Slessinger v. Topkis

15 Del. 140

• Court: Superior Court of Delaware
• Decided: May 15, 1893
• Status: Published

Opinion

Lore, C. J.

(charging the jury.)

In order that you might intelligently pass upon the three questions or issues, submitted for decision, evidence has been produced and arguments of counsel made upon both sides. It is for you now to answer each one of these questions upon that evidence, under the instructions of the Court, upon.the questions of law involved.

We desire to say to you that it is the well settled law of this State, settled in the case of Stockley vs. Horsey, Miller, etc., 4 Houst. 603, by the judgment of the Court of Errors and Appeals, after a careful and exhaustive review of all the eases on this subject, that an insolvent or failing creditor may give a bond and warrant, confess judgment, and prefer one or more creditors to others, if given in good faith to secure bona fide debts, even though such secured creditors receive thereunder a greater proportion of their respective debts than could be secured to all his creditors. Our statute does not prohibit such preferences.

By § 4, Ch. 132 of the Revised Code, “it is not preferences given in contemplation of insolvency or under failing circumstances which are prohibited, but preferences given under an assignment made for the benefit of creditors; it is the act of assignment and not merely his being in failing circumstances which brings the debtor.within the scope of this Statute. Our law recognizes two distinct policies with respect to the liquidation of a failing debtor’s estate, and one is the policy of giving to a creditor the benefit of his diligence against other creditors. This policy obtains so long as the debtor keeps control of his property by not making an assignment; if no assignment be made, he may prefer an honest creditor, though he be in failing circumstances and though the preference in effect, covers all his property for the benefit of creditors; but the moment he makes an assignment, and not before, the policy of equal distribution among all the creditors prevails, and the debtor can give no preference either under the assignment or by any act done in contemplation of it. There is sound reason for treating the act of assignment as a test of the application of this statute to the debtor. It is a highly penal statute, and upon general principles, penal statutes are to be strictly construed, and especially should that rule apply to this statute, for if the fact of an assignment alone subjects the debtor to its provisions, and renders him punishable for a preference, we have a certain test of his liability which he himself could not misunderstand, and which could be easily proved against him. But if his being in failing circumstances is held to render the preference of a creditor illegal, and subjects the debtor to the penalty of the law, a very uncertain test of his. liability would be created, depending upon a wide range of proof; and frequent injustice might be done to debtors who as often fail to appreciate their real situation, and honestly believe themselves to be solvent, when they are not solvent. On the whole, it is a sound policy of the statute, working the least injustice which avoids a preference only when given under or in contemplation of an assignment.”

Thus the law not only recognizes, but favors and protects a preferred creditor, who in good faith has thus secured a just debt, although it may cover and absorb the entire property of the debtor.

Therefore, to avoid a preference given to a bona fide creditor, it must be given by an assignment “ eo nomine,” or by an instrument that is in fact an assignment, under cover of another form.

The law, then, gentlemen, clearly is that Jacob H. Topkis had the right to give Samuel Slessinger and David Abramson or either of them such judgments as he did, if he was justly indebted to them or either of them in the sums named, and the judgment was honestly given to secure such debt, notwithstanding the fact he was insolvent or in failing circumstances. In order to avoid these judgments you must be satisfied from the evidence in this case that in giving such judgments Jacob H. Topkis did not intend in good faith to secure honest debts, but intended or contemplated insolvency, securing them a larger share of his estate in view of insolvency or intended to hinder, delay or defraud his other creditors.

This brings us to the real issue in this case, i. e., were these judgments confessed with a fraudulent intent? For fraud vitiates every contract, and no man may invoke the law to enforce his fraudulent acts.

Fraud is never presumed; it must always be proved. Your consciences should be satisfied that the facts proved admit of no other interpretation, but that the judgments were confessed with a dishonest intention on the part of both parties to them, to delay or prevent Topkis’ other creditors in the recovery of their just debts; Stockley vs. Horsey, Miller & Co., 4 Houst. 614.

Proof of fraud need not be express; it may be inferred from circumstances, but ought not to be presumed without either. A jury ought to be satisfied from facts that there was a dishonest intention, and not to infer fraud merely because they have doubts of the fairness of the transaction, from the conduct and situation of the parties and the effects intended to be produced by • the act. Something should be made to appear inconsistent with integrity, so as to admit of no reasonable interpretation, but meditated fraud (4 Pet. 295-297). Both parties to the alleged act of fraud must concur in the illegal design. The debtor may lawfully prefer one creditor to another with the direct intention of defrauding other creditors, but unless the preferred creditor receives the property with the same fraudulent design the contract is valid against other creditors who may be injured by the transaction; 8 Wheat. 238; 4 Houst. 614.

Applying the law thus laid down to the issues submitted to you:

If you believe from the evidence in the case that in confessing these judgments to Slessinger and Abramson, Topkis intended insolvency, then your finding on the first issue should be that he contemplated insolvency, but if you believe that he intended thereby only to secure debts honestly due them, your finding should be that he did not contemplate insolvency.

In like manner, if you believe that thereby his intention being to attempt to secure to Slessinger and Abramson a greater proportion of their respective debts than he could pay to all his creditors, you should so find as to the second issue, but if you believe that thereby he only intended to secure debts honestly due them, your finding should be that he did not attempt such preference.

If you should in like manner believe that Topkis intended by the judgments to hinder, delay, or defraud his creditors, you should so find on the third issue, but if you should believe he thereby only intended to prefer in good faith, just debts, you should find then his purpose thereby was not to hinder, defraud or delay. In other words if from the evidence which has been produced you are satisfied that the said bonds given to Slessinger and Abramson, on which judgments were entered and property sold, were not bona fide and for a just consideration, but given to prevent and hinder the collection of their just debts by other creditors, such bonds were fraudulent and therefore void. It is for you to determine this fact from the evidence. In fact, gentlemen, it is the single issue in this case for your determination.

If you so believe you may find as to Slessinger and Abramson on any or all of the issues, affirmatively as to one and negatively as to the other.

Your finding must be only upon the evidence before you in this case, and not from statements made by counsel on either side of what they proposed to prove, which was ruled out by the Court as inadmissible, nor are you to consider information had from any other source whatever. You must divest yourselves of all prejudice. Before you men of all conditions and creeds stand upon the plane of absolute equality. Their rights are to be tried and determined only by the evidence produced in open court, and with which they are openly and fairly confronted, with full opportunity to meet, explain and refute. Any other course would be a travesty of justice, and a violation of your oaths.

Verdict: “ Yes” to each question submitted,.