Utah Ass'n of Credit Men v. Boyle Furniture Co.

FEIGN, J. Titis action was brought under the federal Bankruptcy Act (Act July I, 1898, cb. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]) to recover an alleged preference. This is the second appeal. See 39 Utah, 518., 117 Pac. 800, for first appeal. This appeal was argued and submitted during the February, 1913 term. An opinion affirming the judgment was handed down before the commencement of the May term of that year, but pending the latter term appellant’s counsel filed a petition fqr a rehearing, which was granted, and the judgment of affirmance was set aside, and the case was again thrown at large. During the present October term the case was again argued by both sides and resubmitted. We have again carefully gone over the evidence and considered the arguments of counsel, and this opinion is substituted for the. former one and will be the only one published in this case. 1 The first contention made by counsel for appellant is that the complaint is deficient in substance, and hence does not support the verdict and judgment rendered and entered against the appellant. In this connection it is • contended that the allegation that “the effect of said transfer was to enable the said defendant (appellant) to obtain a greater percentage of his debt than any of the other creditors of said W. B. Jensen (the bankrupt) of the same class” is a mere conclusion of law, and hence leaves the complaint in this case as if no allegation upon that subject had been made. In making the foregoing statement in the complaint the pleader substantially followed the language of the Bankruptcy Act. It has repeatedly been held by the courts that, among other things, it is essential to allege in the complaint that the transfer or payment complained of will have the effect of giving the creditor to whom it is made a greater percentage .of his claim out of the bankrupt’s estate than other creditors of the same class will obtain.' The only question is whether an allegation substantially in the language of the statute is sufficient. This question was squarely presented for decision in Crooks v. People’s Nat. Bank, 46 App. Div. [527] 335, 61 N. Y. Supp. 604, 3 Am. Bankr. Rep. 243, and it was there held that the statement aforesaid is not a statement of a legal conclusion, but that it “is an allegation of a resultant fact, and it is such facts and not evidentiary facts that are to be alleged in a pleading.” The allegation substantially in the language of the statute was accordingly held to be sufficient. The subsequent cases of Schreyer v. Citizens' Nat. Bank, 74 App. Div. 478, 77 N. Y. Supp. 494, and West v. Bank of Lahoma, 16 Am. Bankr. Rep. 733, 16 Okl. 328, 85 Pac. 469, merely make it clearer that the rule as laid down in Crooks v. People's Nat. Bank, supra, is the proper one. Counsel for appellant have cited no case in support of their contention. We are of the opinion that upon principle, and according to the rules of pleading, the allegation is sufficient; and hence this objection is not tenable. It is further contended that no demand for the goods which are the subject of the action was proved. In view of appellant’s claim and contentions it was not -necessary to prove a demand. It is manifest from the record that if a demand had been made it would have been refused by appellant. The law does not require a demand to be made when it is clear that it would have been useless to make it. (1 Cyc. 698; Kimball v. Farmers' & Mechanics’ Bank, 50 Wash. 610, 97 Pac. 748; Coreland v. Kilpatrick, 38 Colo. 208, 88 Pac. 472.) 2 One of the principal reasons assigned in the petition for a rehearing why a rehearing should be granted was that we had erred in holding that there was not sufficient evidence of the bankrupt’s solvency to require a submission of that question to .the jury. In Loveland on Bankruptcy (3d Ed.) 186, in referring to what constitutes insolvency the author says: “A person is deemed insolvent whenever the aggregate of his property exclusive of any property which may he conveyed, transferred, concealed, or removed, or permitted to he concealed or removed, with intent to defraud, hinder, or delay his creditors, shall not, at a fair valuation, he sufficient in amount to pay his debts.” [528] In tbe foregoing statement must be included all property that may be exempt to tbe bankrupt under tbe state laws. At tbe last bearing we took special pains to bave counsel for appellant point out to us all of tbe property, either exempt or otherwise, wbicb they claimed was owned by tbe bankrupt at tbe time tbe transfer in question was made. We bare again carefully gone over tbe whole list of tbe property claimed by counsel and tbe valuation put upon it by them, and, without going into details or setting forth tbe several items, we are more firmly convinced than ever that under