Haughey v. Albin. said property, by consent of the plaintiff, have been admitted as defendants in the suit. Issues have been made by the pleadings to test the question of the right of possession to the property in controversy; and a jury having been waived by the parties, the case is submitted to the court. The material facts in evidence are that Reeder, in his own name, and as a member of the firm of Reeder & Co., had, for some years prior to his insolvency, been engaged in business in the town of South Charleston, in Clarke county, as a retail dealer in various descriptions of merchandise. Reeder, for himself, and as a member of said firm, had dealt largely with the firm of Kelton, Bancroft & Co., of Columbus, prior to September 1, 1867, and about that time was indebted to said firm in his own right, and as a partner in the firm of Reeder & Co., by book account, in a sum upward of $1,500, On the 16th of September, Sheldon, the confidential clerk of said firm of Hilton, Bancroft & Co., called on Reeder at his place of business in South Charleston, and requested a settlement of the account due the firm. Reeder then paid him $200 on account, and, at the request of Sheldon, gave his promissory notes, payable one day after date, for the balance due from Reeder individually, and from the firm of Reeder & Co., giving, at the same time, warrants of attorney to confess judgments on said notes. On the 24th of September, separate judgments were entered on the notes in the Court of Common Pleas of Delaware county; and on the same day executions were issued on the judgments, directed to the sheriff of Clarke county, which were immediately placed in the hands of the defendant, Albin, then being sheriff of that county. And on the 27th of September, a levy was made on the entire stock of merchandise in possession of Reeder, and Reeder & Co., under which the sheriff has since held, and to which he now asserts the right of possession, adverse to the claim of Haughey, as assignee in bankruptcy of Reeder. Reeder filed his petition in bankruptcy on November Haughey v. Albin. 15, 1867, and having been duly adjudged a bankrupt without objection by his creditors, the plaintiff, Haughey, was appointed assignee on the 28th of November .No objection being filed to the final discharge of Reeder, it was granted August 28, 1868. The assignee, soon after his appointment, demanded of the sheriff the possession of the merchandise held by him under the executions in his hands, which was refused. The question for the decision of the court is, whether the assignee of Reeder, or the defendant Albin, in right of Kelton, Bancroft & Co., as creditors of Reeder, have the right to the possession of the property. On the part of the plaintiff, as assignee, it is insisted that the notes given with a cognovit to Kelton, Bancroft & Co., by Reeder, were given, he being insolvent, or in contemplation of insolvency, with knowledge by said creditors that he was then insolvent; and that, in effect, they operate as a preference over other creditors, and were in violation of the bankrupt act, and therefore void; and that a levy on executions upon the judgments created no lien on the property, which is protected or can be enforced under the act. Kelton, Bancroft & Co. insist that the judgment notes given by Reeder were executed in good faith, in the ordinary course of their business, to secure a just debt, without knowledge of Reeder's insolvency on their part, and when Reeder did not believe he was insolvent, and, therefore, not in contemplation of insolvency or bankruptcy, or with intent to give an unlawful preference, within the meaning of the bankrupt act. They claim, therefore, that their levies are valid, and that no title to the property in question vested in the plaintiff under the assignment in bankruptcy. The decision of this case turns upon the construction to be given to section 35 of the bankrupt act of 1867. That part of the section applicable to this case is as follows: “That if any person being insolvent, or in contemplation of insolvency, within four months before the filing of the peti Haughey v. Albin. tion 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, sequestered, or seized on execution, or makes any payment, pledge, transfer, or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, pledge, assignment, or conveyance, or to be benefited thereby, 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 law, shall be void," etc. From this and various other provisions of the bankrupt act, it is apparent that it was the intention of the law to prevent all preferences by an insolvent person, and, as far as possible, to insure the equal distribution of his property to all his creditors. And to effect this object, the statute has taken a step in advance of any prior bankrupt act in this country, and perhaps in England. It differs in a material point from our act of 1841. By section 2 of that act, to render void a payment, transfer, or assignment, it must have been