Washburn v. Huntington

California Supreme Court Apr 17, 1889 No. No. 12666Published

Before: Thornton

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Holding. The court held that while the evidence supported the finding that the transfer was a fraudulent preference under the insolvent act, the trial court erred by failing to conclude whether the plaintiff was entitled to recover the specific property before awarding monetary damages.

Issues

Whether the evidence supported the finding that the debtor was insolvent and the defendants had reasonable cause to believe so at the time of the transfer.
Whether a transfer made outside the usual course of business constitutes prima facie evidence of fraud under the insolvent act.
Whether a judgment for the value of property in an action for possession is valid without a finding that the plaintiff is entitled to recover the property itself.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“We entertain no doubt that the finding that when the defendants accepted the transfer of the accounts from Jones they had reasonable cause to believe that he was insolvent, is sustained by the evidence.”

Synopsis

Appeal from a judgment of the Superior Court of Sacramento County, and from an order refusing ’a new trial.

The action was brought by the assignee in insolvency of an insolvent debtor, to recover certain personal property which the debtor had transferred to the defendants. The insolvent, A. F. Jones, had been engaged in business as a blacksmith, and the defendants, wholesale dealers in iron, had sold him goods for a period of about two years prior to his insolvency. At the time of the transfer in question, the insolvent owed the defendants about $360 for goods sold him by them. The evidence of the insolvent, and of one Sheets, an agent of the defendants, tended to show that the defendants had repeatedly demanded payment of this balance, but that the insolvent had repeatedly expressed to them his inability to pay. On the trial, the plaintiff, for the purpose of showing the insolvency of A. F. Jones, called as a witness one Hinkle, with whom the insolvent had done business, who testified, against the objection of the defendants, to certain conversations had with the insolvent, in which he had stated his inability to pay his debts at the time of the transfer. The further facts are stated in the opinion of the court.

Thornton, J. —This action is brought by the plaintiff, as assignee in insolvency of .one Jones, to recover certain book-accounts transferred by Jones to the defendants on the 27th of July, 1886. The transfer was made by orders drawn by Jones on his debtors in favor of defendants. Within less than one month after the transfer, viz., on the twenty-third day of August, 1886, Jones filed his petition in insolvency, and on the same day was declared an insolvent.

[575]The ground on which a recovery in the action was urged-is, that the defendants, when they received and accepted the transfer above mentioned, had reasonable cause to believe that the transferrer was insolvent, and that such transfer was made with a view to prevent the property of the transferrer from coming to his assignee in insolvency, or from being distributed ratably among the creditors of the transferrer, and to defeat the object of, and hinder, impede, and delay the operation, and to evade the provisions of the act of insolvency of April 18, 1880, by preventing the property of the assignor from being subjected to the payment of the debts of the transferrer other than the debt due to the defendants.

It is urged that the evidence is insufficient to show that Jones was insolvent on the 27th of July, 1886. We do not think this contention maintainable. The evidence of the witnesses of Jones, Sheets, and Hinkle, all tended to show that Jones was then insolvent, and justify the court in so finding.

We will remark here, in relation to the evidence of Hinkle, which attorneys for defendants (appellants here) contend was improperly admitted in the court below, that in our view it was admissible as relevant to the issue of Jones’s insolvency on the 27th of July, 1886.

It is further contended that the evidence is insufficient to justify the finding that the. .defendants had reasonable cause to believe Jones insolvent on the 27th of July, 1886, or that they had any cause to believe that the assignment was made with a view to prevent the property of Jones from coming into the hands of the plaintiff as assignee, or to evade any of the provisions of the insolvent act, or to impede its provisions.

We think that the facts deposed to by Jones and Sheets were sufficient to put defendants on inquiry as to Jones’s solvency, which inquiry, if prosecuted by defendants, would have disclosed to them that Jones was, when he made the transfer above mentioned, unable to pay his

Washburn v. Huntington

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