Dow vs. Sargent

Dow vs. Sargent.

C. was declared a bankrupt under the IJ. S. bankrupt act of 1841, on a petition filed against him by his creditors, September 21, 1842. It appeared, that August 5, 1842, the bankrupt had made a mortgage of land to secure a note due one of his creditors. The security was given at the urgent request of the creditor; and the bankrupt testified that, though he was in fact at the time deeply insolvent, ho supposed he could go on and pay his debts, and that he did not at the time intend to petition, nor expect to be proceeded against, in bankruptcy. — Held, that the mortgage was valid, and not within the condemnation of the provisions of the second section of the bankrupt act.

Writ or Entry, to recover a tract of land in ITopldnton, tried at the March term of the court of common pleas, 1844, upon the general issue. The plaintiff claimed the premises under a mortgage from one Nathaniel Curtis, dated August 5, 1842. The «defendant claimed title under a deed from the assignees in bankruptcy of said Curtis, dated April 26, 1848.

It appeared in evidence that on the 21st day of September, 1842, a petition was filed in the United States District Court for New-Hampshire against said Curtis as an involuntary bankrupt, upon which, after due proceedings had, he was, on the 21st of December, 1842, duly declared a bankrupt, under the act of Congress passed August 19, 1841, entitled “An act to establish a uniform system of bankruptcy throughout the United States and the assignees, under whose deed the defendant claimed, were then appointed.

Curtis, being called as a witness, testified that at the time when he gave the mortgage deed to the plaintiff, he owed the plaintiff the note described in the condition of the mortgage; that the plaintiff called upon him and insisted upon security for his debt, and he thereupon executed the mortgage, for the purpose of securing it. He farther testified, that at that time he was deeply insolvent1, owing several thousand dollars more than he could pay, but that he then supposed himself able to pay his debts, and so represented himself to the plaintiff and others, and ‘that he then had no intention to avail himself of the bankrupt act, nor did he then expect to be forced into bankruptcy. He also stated, that before the petition was filed against him in bankruptcy he had executed various mortgages of all his visible property, (copies of which were produced,) to various individuals, to whom he represented himself as able to pay his debts; and that the persons to whom these mortgages were made, had, upon his being declared a bankrupt, Relinquished any claim to the property mortgaged, and the same had gone into the hands of his assignees, for the benefit of his creditors generally.

The defendant contended, upon the evidence offered, that the mortgage from Curtis to the plaintiff, having been executed by Curtis, who was then deeply insolvent, as security to a creditor, less than two months before the petition was filed against him in bankruptcy, was fraudulent and void, under the second section of the bankrupt act, as against the defendant, who claimed under a sale by Curtis’s assignees.

A verdict was taken, by consent, for the plaintiff, subject. to the opinion of this court upon the foregoing case.

Pierce § Fowler, for the defendant.

Where a party mortgages afi his property, we hold that he must be understood as having knowledge of Ms condition and relations as a bankrupt. Whatever the intent of the party may be, if the conveyance is a fraud on the bankrupt act, or on general principles fraudulent, it is an act of bankruptcy. A voluntary conveyance to a creditor, with a design to give him a preference, is fraudulent. Doug. 86, 282; 1 Burr. 467; 3 Wils. 47; 2 Burr. 827; 1 Black. 362; Doug. 89, note; 5 Law Rep. 296, Arnold vs. Maynard; 5 Law Rep. 309, 311, Wakeman vs. Hoyt.

Perley & Ainsworth, for the plaintiff.

We understand the question to be, whether a conveyance, fairly made for the purpose of securing a bond fide debt, not in contemplation of bankruptcy, but within two months of the filing of a petition in bankruptcy, can be good. The conveyance is good unless given in contemplation of bankruptcy, and for the purpose of giving a preference. The proviso in the second section of the act cannot extend the meaning of the enacting clause. If the debtor contemplate bankruptcy, and the creditor concur, though it be more than sixty days before the act of bankruptcy, a conveyance is void; if the creditor does not concur, it is good. If within the sixty days, and the debtor contemplates bankruptcy, it is bad, although the creditor had no knowledge of what his debtor contemplated. But here the debtor did not contemplate bankruptcy. 3 C. P. 99. The Bankrupt Act, 6 Deo. 4, has an enactment like this; Owen on Bankruptcy 153.