Torlina v. Trorlicht

• Decision Date: 28 February 1889
• Citation: 5 N.M. 148,21 P. 68
• Parties: TORLINAv.TRORLICHT et al.
• Court: New Mexico Supreme Court

5 N.M. 148

21 P. 68

TORLINA

v.TRORLICHT et al.

Supreme Court of the Territory of New Mexico.

Feb., 1889.

Error to district court, Bernalillo county; BRINKER, Judge.

On an affidavit for attachment, in assumpsit, under subdivision 4, section 1923, Compiled Laws, providing that an attachment may issue “when the debtor is about fraudulently to convey or assign, conceal or dispose of his property or effects, so as to hinder, delay, or defraud his creditors,” it is not sufficient ground that the debtor is about to make an assignment of property, the effect of which will be to delay creditors. Mere delay, which is a necessary incident to the conversion of property into cash to pay debts is not per se fraudulent; the language of the statute “about fraudulently to convey” clearly implies that there may be a conveyance or assignment which will merely delay creditors, as an incident to the transaction, without being fraudulent. But the delay must be so unreasonable as unduly to embarrass or hinder the creditor; and what constitutes such unreasonable delay must depend upon the particular circumstances of each transaction. Where there has been no such delay, the law will not impute fraud, especially not if it appear that the debtor acted in good faith, with the honest intent to apply his property to the just payment of his debts.

Neill B. Field, for plaintiff in error.

Mr. Childers, for defendants in error.

LONG, C. J.

The plaintiff in error was the plaintiff in the court below. There, in the district court of the county of Bernalillo, the plaintiff filed, in the office of the clerk of said court, his declaration in assumpsit and an affidavit for attachment. No question arises as to the sufficiency of the affidavit. Among other averments, it contains the following: “The said affiant has good reason to believe, and does believe, that the said August Trorlicht and J. Henry Hohnstrater, partners in trade under the firm name of Trorlicht & Hohnstrater, are about fraudulently to convey, assign, conceal, and dispose of their property and effects so as to hinder, delay, and defraud their creditors.” Upon the affidavit issue was taken, the parties stipulated to waive a jury, and the cause was on such stipulation submitted to and tried by the court. After the close of the evidence the plaintiff asked the court to declare the law to be as follows: “ First. If it appears from the evidence that, at the time of the suing out of the writ of attachment in this cause, the defendants were about to sell, assign, convey, or dispose of their property or effects, so as to hinder, delay, or defraud their creditors, the truth of the allegations of the affidavit for attachment is sustained. Second. The law presumes that every person intends that the reasonable and probable consequences of an act shall follow its commission, and, if it appears from the evidence that at the time of suing out the writ of attachment in this cause the defendants were about to make an assignment of all their property, and that the result of such assignment would be to hinder, delay, or defraud their creditors, then the law conclusively presumes that such assignment was about to be made with intent to hinder, delay, or defraud the creditors of the defendants, and the finding should be for the plaintiff. Fifth. Any assignment contemplated by the defendants, the reasonable and probable result of which was to hinder their creditors in the collection of their debts, is sufficient to sustain the attachment in this cause. Sixth. Any assignment contemplated by the defendants, the reasonable and probable result of which was to delay the creditors in the collection of their debts, is sufficient to sustain the attachment in this cause.” The court declined to declare the law to be as stated in said requests, and found for the defendants on the attachment proceeding, and rendered judgment on such finding, and also rendered a personal judgment for the sum of $1,650.30 in favor of the plaintiff, and against the defendants, on the averments of the declaration. It is the finding for the defendants on the issue under the affidavit in attachment and the refusal to declare the law as asked that is assigned for error.

