Williams v. Cohen

Cochran, J., delivered the opinion of this Court.- This bill was filed for the purpose of setting aside a deed of surrender and release, executed by Herman Pollack to Moses Cohen, on the 26th of December, I860,- upon the alleged ground, that Pollack was then insolvent, and that the deed to Cohen, one of his creditors, was an undue preference within the meaning of sec. 7, Art. 48 of the Code. It is admitted that Pollack did not apply for the benefit of the insolvent laws until the 18th of February, 1862, about fourteen months after the date of the deed. There is no pretence that the deed was executed for an insufficient consideration, or that it was fraudulent in fact; and we have, therefore, to decide the simple question, whether it -was executed by the grantor when he had “ no reasonable expectation- of being exempted from liability to execution on account of his debts-without petitioning for the benefit of the insolvent laws.” The 7th section of Art. 48 of the Code, taken as- a whole,unquestionably contemplated a class of cases in which the1 acts- of an insolvent before his application cannot be avoided, notwithstanding his actual insolvency at the time the acts were done. It is not difficult to imagine a case where one,knowing himself to be insolvent, might, nevertheless, very reasonably conclude, from the state of his credit, the increas*. ⁴⁹⁷ ing profits of his business, or enhancing value of his property, that he could protect himself from liability to execution and pay his debts in full.

If in such a case as this, the debtor' should part with a portion of his property to satisfy pressing claims, or should convey it to a creditor in satisfaction of an existing debt for the purpose of maintaining Ms credit, and enabling him to provide for the eventual payment of all his debts, without incurring liability to execution on account thereof, such a conveyance could not reasonably be said to fall within that class of acts declared to be void by this section. It would, in fact, be the case of one, who, notwithstanding his insolvency and subsequent application for the benefit of the insolvent laws, nevertheless, had a reasonable expectation of being exempted from liability to execution, and whose act could not be impeached as within the meaning of this provision. The terms “ no reasonable expectation of being exempted, <fec., clearly imply a knowledge or belief on the part of the insolvent of his inability to pay bis debts, for, without such knowledge or belief, he ■would necessarily be presumed to have a reasonable expectation of being exempted from execution without applying for the benefit of the insolvent law's. If, however, a conveyance of property is made by a debtor to a creditor to satisfy or secure a debt at a time when the debtor knows or believes himself to be insolvent, and does not expect to be relieved from execution for his debts without the aid of tbe insolvent laws, the necessary presumption would be, that the conveyance was executed with a view of applying for the benefit of the insolvent lawsj and, in such a ease, the conveyance would be void within the meaning of this provision of the Code.

Onr conclusion is, that this section contemplates as void or voidable, only such acts of a debtor In derogation of the rights of his creditors as may be done by him when he knows or believes himself to be insolvent, and has no reasonable expectation of exempting himself from execution without the aid of the insolvent law's, ⁴⁹⁸ or expressing the same proposition in equivalent terms,- only such acts as the debtor may be presumed to have done in derogation of the rights of his creditors, with a view of applying for the benefit of the insolvent laws. The provision in question was codified from the Act of 1854, chap. 193, sec. 7,- which in substance and effect is