Godfrey v. Miller

California Supreme Court Sep 5, 1889 No. No. 11706Published

Before: Fox, Thornton

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Holding. The court held that the evidence was insufficient to support the finding that the defendant acted in good faith and without reasonable cause to believe the debtor was insolvent, as the transaction was not in the ordinary course of business and the defendant was put on notice of the debtor's insolvency.

Issues

Whether the evidence was sufficient to support the trial court's finding that the defendant acted in good faith and without knowledge of the debtor's insolvency.
Whether a transfer of property not made in the usual and ordinary course of business constitutes prima facie evidence of fraud under the insolvent act.

Disposition. reversed

Quotations verified verbatim against the opinion

“If the transfer was not made in the usual and ordinary course of business, the statute makes that fact itself prima facie evidence of fraud.”

“The fact that a sale of goods by an insolvent is not made in the usual and ordinary course of business is sufficient to charge the purchaser with notice of the insolvency of the seller.”

Synopsis

Insolvency—Transfer not in Usual Course of Business — Fraud.— A transfer of property made by a debtor to bis creditor, not in the usual and ordinary course of business, is prima Jacte fraudulent within the meaning of the insolvency act, and is sufficient to charge the transferee with notice of the insolvency of the transferrer.

Id.—Transferee when Charged with Notice of Transferrer’s Insolvency. —• A transfer of a horse and buggy, made by a debtor to his creditor on a Sunday, and accepted by the latter without trying the horse, and with knowledge that the debtor’s other property had been attached on the preceding day, and that another attachment was expected to be made on the following day, is not in the usual and ordinary course of business; and the transferee, under such circumstances, will be charged with notice of the transferrer’s insolvency, and with an intent to hinder, delay, and defraud other creditors of the transferrer.

Id. — Payment of Indebtedness Arising from Fiduciary Relation. — The transfer is not relieved of its fraudulent character by the mere fact that it was made in part payment of an indebtedness due to the transferee fy moneys held by the transferrer in a fiduciary capacity.

Opinion — Fox

Fox, J. This action was brought by plaintiff, as assignee of the estate of an insolvent debtor, to recover the possession or value of a horse and carriage, alleged to have been transferred by the insolvent to defendant, in violation of section 55 of the insolvent act.

The case was tried by the court, and judgment given for the defendant, from which, and from an order denying a new trial, the plaintiff appealed.

The following is one of the findings:—

“10. That the defendant took and received the property described in the complaint from the possession of said A. C. Gilbert within ten days before the filing of his petition as an insolvent debtor as aforesaid, to wit, on the fifteenth day of March, A. D. 1885, but that the same was purchased by the defendant from the said Gilbert for a valuable consideration in good faith, and without intent to hinder, delay, or defraud any creditor or creditors of said Gilbert, or to violate any provision of the insolvent act of 1880; that at the time of said sale and delivery of said property, said defendant had no reason[422]able cause to believe that said A. 0. Gilbert was insolvent, and that such transfer of said property was made with a view to prevent his property from coming to his assignee in insolvency, or to prevent the same from being distributed ratably among his creditors, or to defeat the object of, or in any way hinder, impede, or delay the operation of, or to evade any of the provisions of said act.”

It is this finding particularly that is attacked, on the ground that the evidence is insufficient to justify the same.

From other findings it appears that on and prior to the thirteenth day of March, 1885, said A. 0. Gilbert had collected moneys for the defendant to the amount of more than $800, including $607 which he had so collected on a note belonging to defendant, and of which last-named collection the defendant was not informed until on the said thirteenth day of March; that the moneys so collected by Gilbert for defendant had been used by Gilbert for his own benefit, without the knowledge or consent of defendant; that on the 14th of March defendant notified Gilbert by letter that he should call on him for the amount of said last collection; that on the 15th of March, which was Sunday, Gilbert went to the defendant, taking with him the horse and carriage described in the complaint, and informed defendant that he had none of defendant's money, and could not pay him; that certain of his property had been theretofore attached, and he had released the same; that on the day before (the 14th) it had again been attached by another creditor, and that he had been unable to release the same, and that he expected a further attachment would be levied on the following day (the 16th), and that if he were allowed time he could work out of his difficulties. He thereupon proposed to defendant that he should take the horse and carriage in part payment of the amount which he had collected on the $600 note, and after some negotiations

Godfrey v. Miller

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Synopsis

Opinion — Fox

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Concurrence — Thornton

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