Waite v. Citizens' State Bank of Mt. Vernon

• Court: Iowa Supreme Court
• Writing for the Court: PRESTON, J.
• Citation: Waite v. Citizens' State Bank of Mt. Vernon, 178 Iowa 1331, 160 N.W. 919 (Iowa 1917)
• Decision Date: 17 January 1917
• Docket Number: 30956
• Parties: ROBERT WAITE, Trustee, Appellant, v. CITIZENS STATE BANK, Appellee

160 N.W. 919

178 Iowa 1331

ROBERT WAITE, Trustee, Appellant, v. CITIZENS STATE BANK, Appellee

No. 30956

Supreme Court of Iowa, Des Moines

January 17, 1917

Appeal from Linn District Court.--MILO P. SMITH, Judge.

THIS is an action at law, brought by the trustee of the bankrupt estate of John W. Garrett to recover money paid on default judgment against Garrett within four months preceding the filing of the petition in bankruptcy. There was a trial to a jury, and, at the close of the testimony, the trial court directed a verdict for the defendant, and rendered judgment against plaintiff for costs. Plaintiff appeals.

Affirmed.

Barnes Chamberlain & Randall, for appellant.

Remley & Remley, for appellee.

PRESTON J. GAYNOR, C. J., WEAVER and EVANS, JJ., concur.

OPINION

PRESTON, J.

It is alleged that the defendant herein obtained a judgment against Garrett on September 15, 1914, for $ 141. On December 29, 1914, and within four months preceding that date, that is, on September 17, 1914, there was paid to the said bank on said judgment the sum of $ 115.14. An attachment was issued in the suit by the bank against Garrett, and different parties were garnisheed on Garrett's threshing accounts. These parties paid their money to the clerk of the district court, which was applied on the judgment as aforesaid. Nothing further was done until about December 29, 1914, when execution was issued for the small balance due on the judgment, and the execution was placed in the hands of the sheriff. Garrett was notified about the execution and immediately filed his petition in bankruptcy. On March 19, 1915, this suit was brought against defendant, the plaintiff claiming that the said payment on the judgment resulted in an unlawful preference; that, at the time the said bankrupt suffered the said judgment to be taken, he was insolvent, and the defendant bank then had reasonable cause to believe that the enforcement of such judgment would effect a preference. The defendant bank in this case admitted that it received the said sum of $ 115.14 on the judgment, but denied any unlawful preference.

The motion to direct a verdict was on the following grounds:

First. That the evidence failed to show that the bankrupt permitted or suffered a judgment to be entered against him, but that the evidence shows it was against his wish, and that it was necessary to show that the bankrupt permitted or suffered a judgment against him, intending thereby to create a preference.

Second. That there are no facts shown that would influence a reasonably prudent man to believe that the bankrupt was in fact insolvent when the money was paid on the judgment, and that the evidence is not sufficient to cause the bank reasonable ground for believing that Garrett was insolvent.

Third. That the evidence shows that another bank paid checks issued on said bank by the bankrupt, which showing is sufficient to show that Garrett was not in fact a bankrupt.

Fourth. That upon the whole record there is not sufficient evidence to sustain a verdict in favor of the plaintiff, should the jury return such a verdict.

The motion was sustained generally. The errors assigned relate to the ruling on the motion to direct a verdict, and in regard to the admission of testimony. Appellee contends that the errors assigned are not all argued. However this may be, the argument is directed principally to the question as to whether the creditor, the bank, had reasonable ground to believe that the debtor was insolvent, appellant contending that there was such evidence, and sufficient to take the case to the jury. As we understand counsel, when the matter is boiled down, this is really their only contention; for they say in argument that there was but one question to submit to the jury, and that was whether or not there was reasonable cause for the creditor to believe the debtor was insolvent; and they state that there can be no dispute that Garrett suffered a judgment to be rendered against him, and that the actual intent of the debtor was immaterial. This being so, we shall direct our attention to this one question. We may say, however, that it is doubtful whether it was shown that the bankrupt was insolvent at the time the judgment was entered and the attached property applied on the judgment. We think the evidence fails to show that the bank knew that the bankrupt was insolvent, if he was. The bankruptcy statute provides:

"A person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, with intent to defraud, hinder or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts." 30 Stat. at L. 544, Ch. 541.

And it is held that the fact that a debtor is adjudged a voluntary bankrupt does not raise a presumption of insolvency prior to the filing of the petition. Collier's Bankruptcy (10th Ed.), page 791.

The facts, stated as briefly as may be, on this point, are: That Garrett, the bankrupt, lived upon a rented farm of 200 acres and in the fall of 1914 had 80 acres of good corn, worth $ 1,600, 12 acres of oats, 15 tons of hay, worth $ 150, besides 7 head of horses, a complete threshing outfit, farm machinery, and some stock. He gave the note upon which judgment was rendered, in March, 1913. The evidence shows that Mr. Falcon, the president of defendant bank, went to see the Martelle bank, and learned that they had a bill of sale on Garrett's property as security, and that that bank held $ 600 worth of property over and above enough to pay its own claim and the rent. The Martelle bank wanted Mr. Falcon to leave his note, and they would collect it. The cashier of the defendant bank did not know of any other debts than what was due the bank, and the rent. But, however this may be, and without determining that point, we think the trial court properly directed the verdict on the one question which appellant concedes is the...