Daniels v. Palmer

• Decision Date: 06 July 1886
• Parties: DANIELS, RECEIVER, ETC., v PALMER AND ANOTHER.
• Court: Minnesota Supreme Court

35 Minn. 347

29 N.W. 162

DANIELS, RECEIVER, ETC.,vPALMER AND ANOTHER.

Supreme Court of Minnesota.

July 6, 1886.

Appeal from a judgment of the district court, Goodhue county.

Chas. C. Willson, for appellant, Milton J. Daniels, Receiver, etc.

W. C. Williston, for respondents, H. H. Palmer and another.

MITCHELL, J.

This action was brought by plaintiff, as receiver, to recover certain property and money alleged to have been conveyed and transferred by defendant Wells, an insolvent debtor, to defendant Palmer, with a view of giving a preference to certain creditors, contrary to the provisions of the “insolvent law;” Palmer having, at the time, “reasonable cause to believe” that Wells was insolvent. Gen. Laws 1881, c. 148, § 4. The court submitted to a jury the single issue whether, at the time of this transfer and conveyance, Palmer had reasonable cause to believe that Wells was insolvent. The court, in his charge, instructed the jury that “an insolvent is a person whose estate is not sufficient to pay his debts, or one who is unable to pay his debts from his own means. A person is solvent who has property subject to legal process sufficient to satisfy all his legal obligations.” An exception to this instruction raises the principal question on this appeal, viz.: What constitutes insolvency, within the meaning of this statute?

The term “insolvency” is not always used in the same sense. It is sometimes used to denote the insufficiency of one's entire property and assets to pay all his debts. This is its popular and most general meaning. Herrick v. Borst, 4 Hill, 650. But it is also used, in a more restricted sense, to express the inability of a person to pay his debts in the ordinary course of business. This is the sense in which it has been invariably held to have been used in all the various bankrupt acts of England and America.

In Bayly v. Schofield, 1 Maule & S. 338, it is said: “‘Insolvency,’ as respects a trader, means that he is not in condition to pay his debts in the ordinary course, as persons carrying on trade usually do; and it does not follow that he is not insolvent because he may ultimately have a surplus, upon the winding up of his affairs.”

So, in Shone v. Lucas, 3 Dowl. & R. 218, it is said: “‘Insolvency,’ within the meaning of the bankrupt laws, does not mean an inability to pay 20 shillings on the pound, when the affairs of the bankrupt shall be ultimately wound up; but a trader is in insolvent circumstances when he is not in condition to pay his debts in the usual and ordinary course of trade.”

The same definition has been given of the term as used in the insolvent law of Massachusetts, which, in respect to the matter now under consideration, is very similar to our own. Gen. St. Mass. 1860, c. 118, § 89, (Pub. St. Mass. c. 157, § 96.)

In Thompson v. Thompson, 4 Cush. 127, SHAW, C. J., says: “By the term ‘insolvency,’ however, as used in these statutes, we do not understand an absolute inability to pay one's debts, at some future time, upon a settlement and winding up of all a trader's concerns; but a trader may be said to be in insolvent circumstances when he is not in a condition to pay his debts in the ordinary course, as persons carrying on trade usually do.” This definition has been repeatedly reasserted by the same court. Lee v. Kilburn, 3 Gray, 594; Vennard v. McConnell, 93 Mass. 561;Barnard v. Crosby, 6 Allen, 327.

The same construction has been placed upon the term as used in the late United States bankrupt act. Rev. St. U. S. § 5128.

In Toof v. Martin, 13 Wall. 40, the court, after referring to the more general and popular meaning of the word “insolvency,” add: “But it is also used in a more restricted sense to express inability of a party to pay his debts, as they become due, in the ordinary course of business. It is in the latter sense that the term is used when traders and merchants are said to be ‘insolvent;’ and, as applied to them, it is the sense intended in the act of congress.” To the same effect, see Wager v. Hall, 16 Wall. 599; Buchanan v. Smith, Id. 308; Dutcher v. Wright, 94 U. S. 557;Merchants' Bank v. Cook, 95 U. S. 342.

That our statute is a bankrupt law has been repeatedly held by this court. Wendell v. Lebon, 30 Minn. 234;S. C. 15 N. W. Rep. 109;In re Mann, 32 Minn. 64;S. C. 19 N. W. Rep. 347;Simon v. Mann, 33 Minn. 414; S. C. 23 N. W. Rep. 856;Jenks v. Ludden, 27 N. W. Rep. 189. And when the legislature, in such an act, employed terms which had acquired this certain and well-understood meaning, as used in the various bankrupt acts of both England and the United States, it is to be presumed that they used them in the same sense.

It should be remembered, however, that formerly bankrupt laws applied only to “traders.” This was true of the English statutes down to 1861. It was true of the United States bankrupt act of 1800, and substantially so of the involuntary bankruptcy features of that of 1841. Hence some of the definitions of the term “insolvent” were made with special reference to “traders.” But later statutes, including our own, apply to all insolvent debtors, whether traders or non-traders. Now, the test of insolvency on the part of a merchant or other trader may not be strictly applicable to a farmer, mechanic, or other non-trader. The general abstract definition of “insolvency,” as “inability to pay one's debts in the ordinary course of business,” has reference to the usages of the trade or business in which the person is engaged, and of the place in which he is carrying it on. Even as applied to traders, this definition must be...