Lincoln v. Wilbur

Ames, J. In order to impeach and set aside a conveyance of property by an insolvent person, as a fraudulent preference of a creditor in violation of the provisions of the United States bankrupt law, it is necessary, as the law now stands, for the assignee of the bankrupt to prove, among other things, that the debtor was insolvent or in contemplation of insolvency, and that the grantee or person to be benefited by the conveyance had reasonable cause to believe the debtor to be insolvent, and knew that the conveyance was made in fraud of the bankrupt act. U. S. St. June 22, 1874, § 12. Until June 22, 1874, it was sufficient to prove, against the grantee or preferred creditor, that he had “ reasonable cause to believe ” that the conveyance was made in fraud of the statute. U. S. Rev. Sts. § 5128. It is impossible to believe that the change introduced in the more recent statute was intended as a mere verbal alteration. It is well said by Dillon, J., in Singer v. Sloan, 3 Dillon, 110, that if these two forms of expression are in contemplation of law identical, then the change of the statute meant nothing and accomplished nothing; and that “where reasonable cause to believe that a fraud on the act was intended was before sufficient, knowledge of that fact is now required.” We have had occasion to decide, in Carroll v. Hayward, 124 Mass. 120, that reasonable cause to know, although it is evidence tending to prove knowledge, is not identical with actual knowledge. “ Reasonable cause to believe ” is certainly entitled to no greater weight. The court could not have ruled as the plaintiff requested, without giving the jury to understand that something short of actual knowledge would be sufficient to make out this element in the plaintiff’s case. Tryon v. Whitmarsh, 1 Met. 1. Pearson v. Howe, 1 Allen, 207. The bankrupt was called by the plaintiff as a witness, and of course it was competent for the plaintiff to examine him fully as to the disposition of his property, and as to his purpose and design in the arrangements which he had made and carried out. But with regard to his testimony as to a conversation with the plaintiff on that subject, the day after the conveyance, the defendant not being present or having any knowledge of it, we see no ground on which it could have been admitted. [253] As to the mortgages which he subsequently made to other parties not shown to be connected with the defendant, we find nothing in the facts stated in the bill of exceptions which shows that the presiding judge was bound to rule, as a matter of law, that they and the conveyance to the defendant were parts of one general scheme, or that they had such a connection with each other as to bring them within the rule laid down in Jordan v. Osgood, 109 Mass. 457, and Lynde v. McGregor, 13 Allen, 172, 180. We cannot say therefore that there was any error in holding that the general rule should be applied, namely, that the title of a purchaser is not to be impeached by any subsequent act or declaration of the vendor. Bridge v. Eggleston, 14 Mass. 245, 250. Taylor v. Robinson, 2 Allen, 562. Horrigan v. Wright, 4 Allen, 514. Holbrook v. Holbrook, 113 Mass. 74. As the question of the defendant’s knowledge of Leonard’s purpose in making the conveyance was directly raised by the case, it was of course proper to ask the defendant whether he knew that Leonard intended a fraud upon the bankrupt law when he made the conveyance. The result is, that we find no error in the rulings and instructions at the trial, and therefore the Exceptions are overruled.