there is no proof of such a solemn pledge previously given, but it was for a debt of precisely the same kind as Crawford's, and when Sellman insisted on being paid, as one of the witnesses has said was, “urgent and pressing for payment, or security,” he satisfied so much of Sellman's debt as arose from loans, in the same manner as he had satisfied Crawford's, leaving each of them other debts still unpaid, which arose in the usual and ordinary transactions between them as merchants.

It has been said that these appellants never would have been paid, except for the peculiar relation in which they stood to Ford. But this does not vitiate the payment. A man may yield more readily to the solicitation of a creditor, to whom he is under peculiar pecuniary obligations, and it is perfectly probable that Ford was gratified to have an opportunity to place these peculiar debts in a state of comparative security. But there is not in the whole testimony one solitary fact, that goes to show he ever moved in the matter, or suggested to him the necessity of making a demand upon him; nor indeed is there the least evidence of his intention to do this, or any other act, which should make it necessary for him to discontinue his business and trade, or to diminish its extent, until the appellants required of him the delivery of so much of his stock of goods, as was necessary to discharge their claims.

It was also strongly insisted, that the notes on which the appellants were liable for the advances made to Ford were not due. The cases referred to in the argument, show that this is not material. The creditor is entitled to use vigilance and obtain security, as well before as after the debt is payable, and it was expressly a part of the contract with the Crawfords, to secure them at any time, as well as in any mode they might require.

DECREE REVERSED, AND BILL DISMISSED WITH COSTS.