Fisher v. Utendorfer

• Decision Date: 12 May 1897
• Citation: 71 N.W. 29,68 Minn. 226
• Parties: FISHER v UTENDORFER.
• Court: Minnesota Supreme Court

68 Minn. 226

71 N.W. 29

FISHERvUTENDORFER.

Supreme Court of Minnesota.

May 12, 1897.

(Syllabus by the Court.)

1. To render a conveyance or security voidable under the fourth section of the insolvency act of 1881 (section 4243, Gen. St. 1894), an intent on part of the debtor to give or allow a preference to one creditor over others is essential, whether the preference is secured by the active conduct of the debtor or by his passive conduct in suffering judgment to be obtained against him without making an assignment for the benefit of all his creditors.

2. Such intent does not necessarily follow as a conclusion of law or inference of fact merely from the fact that one who is technically insolvent within the meaning of the statute allows judgment to be obtained against him without his making such an assignment.

3. Former decisions reviewed and explained.

4. A conveyance of or lien upon land cannot be avoided by a purchaser of the property from the assignee in insolvency merely on the ground that it constituted a preference in violation of the provisions of the insolvent law. This can only be done by the assignee or receiver himself, by legal proceedings instituted for that purpose.

5. Distinction noted between conveyances merely voidable as preferential under the insolvent law and conveyances made by a debtor with intent to hinder and defraud his creditors.

Appeal from district court, Sibley county; Francis Cadwell, Judge.

Action by Elmer E. Fisher against G. P. Utendorfer. The court found for defendant, and from an order denying a new trial plaintiff appeals. Reversed.

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

Thomas Hessian, for respondent.

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 Rothmond 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 Rothmond 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 insolvent law (section 4243, Gen. St. 1894). The court found that Rothmond was insolvent, and that Dodson, Fisher & Co. knew that fact when they commenced their action and when they obtained their judgment (which was by default) against Rothmond; but the court did not find that Rothmond 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. Fuel Co., 60 Minn. 321, 62 N. W. 387, to which we had occasion to refer in Bean v. Scheffer (April Term, 1897) 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 & Graves Manuf'g Co., 40 Minn. 39, 41 N. W. 241;Wright v. Bank, 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. Malting Co. v. Heller, 47 Minn. 71, 49 N. W. 400;Tripp v. Bank, 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 4 of the insolvency act of 1881 (section 4243, Gen St. 1894), 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 3 of the statute (section 4242, Gen. St. 1894). 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,...