Barrett v. Kaigler

• Decision Date: 14 June 1917
• Docket Number: 4 Div. 724
• Citation: 76 So. 320,200 Ala. 404
• Parties: BARRETT et al. v. KAIGLER.
• Court: Alabama Supreme Court

76 So. 320

200 Ala. 404

BARRETT et al. v. KAIGLER.

4 Div. 724

Supreme Court of Alabama

June 14, 1917

Appeal from Circuit Court, Barbour County; J.S. Williams, Judge.

Bill by H.M. Kaigler, as trustee in bankruptcy, against Mary Barrett and another. From a decree overruling demurrer to the bill respondents appeal. Affirmed.

McDowell & McDowell, of Eufaula, for appellants.

A.H Merrill & Sons, of Eufaula, for appellee.

THOMAS J.

The bill is filed by a trustee in bankruptcy, to set aside a conveyance of certain property alleged to have been transferred by the bankrupt in fraud of his creditors. The bill avers the bankruptcy of one Barrett, and the appointment of complainant as trustee of the bankrupt estate, by the District Court having jurisdiction thereof. It is by the bill further averred that in the summer of 1914 said Barrett "became and was insolvent; that he owed large amounts of money, consisting of open accounts, to various wholesale grocers, which debts were due at the time of filing the bill to wit, the Interstate Grocery Company *** and the Eufaula Grocery Company, *** and various other concerns of similar kind, *** and that he owed them by open accounts and also by notes, and *** owed banks considerable money by notes secured and unsecured; that the assets of said Barrett were greatly less in value than his liabilities"; that he was and remained insolvent from the summer of 1914 to the filing of his petition in bankruptcy on the 1st day of November, 1915. The bill further avers "that on the 7th day of November 1914, when and at the time said S.H. Barrett was an insolvent; and since said time he has continued to be insolvent as aforesaid, he *** being the owner of the following described real estate, ***" executed a deed to the same to his wife, Mary Barrett, for the purpose of hindering, delaying, and defrauding grantor's creditors. The recited consideration of this conveyance was:

"That I, S.H. Barrett, having purchased a house and lot, in the city of Eufaula, Alabama, hereinafter described, with money that was the property of my wife, Mary Barrett; and whereas, the deed for said property originally made in my name; and whereas, I desire to convey the property to my said wife, she having furnished the money that paid for said property: Therefore I, S.H. Barrett, for and in consideration of the premises, and for the further consideration of the natural love and affection I have for my beloved wife, Mary Barrett, and the further consideration of one hundred dollars cash in hand paid by the said Mary Barrett," etc.

It is alleged that this consideration was false and fictitious and simulated, and that said conveyance was voluntary and fraudulent and without a valuable consideration. Appellant S.H. Barrett demurred to the bill, and his demurrer was by the court overruled. The error here complained of, and assigned particularly, was the failure of the court to sustain the second, third, and fourth grounds of demurrer.

Under the Bankruptcy Act (section 70) it is provided:

"The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all (1) documents relating to his property; (2) interests in patents, patent rights, copyrights, and trade marks; (3) powers which he might have exercised for his own benefit, but not those which he might have exercised for some other person; (4) property transferred by him in fraud of his creditors; (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him." U.S.Comp.St.1916, § 9654.

See Collier on Bankruptcy (10th Ed.) p. 987.

By subdivision 4 of section 70 of said act, property transferred by the bankrupt in fraud of his creditors passes to his trustee. This is the converse of the doctrine that such trustees take title subject to equities; they take title to the property which the bankrupt has fraudulently transferred, and in which the creditors have the equities. Cowan v. Burchfield (D.C.Ala.) 180 F. 614; English v. Ross (D.C.) 140 F. 630; In re Holbrook Shoe & Leather Co. (D.C.) 165 F. 973; Mueller v. Bruss, 112 Wis. 406, 88 N.W. 229, 8 Am.Bankr.R. 442; Beasley v. Coggins, 48 Fla. 215, 37 So. 213, 5 Ann.Cas. 801, 12 Am.Bankr.R. 355; In re McNamara, 2 Am.Bankr.R. 566; In re Legg (In re Yukon Woolen Co.) (D.C.) 96 F. 326, 2 Am.Bankr.R. 805; Sheldon v. Parker, 66 Neb. 610, 92 N.W. 923, 95 N.W. 1015, 11 Am.Bankr.R. 152. Thus the trustee is vested, not only with the title of the property, but also with the creditors' right of action with respect to the property of the bankrupt theretofore conveyed by him in fraud of such creditors; and the trustee may assail such transfers or conveyances to the same extent as the creditor, as though the debtor had not been declared a bankrupt. In re Rodgers, 125 F. 169, 60 C.C.A. 567; In re Butterwick (D.C.) 131 F. 371; Thomas v. Roddy et al. 122 A.D. 851, 107 N.Y.Supp. 473, 476.

That a trustee in bankruptcy may sue to set aside a fraudulent conveyance made by the bankrupt more than four months prior to the filing of the bankruptcy petition, "without showing that some creditor of the bankrupt between the disposition of the property and the...