Barnes v. National Bank of Oshkosh

The following opinion was filed May 21, 1897: "Winslow, J". It is difficult to see why the Michigan judgment is not a perfect bar to the maintenance of this action, so far as the chattel mortgages are concerned. The mortgages covered personal property within the jurisdiction of that court. ’ They were executed and filed prior to the execution of the assignment. They were valid by the laws of the state of Michigan when executed, and their validity has [20] been solemnly adjudged in a proper action brought for the purpose in a court of competent jurisdiction, to which the assignee was a party; said judgment having been rendered nearly four years before the trial and judgment in the present action. Why this judgment was not valid and binding upon the assignee as to tangible personal property, like lumber and logs, whose actual situs was in Michigan, we are unable to perceive. As to the book accounts, there may indeed be a serious question, because it may be, and it is argued with much force, that their situs is in Wisconsin, where their owners resided, and, hence, that the title to them could not be affected by the Michigan decree, in the absence of personal service upon the assignee or his voluntary appearance in the action. We are -relieved, however, from consideration of these questions by the finding of fact to the effect that the evidence does not show that the transfers to the bank were made by Hoxie & Mellor in contemplation of the making of an assignment or of insolvency. We cannot say that the finding is against the weight of the evidence, consequently it must stand; and so long as it stands it is a complete bar to the maintenance of this action. The mortgages and assignment are not attacked as having been made with intent to defraud creditors, but simply as being within the terms of sec. 1693», S. & B. Ann. Stats. In order to come within the prohibition of that section, they must have been made (1) by an insolvent debtor, (2) within sixty days prior to the making of the assignment, (3) in contemplation of such assignment or of insolvency, (4) to a creditor who knew, or had reasonable cause to believe, the debtor insolvent. All of these conditions must concur, in order to make a transfer void under this section. We are quite well satisfied that “contemplation of insolvency,” in this section, means contemplation by the debtor of the institution of insolvency proceedings under ch. 179, R. S., and [21] does not mean mere expectation or apprehension of inability to meet business obligations, or of failure in common parlance. The section in question was first enacted as oh. 349, Laws of 1883, and its object was simply to prevent and abolish preferences in voluntary assignments. As preferences might easily be made by first giving a mortgage to the favored creditor, and then executing a general assignment, the provision under consideration was put into the statute to meet any such evasion of the law. Its purpose was to prevent preferences, whether in the assignment or outside of it, but not to prevent honest transfers made in the hope of continuing in business. Yiewed in this light, we think the argument is conclusive that the law means an intention by the debtor to make an assignment, or take advantage of the insolvent law. The debtor must be in fact insolvent under the terms of the law, at the time of the transfer. The law has no application unless he is insolvent at that time. The word is here used .undoubtedly in its ordinary sense of inability to meet his obligations as they fall due. This being the necessary situation, it would be absurd to say that the words “in contemplation of insolvency” mean that the debtor contemplates a condition to arise in the future which already' exists. Insolvency, in its ordinary sense, must exist when the transfer is made; but, to avoid the transfer, there must be in the mind of the debtor an expectation or design that he will do something else, and that thing is that he will make an assignment, or commence proceedings in insolvency; and by this means circumvent the statute against preferences. This construction makes the statute logical and sensible, and we adopt it. By the Court.— Judgment afiirmed. A motion for a rehearing was denied September 28,1897.