made. " in contemplation of bankruptcy," which, as interpreted by the courts, was understood to mean a state of bankruptcy at the time of the transaction known to the bankrupt, or the expectation that he was to become a bankrupt. Now, section 35 of the present law quoted above, as applicable to unlawful preferences, includes persons "being insolvent, or in contemplation of insolvency." This is noticed here for the purpose of the remark, that from this difference in the phraseology of the two acts the cases cited by counsel involving the construction of the act of 1841 have no direct application to the case before the court. In this case the questions are: 1. Was Reeder actually insolvent when he executed the notes to Kelton, Bancroft & Co., and gave the warrant to confess judgment on them? Haughey v. Albin. 2. Was it with a view to give a preference to said firm? 3. Had that firm reasonable cause to believe Reeder was insolvent at the time? If these questions can be answered affirmatively, the result will be that the notes and cognovit, and consequently the judgments, executions, and levies, are nullities, and give no lien or title to Kelton, Bancroft & Co., to the property taken in execution by the sheriff, and no right of possession in the sheriff. As to the first point-the actual insolvency of Reederthe evidence leaves no room for doubt. His schedules in bankruptcy show that, at the time he gave his notes to the firm, and at the time of his application in bankruptcy, his debts and liabilities amounted to $16,000, while his entire property, by his own estimate, was but $8,000. It is true Reeder, as a witness, testifies that he did not know, on the 16th of September, when he gave the notes and cognovit, that he was insolvent. But the statute does not require this knowledge to invalidate the transaction. It requires only the existence of the fact of insolvency, to bring it within the scope of the section quoted, if the other elements contemplated by the statute, to render the transaction a nullity, co-exist. This brings me to the second inquiry, namely: Was the execution of the notes and cognovit with a design to give Kelton, Bancroft & Co. a preference over other creditors? It is a very familiar principle of law, that every one is presumed to intend what is the necessary and unavoidable consequences of his acts. The fact of Reeder's insolvency being established, the giving of notes, payable one day after date, with a warrant to confess judgment, importing the right to an execution without delay, and a consequent levy upon his property, affords the strongest ground for the presumption that the intention was to give Kelton, Bancroft & Co. a preference over other creditors. The evidence shows, conclusively, that this was the result. The notes and cognovits were given on the 16th of September; judgment was entered on the 24th, and executions issued the same day Haughey v. Albin. and were put into the hands of the sheriff for service, and on the 27th levies were made on the merchandise in controversy. It is hardly to be supposed that Reeder did not know that this course could and would be taken, and it is difficult to resist the conclusion that he did not intend to give this firm a preference. All the circumstances connected with the transaction known to Reeder must have convinced him, it was the intention of Kelton, Bancroft & Co. to make an immediate levy on his property, and thus give them a preference, in violation of the policy and intention of the bankrupt act, or, in the words of the statute, "in fraud of the law." It would not be a strained construction of section 35 of the statute to hold that Reeder had thus procured his property to be taken in execution, as his act, in giving the judgment notes, naturally and certainly led to such a result-thus breaking up his business and putting him in a state of bankruptcy. The third inquiry is: Had that firm reasonable cause to believe Reeder was insolvent at the time? On this subject there is some conflict in the testimony. Sheldon swears he did not know that Reeder was insolvent when he was applied to for a settlement, and when he procured the notes and cognovits. On the other hand, Fulton, a disinterested witness, testifies that Sheldon, about the 1st of October, stated that he had known, for two months past, that Reeder was insolvent. If this witness is credible, it establishes the fact that Sheldon was cognizant of Reeder's failing circumstances some time before he applied for a settlement and procured the notes and cognovit. But, without reference to this direct evidence on this point, all the facts point to the conclusion that the firm had "reasonable cause" to suppose Reeder to be insolvent. The firm had been dealing with Reeder for some time, and had, without hesitation, given him credit. On his application for further credit, they refused to give it unless he would pay the sum then due, which he was unable to do. They advised him then to purchase elsewhere on credit, and |