no possible view of tbe evidence could a jury of reasonable men bave found that tbe bankrupt’s property, taken at a fair valuation at tbe time of tbe transfer, was sufficient to pay bis debts wbicb were undisputed. Indeed, from a consideration of tbe evidence most favorable to appellant, all reasonable minds must arrive at but one conclusion, and that is that tbe whole of tbe bankrupt’s property would have fallen far short of paying tbe admitted claims against him. In making tbe foregoing statement we desire to say that we do not do so with tbe intention of reflecting upon tbe sincerity of counsel or upon their good faith in making their contention, but we make it because we are fully convinced that there is not sufficient evidence in tbe record from which a jury could find that tbe bankrupt was solvent at tbe time of tbe transfer. In view that after a second argument we are all convinced of tbe correctness of tbe foregoing statement, we shall refrain from setting forth tbe evidence or any part of it here. Tbe only purpose that could be subserved in doing so would be to show from tbe evidence itself that our conclusions are justified. Where, as in this case, we are thoroughly convinced that but one result is permissible, we must determine what tbe result shall be. Where counsel and this court disagree, we must assume tbe responsibility of deciding who shall prevail. We therefore adhere to our former conclusion that tbe district court committed no error in determining as a question, of law that tbe ‘bankrupt was insolvent at tbe time of tbe transfer. [529] It is again contended, as it was on the former appeal, that the bankrupt and bis wife owned certain real property as co-partners, and tbat although the title to the same was held in the name of the wife alone the bankrupt nevertheless had an interest therein. We fully considered that question on the first appeal, and there held that there was not sufficient evidence to justify a finding that the relation of business partners existed between the bankrupt and his wife at any time. The evidence upon that subject was even more meager on the last trial than it was on the former. In view of that fact, and for the reasons stated in the former opinion handed down on the first appeal, we adhere to the ruling there made. 3, 4, 5, 6 It is next contended that the court erred in admitting in evidence the schedules filed by the bankrupt in the bankruptcy proceedings as evidence of his assets and liabilities. We left these schedules out of consideration in arriving at our conclusions, and hence, if any error has been committed by the trial court in that regard, it is error without prejudice. Apart from this, however, the weight of authority clearly supports the ruling of the district court and the rule laid down by us in the former opinion, which, in any event, is the law of this case. But in no event could appellant have been prejudiced by the introduction of the schedules on the last trial, for the reason that the statements therein contained were, to say the least, declarations of the bankrupt, who was a witness for the appellant at the trial. This much he conceded. His testimony ■on the trial in some respects confirmed the statements contained in the schedules, and in others it was in conflict therewith. So far as the statements were confirmatory their admission could not have injured the appellant, and so far as they were in conflict the respondent had a right to show such conflict after directing the bankrupt’s attention thereto. [530] 7, & [529] It is further strenuously insisted that the court erred in charging the jury with respect to the question of appellant’s intention to receive a preference by the transfer of the property to it. While the district court perhaps might have chos [530] en language which would have been clearer and better adapted to inform the jury upon tha-t question, yet we are of the opinion that when all the instructions are considered together, as they must be, the charge as- a-whole could not have misled the jury. In instruction No. 4-the court specifically informed the jury what respondent was-required to prove in order to recover. No exception was taken to that instruction and no fault is found therewith. Counsel, however, contend that the court charged the jury that a specific intent to make and receive a preference need not be-' proved, and that this constituted error. In this connection it is insisted that under the law in force when the transfer-in question occurred a specific intent to give and receive a preference was necessary. The court gave two instructions-relating to that subject. Those two instructions must be-considered together, as no doubt the jury considered them.. If both are so considered, we are of the opinion that the appellant has no cause for complaint. The court did not charge the jury that an