1. When the issue to be decided is whether a judgment against an
insolvent was obtained with a view to give a preference, the
intention of the bankrupt is the turning point of the
case, and all the circumstances which go to show such intent should
be considered.
2. Hence, when an ordinance of a state gave a preference as to
time of trial in the courts in suits on debts contracted after a
certain date, and the insolvent debtor gave his son and niece new
notes for an old debt, so as to enable them to procure judgments
before his other creditors, the fact that the ordinance was void
does not repel the inference of intent to give and obtain a
preference, and when a judgment was so obtained which gave priority
of lien, it will to that extent be null and void,
Little, as assignee in bankruptcy of J. R. Alexander, the
father, filed a bill against T. L. Alexander, the son, to have
Page 88 U. S. 501
certain real estate of the bankrupt, the father, and which had
come as part of his assets to the complainant as assignee, relieved
from the apparent encumbrance of a judgment which the son had got
against it, the father having made no opposition to the obtaining
of the judgment.
The court below dismissed the bill, and the assignee in
bankruptcy took this appeal.
The judgment was docketed on the 19th day of May, 1869, and on
the 1st day of September, within less than four months thereafter,
the petition was filed on which the defendant was declared
bankrupt.
MR. JUSTICE MILLER stated the case and delivered the opinion of
the Court.
The question in the case on which the decision of it must turn
is whether the bankrupt intentionally aided in the procurement of
this judgment, in order to give his son a preference over his other
creditors. We are of opinion that he did.
It is quite apparent that from the close of the late civil war,
Alexander, the father, was insolvent, and that this was well known
to the son, to whom he was indebted between two and three thousand
dollars. He also owed other debts, and his property consisted of
two or three parcels of land, and perhaps a thousand dollars' worth
of personal property.
By an ordinance of the State Convention of North Carolina of
March 14, 1868, which it is not necessary to give in detail, it was
provided in effect that as to debts which were contracted prior to
May 1, 1865, judgments could not be rendered before the spring
terms of the courts in 1869, and if there was opposition or
defense, they should be continued until the spring terms of 1870.
Other obstructions were also interposed to the collection of the
class of debts called old debts by this ordinance. This provision
also applied to notes or obligations given after May 1, 1865,
Page 88 U. S. 502
which were wholly in renewal of such old debts. But in suits on
debts created after that time, or on notes where a part of the
consideration was new, judgments could be obtained at the first
term after suit was brought. This was the condition of the law as
found in the statute books of the state when, on the 1st day of
January, 1869, the bankrupt gave his son, the appellee in this
case, a note for the old debt and interest, and for twenty dollars,
then first loaned to him. Nothing can be plainer, we think,
considering the relationship of the parties and the known
insolvency of the father, than that the purpose of this transaction
was to enable the son to get a judgment at the approaching spring
term of the court on this note as a new debt within the meaning of
the ordinance, while his other creditors were left to the mercy
which that ordinance held out to holders of old debts. If anything
else were wanted to make clear this purpose, it is found in the
fact that twenty dollars were included in the renewal note for
money received at that time, to take it out of the class of
renewals for debts wholly created before the 1st of May, 1865.
It adds strong confirmation of this view that a similar renewal
was made in favor of Miss Hattie Alexander, a niece of the
bankrupt, and in favor of the firm of which the son had been and
was then a partner, and in favor of no others. In execution of this
purpose, suits were brought on these three notes, and judgments
obtained on all of them for want of appearance at the May Term,
1869, of the state court, while suits brought on other debts were
continued until another term.
To break the force of this evidence, it is argued that the
ordinance which gave this preference of new debts over old was
unconstitutional and void. And in point of fact, the Supreme Court
of North Carolina so decided in January, 1869.
But this decision was made after the new notes were given, and
it appears by the evidence that it was very well known at the time
the new notes were given that the local judge would enforce the
provisions of the ordinance. It is
Page 88 U. S. 503
the
intent with which the new notes were given which
must determine the validity of the lien of the judgment, and the
unconstitutionality of the ordinance, if the parties believed it
would be enforced, can have no influence in repelling the
presumption of the intention to give and secure priority of
judgment, and by that means a preference.
It is said that this case comes within the principle decided by
this Court in
Wilson v. City Bank, * because in this
case, as in that, the judgment creditor had no defense and made
none. But no careful reader of that case can fail to see that if
the debtor there had done anything before suit which would have
secured the bank a judgment with priority of lien, with intent to
do so, that the judgment of this Court would have been different
from what it was.
The circuit court in this case submitted the question of
fraudulent preference to a jury, but with the opinions of that
court in the case, as found in the record, the jury was probably
misled as to the law. At all events, in such issues from chancery
submitted to the jury their verdict is not conclusive, and we think
the intent to secure a preference in this case by means of this
judgment, both on the part of the bankrupt and the judgment
creditor, so clear that we feel bound to reverse the decree and to
remand the case with instructions to enter a decree in favor of
plaintiff, that the judgment of T. L. Alexander is void as against
the assignee, and is no lien on the property of the bankrupt in the
hands of his assignee.
Decree reversed and the case remanded.
*
84 U. S. 17 Wall.
473.