It appeared from the testimony of the debtor on the hearing before this Court that, after entry of said judgment and on July 5, 1921, he executed to his sister, Laura A. Vreeland, a chattel mortgage, for the sum of $1,505, being the amount of a pre-existing debt for cash advanced by her to him between August 30, 1920, and the date of the mortgage (to wit, July 5, 1921). The debtor has no property of any substantial value remaining, and, while the value of the property mortgaged is questioned, it represented substantially all his resources and appears to be by no means equal in value to the amount of the loan against it, $1,505.
The creditor contends that the debtor, having thus made a preference in favor of his sister since the entry of the judgment, he is not entitled to a discharge. This is the only question which is involved in the present application.
The statute provides (Section 8) that the Court shall "consider and examine the truth and fairness of the account and inventory," and (Section 11) that, if the Court is "satisfied that the conduct of the debtor has been fair, upright and just," it may proceed to grant his discharge upon compliance by him with the further provisions as to assignment, etc., set forth in the statute.
Under Section 15 of the Act it is provided that if it shall appear that the debtors have "concealed or kept back any part of their estate or property, or made any ... mortgage ... with intent to defraud his creditor ... then ... said debtors shall be refused ... discharge."
The provision which requires the debtor's conduct to be "fair, upright and just" is restricted to his conduct in making his account and inventory, and "in delivering up to his creditors all his estate" (Meliski v. Sloan, 47 N. J. L. 83; Reford v. Creamer, 30 N. J. L. 253), and, unless the mortgage to the debtor's sister was with intent to defraud, it would seem he is entitled to his discharge. Of course, if the mortgage is fraudulent, he would not be entitled to it. Iliff v. Banhart, 60 N. J. L. 253; affd. 61 N. J. L. 286.
There is no evidence in the case that the consideration paid for the mortgage by the debtor's sister was fictitious, or was not bona fide, or that the mortgage was with any promise or expectation of future benefit to the debtor, or was otherwise improper. On the contrary the testimony is that the mortgage was given for money advanced. The only objection to the discharge which the evidence would justify is that the mortgage was given when the debtor was in failing circumstances while insolvent and after the creditor's judgment had been entered.
There is nothing fraudulent or wrong, within the meaning of the Act for the Relief of Persons Imprisoned on Civil Process in the giving of a preference knowingly by a person in an insolvent condition.
At common law every man, even when in failing circumstances, has a right to dispose of his property, to pay one honest creditor in preference to another one. Garretson v. Brown, 26 N. J. L. 437; affd. 27 N. J. L. 644; Stillman's Ex. v. Stillman, 21 N. J. Eq. 126. If the debt was honestly due the debtor had a right to select his favorites. There is nothing in the Act to change the common law on this subject and hence the debtor was within his legal rights when he made the preference referred to his sister.
For these reasons the debtor is entitled to his discharge.