intent to prefer was not necessary;but what the court in effect told the jury was that it was not necessary to prove such an intent by direct evidence, and that from certain circumstances, if found to- exist, the intent might be presumed. The court, in charging the jury upon this subject, evidently attempted to follow the law as laid down by the United States Circuit Court of Appeals of the-Sixth circuit in the recent case of Kimmerle v. Farr, 189 Fed. 300, 111 C. C. A. 32. In that ease, after holding that the intent to prefer must be shown, it is said: “The intention to give a preference may he shown not merely hy proof of actual intent, hut hy its equivalent in law — that is, hy proof that the necessary result of the transaction was to create a preference — in which case the intention to give a preference will he presumed. Where the inevitable result of a transaction between a debtor and a creditor is to create a preference, the law will conclusively impute to .the debtor the intention to bring about the result necessarily arising from the nature of the act which he does.” What is to be presumed with regard to tke debtor, where the circumstances governing them are the same, must also be [531] presumed with respect to bis creditor. Tbe district court, in tbe instruction criticised, in effect told tbe jury just wbat is contained in tbe foregoing quotation, but did so in different language. 9 Tbe object of tbe bankruptcy law is to enforce equality among tbe bankrupt’s creditors. That sucb is tbe case is clearly stated in Re Blount (D. C.) 142 Fed. 263, in tbe following words: “The main object of the Bankruptcy Act is to secure an equal distribution of the assets' of an insolvent among all his creditors and prevent preferences. And it is the duty of the courts to carry this purpose into effect to the extent which the language of the act justifies. Schemes and artifices to evade the letter and spirit of the law will not be tolerated.” See, also, In re John J. Coffey, 19 Am. Bankr. Rep. 148. 10 Tbe facts in tbis case are beyond dispute that one of tbe ■officers of tbe appellant corporation personally inspected tbe stock of merchandise tbe bankrupt bad on band and was told tbe amount of tbe bankrupt’s unsecured liabilities at tbe same time, or about tbe time tbe transfer in question was made. He was also told that there, were mortgages amounting to at least $2600 on tbe real estate. Tbis officer was therefore charged with notice that tbe real estate was incumbered, and if be bad either sent some one to inspect tbe county records or bad taken tbe trouble to go tbe distance of a few blocks to inspect them himself be would have ascertained all about tbe condition of tbe real estate. He would have found that tbe bankrupt owned no interest in tbe real estate, but that be bad conveyed it all subject to tbe mortgages upon it; that is, that tbe purchaser bad agreed to pay tbe mortgages to tbe extent of $2000. Tbe jury on that branch of tbe case were fully justified in finding from tbe evidence that tbe officer in question bad full information, or was apprised of sufficient circumstances which if followed up would impart to him full information, concerning tbe ■ bankrupt’s insolvent condition. Moreover, from tbe overwhelming weight of testimony coming from disinterested witnesses tbe jury were not only justified in finding, but [532] were almost compelled to find, that appellant bad received, from tbe bankrupt about all of tbe salable or desirable goods be bad in stock. Tbe evidence is all but conclusive that after-appellant bad removed tbe furniture transferred to it there-■was not sufficient left in tbe bankrupt’s store to- continue in. business, and in fact be discontinued it within a very few days thereafter. When tbe fact that tbe bankrupt was-heavily indebted to others for goods purchased by him is kept in mind, and that all this was known to appellant’s officers, tbe conclusion is unavoidable that both tbe bankrupt as well as tbe appellant’s officers intended that appellant should be protected regardless of whether tbe other creditors received payment for their claims or not. Tbe jury, therefore, could have arrived at but one conclusion, namely, that a preference-was intended by tbe transfer in question. 11 It is also contended that tbe court erred in refusing to-allow appellant to prove that it bad on other occasions taken goods back- from tbe bankrupt and bad given him credit therefor. Tbe district court in that regard simply followed our decision on tbe former appeal, and, although counsel have assailed tbe correctness of that decision and have cited several cases which they claim bold to tbe contrary, we, after carefully examining those cases, are of tbe opinion that they are not in point. Moreover, we can see no good reason why tbe rule laid down in tbe former opinion is not tbe right one. We are of tbe opinion that it is tbe right one, and it is therefore adhered to, not only because it is tbe law of this case, but because in our opinion no-other rule would be permissible under tbe circumstances disclosed by this record. 