Sleek & Blackburn v. Turner's Assignee , 2 Foster 254 ( 1874 )

Mr. Justice Sharswood

delivered the opinion of the court, May 25th 1874.

This was a feigned issue in the court below to determine the validity of a judgment entered upon the 26th day of February 1872, upon a judgment-note executed by Lewis A. Turner for the sum of $204, on the 21st October 1871, for a just debt owing by him to Sleek & Blackburn. It was payable in sixty days. On the 10th April 1872 certain creditors of Turner presented a petition to the District Court of the United States for the Western District of Pennsylvania, to have Turner adjudicated a bankrupt. Under these proceedings an assignment was made to the plaintiff below on July 5th 1871, and the fund in court having been raised under an execution upon the judgment, the assignee came in and claimed the money on the ground that the judgment was a fraudulent preference, and void under the thirty-fifth section of the Bankrupt Law, the Act of Congress of March 2d 1867. This section provides that “ if any person, being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him, or who is under any liability for him, procures any part of his property to be attached or seized in execution, or makes any pledge, assignment, transfer or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, pledge, assignment, transfer or conveyance, or to be benefited thereby, or by such attachment, having reasonable cause to believe such person is insolvent, and that such attachment, payment, pledge, assignment or conveyance is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property or the value of it from the person so receiving it or so to be benefited.”

On the trial of the feigned issue, the learned judge was requested to charge the jury “that if the note on which the defendants’ judgment was entered was given for a valuable consideration more than four months before the commencement of the proceeding in bankruptcy against L. A. Turner, then the judgment and fi. fa. issued thereon are valid, although the judgment wa.s entered and fi. fa. was issued within four months of the commencement of said proceedings in bankruptcy, and the verdict must be for the defendants.” This point the learned judge refused to affirm, but, on the contrary, instructed the jury that when the entry of judgment and execution and levy are made within the four months before the petition of bankruptcy, the preference thus given is invalid, although the judgment-note was given more than four months before. In this we think there was error, and as it was an error which ran through and infected the whole charge, it will be unnecessary to consider the other assignments.

It is clear that Turner did not procure the judgment to be entered on the 26th of February 1872, within four months of the filing of the petition. As to that entry he was entirely passive. He had made and delivered the judgment-note on October 4th 1871, more than four months before the petition, for an honest debt, to which he could interpose no defence. He was entirely passive so far as the entry of the judgment and the issuing of the execution were concerned. How then could he be said in any sense to have procured the judgment and execution, and thereby given the defendants a preference ? Had the note been a simple note, and the defendants had commenced suit upon it, and in due course obtained judgment for want of a plea or affidavit of defence, the case would have been no stronger. The Supreme Court of the United States have decided that something more than passive nonresistance in an insolvent debtor is necessary to invalidate a judgment and levy on his property when the debt is due and he has no defence: Wilson v. The City Bank of St. Paul, 31 Leg. Int. 29. It was held also in that case that, though the judgment-creditor may know the insolvent condition of the debtor, his levy and seizure are not void under the circumstances, nor any violation of the Bankrupt Law. We regard this decision as directly in point, and are bound to receive it as an authoritative exposition of the Act of Congress by the highest tribunal in the land invested by the Constitution with the power of deciding such questions in the last resort.

Judgment reversed, and a venire facias de novo awarded.