The defendant in error contends, the court cannot review these questions. That contention is not sustained. The proposition of law which plaintiff asked the court to declare we conceive to be, in effect, that any assignment, contemplated or about to be made by a debtor, the effect or result of which is to hinder or delay his creditors, is, under the statute of this territory relating to attachments, fraudulent as matter of law. We are aware that there is much respectable authority which gives strong support to the plaintiff's contention on this question, but believe the better reason is with the authorities which limit the proposition. The court below was not asked to declare that every assignment having the effect to create an unreasonable delay to the creditor should be held fraudulent, but to so declare if the assignment resulted in delay merely, however short the time might be, or however beneficially it might result to the creditor. In the nature of things, every assignment must to some extent delay the creditor; but is the mere delay which is a necessary incident to the conversion of property into cash to pay debts to be held per se fraudulent? Suppose such a transaction to be made, as matter of fact, with the honest intention by the debtor, to enable him thereby, with all reasonable speed, to make early sale of the property and pay all his debts. Shall it be held fraudulent because some delay or hindrance shall occur to the creditor as a necessary incident to the honest application of the property to the payment of debts? We think not. Mr. Burrill, in his work on Assignments, (section 335,) says: “The term ‘delay’ has an obvious reference to time, and ‘ hinderance’ to the interposition of obstacles in the way of a creditor; but, to a certain extent, the one involves and includes the other. In point of fact and as actually applied by the courts, they are always taken together. The following are prominent instances in which assignments have been declared void on the ground of hindrance and delay; where the time of sale, or of collection by the assignee, or of finally closing the trust, has been, by the terms of the assignment, unreasonably or indefinitely postponed.”

Here is to be found, at least under the fourth subdivision of section 1923 of our Compiled Laws, the true distinction and the real test to which every assignment, conveyance, or disposition of property should be brought. The test should be not does the conveyance or assignment result in delay merely to the creditor, but does it involve unreasonable delay? and what would or would not be unreasonable delay must be determined by the particular facts of each transaction. If the delay was manifestly beneficial to the creditor, or one which in its probable result would be so to the creditor, it would not be unreasonable. While the failing debtor should be required to act in the utmost good faith towards his creditors, he should not be tied up with arbitrary inferences, unreasonable in kind, which would prevent him from realizing for his creditor, either by sale or assignment, the highest possible value for his property, while intending to apply the same to the payment of his debts, so long as he acts therein in good faith, and so as not to create an unreasonable delay in the conversion of the property. The phraseology and spirit of the statute are both in harmony with this view of the question.

It is provided in section 1923, Comp. Laws, that creditors may sue their debtors in the district court by attachment in certain cases, among which are the following: “ Fourth, when the debtor is about fraudulently to convey or assign, conceal or dispose of, his property or effects, so as to hinder, delay, or defraud his creditors.” The language of this statute must be regarded in giving it construction, as well as its spirit. It does not make the ground of attachment to be that the debtor is about to convey or assign his property so as to hinder or delay his creditors,” but the words “convey” and “assign” are qualified and limited by the adverb “fraudulently;” so that thephrase should be read, in effect, “is about to fraudulently convey” or “fraudulently assign.” This language clearly implies that there may be a conveyance or an assignment which will merely delay creditors, as an incident to the transaction, and yet not be fraudulent. An intent to use language with that import by the legislative department would be well founded in reason, and such construction of the law of attachments would be more advantageous both to the debtor and creditor, as it enables the debtor to sell his property, so long as he acts therein in good faith, without involving unreasonable delay, and to apply the proceeds to the payment of his debts, and yet gives to the creditor his right to attach, if the debtor acts in bad faith, or by means of a transaction creating an unreasonable postponement of payment. Such a rule brings the transaction attached to this test, is the delay so unreasonable in time and character as unduly to embarrass or hinder the creditor? If so, fraud may be imputed, But if there is delay merely, not unreasonable under all the circumstances, fraud will not, as matter of law, be imputed to the transaction, especially if it appear that the debtor is acting with an honest intent in fact to apply his property to the just payment of his debts. In the case of Meyer v. Black, 16 Pac. Rep. 620, this court considered substantially the same question, the same arising upon a written assignment, and applied to the facts of that case the rule here stated. The conclusions then reached are not only strengthened by the reasons before stated in this case, but also by some additional authority. In Minnesota (s...