611 F.2d 815 (10th Cir. 1980), 78-1457, In re Santa Fe Downs

Docket Nº:78-1457, 78-1458.
Citation:611 F.2d 815
Party Name:In re SANTA FE DOWNS, INC., a New Mexico Corporation, Bankrupt. Thomas J. DUNN, Trustee in Bankruptcy, Plaintiff-Appellee, v. Clinton B. EWELL, Jr., Harry L. Ewell, J. W. Eaves, Harry Eaves, Leonard Fruchtman and Lawrence T. Foster, Defendants-Appellants.
Case Date:January 03, 1980
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 815

611 F.2d 815 (10th Cir. 1980)

In re SANTA FE DOWNS, INC., a New Mexico Corporation, Bankrupt.

Thomas J. DUNN, Trustee in Bankruptcy, Plaintiff-Appellee,

v.

Clinton B. EWELL, Jr., Harry L. Ewell, J. W. Eaves, Harry

Eaves, Leonard Fruchtman and Lawrence T. Foster,

Defendants-Appellants.

Nos. 78-1457, 78-1458.

United States Court of Appeals, Tenth Circuit

January 3, 1980

Argued Sept. 13, 1979.

Rehearing Denied Feb. 4, 1980.

Page 816

Ronald Segel of Sutin, Thayer & Browne, Albuquerque, N. M., for defendants-appellants Clinton B. Ewell, Jr., Harry L. Ewell, Leonard Fruchtman and Lawrence T. Foster.

William E. Snead of Ortega & Snead, Albuquerque, N. M., for defendants- appellants J. W. Eaves and Harry Eaves.

Jennie Deden Behles, Albuquerque, N. M. (Linda S. Bloom, Albuquerque, N. M., on brief), for plaintiff-appellee.

Before McWILLIAMS, BARRETT and McKAY, Circuit Judges.

McKAY, Circuit Judge.

Appellants hold mortgages against the property of bankrupt Santa Fe Downs, Incorporated. In bankruptcy court, the trustee was successful in voiding the mortgages as preferences. The district court upheld the bankruptcy court's determination. On appeal, the mortgagees challenge, among other things, the bankruptcy court's refusal to dismiss the suit for failure to show a "right to relief." Fed.R.Civ.P. 41(b). We believe this challenge to be meritorious and dispositive of the case. We therefore reverse.

The trustee's complaint stated that suit was "brought to declare liens null and void pursuant to § 67(a)(1) of the Bankruptcy Act" as then constituted. Record, vol. 1, at 133. Section 67(a)(1) is directed at liens "obtained by attachment, judgment, levy, or other legal or equitable process or proceedings." 11 U.S.C. § 107(a)(1). It clearly is not concerned with consensual liens, such as mortgages, which are generally attacked under the voidable preferences section, § 60, of the Act. 11 U.S.C. § 96(b). Section 60 requires a showing of the lienholder's knowledge of insolvency while § 67(a)(1) does not. When the trustee sought to introduce evidence of such knowledge, the mortgagees properly objected that the evidence was outside the pleadings. Record, vol. 2, at 49. Later, at the close of the trustee's case, mortgagees moved under Fed.R.Civ.P. 41(b) for dismissal, again emphasizing the trustee's failure to show the existence of any lien...

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