12 Complaint is also made that tbe court erred in charging tbe jury with respect to tbe allowance of interest. Counsel for appellant devoted just six lines in their printed brief to this question, and perhaps for that reason tbe matter was inadvertently overlooked in our former opinion, and that fact was one of tbe reasons which induced us to grant a rehearing. Tbe court charged tbe jury that if they found for tbe plaintiff they should allow interest. [533] on tbe amount found by them to be owing by appellant at the rate of 8 per cent, per annum from the date of the transfer of the property, which was conceded to have taken place on February 14, 1909. Counsel contend that interest should be allowed only from the time a demand is made for the restoration of the goods, and, as in this case no demand was shown, interest should have been allowed only from the commencement of the action. In the case of Kaufman v. Tredway, 195 U. S. 271, 25 Sup. Ct. 33, 49 L. Ed. 190, it is held that interest should be allowed at least from the date the action was commenced. It is not determined in that ease, however, whether or not interest might be recovered for a period anterior to the commencement of the action, In Ommen v. Talcott (D. C.) 175 Fed. 261, it is held that interest is recoverable from the date on which the goods that were .transferred as a preference were, sold by the transferee. In Collier on Bankruptcy (9th Ed.) 827, it is said: "The judgment should include interest from the date of the preference.” Traders’ Nat. Bank v. Campbell, 14 Wall. 87, 20 L. Ed. 832 is cited in support of the statement. An examination of the opinion in that case, however, discloses that the court did not pass upon the question. We are of the opinion that in view of the authorities interest should be allowed from the time it is shown the transferee wrongfully held the property or money received by him. That is, from the time a demand is made upon him to return the same, and, in case no formal demand is made, then from the time a suit is instituted to recover back the money or property, since the commencement of an action in itself constitutes a demand. This rule seems to be based upon the theory that before demand for the property or money is made the party receiving and holding the same, although it may constitute a preference, is, nevertheless, not holding it wrongfully, and that he is not chargeable with interest until he does so. In this ease, therefore, the court permitted respondent to recover excessive interest. It is conceded that the transfer of the property [534] which constituted a preference was made on the 14th day ■of February, 1909. The record shows that this action was commenced on the 30th day of March, 1910, or one year, one month, and sixteen days after the transfer was made. The jury found the value of the property which appellant wrongfully received and held to be $735.90. Under the charge of the court the jury in their verdict allowed “interest thereon (said sum) at eight per cent, per annum from the 14th day of February, 1909, to date,” to wit, March 29, 1912. The interest at the rate of eight per cent, per annum from February 14, 1909, the date of the transfer, to March 30, 1910, the date of the commencement of this suit, amounts to the sum of $65.37. The judgment is therefore in excess of what it should be in the sum just stated, and hence should be reduced. There are two other assignments relating to the admission of evidence. An examination of the record discloses that the rulings complained of, even though they were conceded to be technical error, were, nevertheless, of that character which could in no event have prejudiced the appellant in any substantial right. For the reasons stated, the judgment of the district court dated the 29th day of March, 1912, should be, and it accordingly is, affirmed with the exception of the allowance of the excessive interest as before stated. To that extent the judgment should be, and it accordingly is, modified. The cause is remanded to the district court of Box Elder County with directions to set aside the judgment heretofore entered on the 29th day of March, 1912, and to enter a judgment for the plaintiff as of that date for the amount found by the jury, to wit, the sum of $735.90, with interest on said sum at the rate of eight per cent, per annum from the 30th day of March, 1910, to the 29th day of March, 1912, amounting to $117.60; said judgment to bear interest from said 29th day of March, 1912, at the legal rate until paid. It is further ordered that neither party recover costs in this court. McCARTY, O. J., and STRAUP, J., concur.