Williams v. Cohen

Cochran, J., delivered the opinion of this Court.- This bill was filed for the purpose of setting aside a deed of surrender and release, executed by Herman Pollack to Moses Cohen, on the 26th of December, I860,- upon the alleged ground, that Pollack was then insolvent, and that the deed to Cohen, one of his creditors, was an undue preference within the meaning of sec. 7, Art. 48 of the Code. It is admitted that Pollack did not apply for the benefit of the insolvent laws until the 18th of February, 1862, about fourteen months after the date of the deed. There is no pretence that the deed was executed for an insufficient consideration, or that it was fraudulent in fact; and we have, therefore, to decide the simple question, whether it -was executed by the grantor when he had “ no reasonable expectation- of being exempted from liability to execution on account of his debts-without petitioning for the benefit of the insolvent laws.” The 7th section of Art. 48 of the Code, taken as- a whole,unquestionably contemplated a class of cases in which the1 acts- of an insolvent before his application cannot be avoided, notwithstanding his actual insolvency at the time the acts were done. It is not difficult to imagine a case where one,knowing himself to be insolvent, might, nevertheless, very reasonably conclude, from the state of his credit, the increas*. [497] ing profits of his business, or enhancing value of his property, that he could protect himself from liability to execution and pay his debts in full. If in such a case as this, the debtor' should part with a portion of his property to satisfy pressing claims, or should convey it to a creditor in satisfaction of an existing debt for the purpose of maintaining Ms credit, and enabling him to provide for the eventual payment of all his debts, without incurring liability to execution on account thereof, such a conveyance could not reasonably be said to fall within that class of acts declared to be void by this section. It would, in fact, be the case of one, who, notwithstanding his insolvency and subsequent application for the benefit of the insolvent laws, nevertheless, had a reasonable expectation of being exempted from liability to execution, and whose act could not be impeached as within the meaning of this provision. The terms “ no reasonable expectation of being exempted, <fec., clearly imply a knowledge or belief on the part of the insolvent of his inability to pay bis debts, for, without such knowledge or belief, he ■would necessarily be presumed to have a reasonable expectation of being exempted from execution without applying for the benefit of the insolvent law's. If, however, a conveyance of property is made by a debtor to a creditor to satisfy or secure a debt at a time when the debtor knows or believes himself to be insolvent, and does not expect to be relieved from execution for his debts without the aid of tbe insolvent laws, the necessary presumption would be, that the conveyance was executed with a view of applying for the benefit of the insolvent lawsj and, in such a ease, the conveyance would be void within the meaning of this provision of the Code. Onr conclusion is, that this section contemplates as void or voidable, only such acts of a debtor In derogation of the rights of his creditors as may be done by him when he knows or believes himself to be insolvent, and has no reasonable expectation of exempting himself from execution without the aid of the insolvent law's, [498] or expressing the same proposition in equivalent terms,- only such acts as the debtor may be presumed to have done in derogation of the rights of his creditors, with a view of applying for the benefit of the insolvent laws. The provision in question was codified from the Act of 1854, chap. 193, sec. 7,- which in substance and effect is the same as the 6th sec. of the Act of 1816, chap. 221, and the construction given to it here corresponds with that given to the Act of 1816, in the cases of Hickey vs. Farmers Bank, 5 G. & J., 377, Crawford vs. Taylor, 6 G. & J., 323, and Dulaney vs. Hoffman, 7 G. & J., 170. It was, therefore, necessary for the appellant in making out a case, upon which this deed could be set aside, to show that Pollock not only knew, or supposed himself to be, insolvent at the date of the deed, but that the circumstances under which it was- executed, were such that he could not reasonably have expected to pay his- debts in full, or avoid liability to execution on their account otherwise than by means of the insolvent laws. This, in our opinion, the appellant has failed to do. The evidence of Pollock’s condition at the date of the deed does not show that he then knew, or supposed himself to be, insolvent. The strongest evidence on that side of the case is that of Pollock, himself,who, upon his examination in July, 1882, says, that at the time the deed was executed he was in debt to the amount of about $29,000, and that he could not, at that time, have paid more than fifty cents in the dollar; but he- does not say that he then knew he was- unable to pay more.- It is true that Geahring and Cunningham, his employees, both state that' they thought him insolvent during the latter' part of the year’ 1860 ; but Pollock testifies that shortly previous to, or in-October, 1860, he believed himself to be worth about $6000 and the statements ot his pecuniary condition, made up in August, 1860, and February, 1861, by the assistance of Geah-ring and Cunningham, neither of which were substantially [499] impeached or contradicted, show that he was solvent at both of these dates. Judging of his condition in December, 1860, by inferences from events subsequently occurring, it might be supposed that he was then insolvent; but the question of his insolvency at that time cannot properly be determined in that way. The evidence shows that the usual course of trade and business was much deranged during the first half of the year 1861, by the political troubles theu commencing, and that commercial confidence, at all times a necessary condition of prosperous trade, gave place to general suspicion and distrust. How far this condition of things was the occasion of Pollock’s suspension in May, 1861, does not clearly appear, but it is evident that his embarrassments were very much increased. But whether solvent or insolvent when the deed was executed, Pollock’s own testimony shows that he then believed himself able to pay his debts in full. In the spring of 1861, some months after the date of the deed, he made an effort to obtain an extension of the time for payment of his debts, and be says that bis idea then was that if Cohen had not forced payment of the claim due to him, and the troubles of the country had not increased, he could have gotten through his difficulties and paid every dollar of his liabilities. He also denies that he had any intention, or that ho even expected at that time, to apply for the benefit of the insolvent laws. Much of the testimony contained in the record has no material bearing upon the question to he decided, and it has not been noticed for that reason ; but that to which we have more particularly referred, was sufficient in our opinion to justify the conclusion reached by the Court below. It shows that the grantor, at the date of the deed, had an expectation of being exempted from execution for his debts, which, so far as we can see, was not unreasonable, and there is an entire absence of evidence to sbow that it was executed with a view [500] fo his ultimate insolvency and release under the insolvent laws. (Decided July 17th 1866.) Decree affirmed with costs to the appellee,