Baldwin v. Rosseau

CONICLING, District Judge,

delivered the opinion of the court, and established the following points:

1. That as, tor several years ¿ntecedent to the autumn of 1841, the respondents had confessedly been largely engaged in the business of buying and selling, and had then only ceased to do so, without any unequivocal act evincing their determination not to resume the business, they might properly be considered, under the circumstances of the case, as still being traders at the time of the alleged act *528of bankruptcy. Sucb was the clear import of the decisions in the English courts.

2. That if they were not to be considered as being at that time traders in fact, so as to be liable to compulsory proceedings under the bankrupt'act, in respect of debts then or thereafter contracted, yet, in as much as the act of bankruptcy charged against them the debt of the petitioning creditor, and their other debts all had their origin while they were using the trade of merchandise, they were on this ground to be treated as merchants in this proceeding. It is true the words “being merchants, or using the trade of merchandise,” are in the present tense. But the act [of August 19, 1841, (5 Stat. 440, c. 9)) in this intent is precisely the same as the English acts, and yet these acts, as the cases cited on the argument clearly show, are unequivocally held to embrace cases like the present, even though the debtor may be shown to have left off trading long before the alleged act of bankruptcy. This is a reasonable construction of the act, and in accordance with its spirit The opposite construction would lead to its evasion and the defeat of its objects.

3. Admitting it to be doubtful whether, in giving the preference secured by the mortgage, the respondents are to be considered as having acted “in contemplation of bankruptcy,” still the mortgage is, under all the circumstances, to be adjudged fraudulent in law as having been given for the purpose of hindering and delaying creditors, and as such an act of bankruptcy, within the express terms of the first section of the act. Had the mortgage embraced only a part of the property of the respondents, it might perhaps have been regarded as a mere act of preference, and not an act of bankruptcy, unless executed in contemplation of bankruptcy. But it was made to cover all their real property, consisting of several other distinct pieces of land in addition to the land on which their buildings and machinery were situated, and also personal effects of considerable value. The property thus conveyed, according to the respondents’ valuation, was worth more than four times the amount of all claims which the mortgagees had upon them, and clearly evinces an intention to hinder and delay the other creditors, and especially those who had already instituted suits against them. The inference is irresistible, moreover, that it was agreed, or at least tacitly understood, between the parties to the mortgage, that the respondents should continue in the possession of the property, both personal and real, as in fact they did. This is also a badge of fraud; and in this respect there is no difference between a mortgage and an absolute sale. The whole current of decisions, from Twyne’s Case [3 Coke, 80, 1 Smith, Lead. Cas. 1] downward in England, and also in this country, properly understood, is believed to be in accordance with this view of the case.

In concluding his opinion, his honor remarked, that it was .due to Messrs. Rosseau and Easton, under all the circumstances of the case as they appeared before the court» to remark, that it by no means followed from anything he had intended to say that they designed to commit any actual fraud upon their creditors. Their intention, desire- and hope seemed to have been ultimately to-pay all they owed; and it appeared to be questionable, at least, whether the ultimate interests of their creditors would not have' been better promoted by leaving them to prosecute their efforts for this purpose, as,, up to the present time, they have been doing.