Dow v. Sutphin

• Decision Date: 09 December 1891
• Citation: 50 N.W. 604,47 Minn. 479
• Parties: DOW ET AL. v SUTPHIN.
• Court: Minnesota Supreme Court

47 Minn. 479

50 N.W. 604

DOW ET AL.vSUTPHIN.

Supreme Court of Minnesota.

Dec. 9, 1891.

(Syllabus by the Court.)

1. Under the insolvency law, (Gen. Laws 1881, c. 148, § 4,) an assignee or receiver may, on the ground that it is a fraudulent preference, test the validity of a mortgage given to a creditor by an insolvent debtor, in any action brought against him in which the creditor's rights as a mortgagee are involved.

2. In order to make out that a creditor has reasonable cause to believe his debtor insolvent, knowledge must be shown of some fact or facts calculated to produce a reasonable belief that the latter is insolvent; but, if such facts are known to the creditor as are clearly sufficient to put a person of ordinary prudence on inquiry, he is chargeable with the knowledge which such inquiry would have furnished him.

3. Held, that the finding of the court below that these plaintiffs had reasonable cause to believe their debtors insolvent, when taking a mortgage upon personal property, was justified by the evidence.

Appeal from district court, St. Louis county; STEARNS, Judge.

Action by James O. Dow and others against John B. Sutphin for conversion. Judgment for defendant. Plaintiffs appeal. Affirmed.

Wm. E. Wright and Wm. B. Phelps, for appellants.

White, Reynolds & Schmidt, for respondent.

COLLINS, J.

But two questions are presented by this appeal. One is whether the plaintiffs had reasonable cause to believe Rickard, Witt & Co. insolvent at the time of the execution and delivery of the chattel mortgage under which they claim the right to recover in this action for conversion. The other question is as to the right of the defendant, who is the assignee of Rickard, Witt & Co. under the insolvency statutes, to defend herein upon the ground that when taking the mortgage the plaintiffs had obtained the fraudulent preference forbidden by the law, having at the time reasonable cause to believe the mortgagors insolvent. Rickard, Witt & Co. were retail butchers at Duluth, and were insolvent, beyond any question. The plaintiffs, engaged in wholesaling butchers' supplies at Red Wing, held a past-due account against them for the sum of $1,678.60. One of the firm, Mr. Dow, went to Duluth to collect the money, but, being unable so to do, took the debtors' notes, dated July 17, 1888, maturing in a short time, secured by the mortgage herein involved, which was duly filed, and covered “all books, book-accounts, store building, (frame,) with fixtures, consisting of meat, racks, scales, one sleigh harness, (two single sets,) together with all and singular all personal property owned by” the mortgagors, of the total value of about $3,500, considerably less than the amount of their indebtedness. The building mentioned stood upon leased ground, and, in fact, according to the evidence, the mortgage was upon and included all property belonging to the insolvents, who soon thereafter, on August 8th, made an assignment to this defendant. The property in dispute was inventoried and turned over to him, and he proceeded to convert the same into money for the benefit of the creditors. Taking up the second, in order of statement, of the questions to be disposed of, it may be said that the defense found in the answer herein was a perfectly proper one, and fully justified by the statute, (Gen. Laws 1881, c. 148, § 4,) which provides that “the assignee may by action, or other proper...