Fisher v. Utendorfer

• Decision Date: 12 May 1897
• Docket Number: 10,312--(93)
• Citation: 71 N.W. 29,68 Minn. 226
• Parties: ELMER E. FISHER v. G. P. UTENDORFER
• Court: Minnesota Supreme Court

71 N.W. 29

68 Minn. 226

ELMER E. FISHER v. G. P. UTENDORFER

Nos. 10,312--(93)

Supreme Court of Minnesota

May 12, 1897

Appeal by plaintiff from an order of the district court for Sibley county, Cadwell, J., denying a new trial. Reversed.

Order reversed.

Ed. H Heubner and Taylor & Edwards, for appellant.

The judgment lien on the debtor's real estate did not constitute an unlawful preference, for there was no intention on the part of the judgment debtor to give a preference. Wright v. Fergus Falls, 48 Minn. 120; In re Church, 40 Minn. 39. Nor had the judgment creditors reasonable cause to believe their debtor insolvent. It is only when made to appear that the creditor had knowledge of such facts as are clearly sufficient to put him upon inquiry that he becomes chargeable with reasonable belief. Dow v Sutphin, 47 Minn. 479; Baumann v. Cunningham, 48 Minn. 292. But even if the judgment lien shall be held to have constituted an unlawful preference, the defendant can not in this action avail himself of that. He can not attack the judgment lien, nor the plaintiff's title acquired thereunder, on the ground that it is a preference. In re Church, supra; Morgan v. Abbott, 148 Mass. 507; Tuite v. Stevens, 98 Mass. 305.

Thos Hessian, for respondent.

Cited Yanish v. Pioneer, 60 Minn. 321; Thomas v Beals, 154 Mass. 51; Hastings v. Heller, 47 Minn. 71; Shea v. Security, 67 Minn. 287; Campbell v. Jones, 25 Minn. 155; Freeland v. Freeland, 102 Mass. 475.

OPINION

MITCHELL, J.

In this action, which was brought to recover possession of certain real property, the plaintiff claimed title under a sale on execution under a judgment rendered and docketed August 28, 1893, against one Rothmund and in favor of the co-partnership of Dodson, Fisher & Co., of which plaintiff was a member, at which sale plaintiff bid in the property, and from which there had been no redemption. The defendant claimed title under a deed from the assignee in insolvency of Rothmund in an assignment for the benefit of all his creditors, executed September 5, 1893, pursuant to the insolvency law of 1881. In his answer defendant seeks to avoid the judgment and execution sale under which plaintiff claims, on the ground that it constituted an unlawful preference within the meaning of the fourth section of the insolvency law, G. S. 1894, § 4243. The court found that Rothmund was insolvent, and that Dodson, Fisher & Co. knew that fact when they commenced their action and when they obtained their judgment against Rothmund by default, but the court did not find that Rothmund suffered judgment to be taken against him with intent to give Dodson, Fisher & Co. a preference over his other creditors, nor did it make any findings that were equivalent to that.

There are, therefore, no findings which, under any view of the case, would support a judgment in favor of the defendant. His counsel seems to assume that if any one who is insolvent within the meaning of the statute permits judgment to be taken against him without making an assignment for the benefit of all his creditors, the intent to give a preference necessarily follows as a conclusion of law or as a conclusive inference of fact. This assumption is based upon a misapprehension as to what was decided in Yanish v. Pioneer, 60 Minn. 321, 62 N.W. 387, to which we had occasion to refer in Bean v. Scheffer, supra, page 33, 70 N.W. 854. We have always held that, to avoid a transaction as an unlawful preference under the provisions of the insolvent act, three things must concur, viz.: (1) The insolvency of the debtor; (2) notice of that fact on part of the creditor; (3) an intent on part of the debtor to give a preference, or that a preference should be obtained. Baumann v. Cunningham, 48 Minn. 292, 51 N.W. 611.

We have also always held, or assumed as elementary law, that this intent is essential, whether the conduct of the debtor was active, as, for example, in making a payment or giving security, or merely passive, in suffering judgment to be taken against him without making an assignment for the benefit of all his creditors. In re Church, 40 Minn. 39, 41 N.W. 241; Wright v. Fergus Falls, 48 Minn. 120, 50 N.W. 1030. Of course, this intent may, in every case, be inferred from circumstances; and, as every man must be presumed to have intended the natural and necessary consequences of his own acts, the evidence may be conclusive, as where a debtor, knowing that he is insolvent, not merely technically within the meaning of the statute, but in the sense of an entire inadequacy of assets to pay all his debts, pays or actively secures one of his creditors, or passively permits one of his creditors to obtain a preference by taking judgment against him. Hastings v. Heller, 47 Minn. 71, 49 N.W. 400; Tripp v. Northwestern, 45 Minn. 383, 48 N.W. 4; Thompson v. Johnson, 55 Minn. 515, 57 N.W. 223; Penney v. Haugan, 61 Minn. 279, 63 N.W. 728.

But, however proved, and whether the conduct of the debtor is active or merely passive in failing to do something which he ought to do, in order to avoid a transaction as an unlawful preference under section four of the insolvency act of 1881, G. S. 1894, § 4243, the same intent on part of the debtor to give or allow a preference must exist which is required to make the act of omission or commission a misdemeanor under section three of the statute, G. S. 1894, § 4242. In the Yanish case the debtor corporation was not merely technically insolvent, but hopelessly so in fact; and its officers must have known this, and yet, when sued by one of its creditors, they remained perfectly passive, and allowed judgment to be taken against the corporation by default, without making an assignment for the benefit of creditors. The trial court having found, however, that it, the insolvent corporation, neither hindered nor facilitated the creditor in obtaining the judgment, but remained strictly passive, the contention of counsel for the judgment creditor was that mere passive inaction on part of an insolvent debtor can never, under any circumstances, constitute an intent to give a preference, or to allow a preference to be obtained; that there must be some affirmative act on his part in order to constitute the giving of a preference within the meaning of the statute; that an insolvent debtor, when sued on a claim to which he has no defense, never, under any circumstances, owes the active duty of making an assignment in order to prevent the suing creditor from obtaining a preference over others. And the great effort of counsel was to distinguish the case on that ground from Wright v. Fergus Falls, supra, where the debtor actively colluded with the creditor in the attempt to secure a preference. What was said in the Yanish case was with reference to the state of facts before the court, and the contention of counsel in that case.

2. A question going more to the merits of this case is whether the defendant is in position to assail the judgment as an unlawful preference under the insolvent act. The assignee never took any steps to have the judgment lien or the execution sale set aside. He merely...