Beall v. Pinckney

• Decision Date: 06 July 1945
• Docket Number: No. 11296.,11296.
• Citation: 150 F.2d 467
• Parties: BEALL et al. v. PINCKNEY.
• Court: U.S. Court of Appeals — Fifth Circuit

150 F.2d 467 (1945)

BEALL et al. v. PINCKNEY.

No. 11296.

Circuit Court of Appeals, Fifth Circuit.

July 6, 1945.

James N. Daniel, of Chipley, Fla., for appellants.

Leo. L. Foster, of Tallahassee, Fla., for appellee.

Before SIBLEY, HUTCHESON, and LEE, Circuit Judges.

SIBLEY, Circuit Judge.

The Bank of Malone failed and Federal Deposit Insurance Corporation was appointed its receiver on April 7, 1942. On April 24th the receiver instituted bankruptcy proceedings against L. H. Beall and he was adjudicated a bankrupt on July 21st, and T. F. Pinckney was elected and qualified as trustee in bankruptcy on August 22nd. On September 24, 1944, the trustee brought a plenary suit in the district court against the bankrupt Beall and his wife Marietta "Tot" Beall praying that the trustee "be adjudged the equitable owner" of a house and lot in Marianna, Florida, the legal title to which was in Mrs. Beall, and that all title be divested out of the Bealls and given to him. On a motion for summary judgment it was held there was no genuine issue as to any material fact, and a decree was entered as prayed. The defendants have appealed.

On the motion for summary judgment only the pleadings were considered. The allegations of the petition were admitted by the answer, to the effect that prior to December 1, 1941, L. H. Beall had misappropriated about $119,000 of the funds of the Bank and owed it that amount; and on that date he paid to H. C. Smith, Sr., his check, bearing on its face a notation that it was the purchase price of the house and lot in controversy; and that in consideration of the check Smith, and other members of his family, made a clear title to Mrs. Beall, the wife of L. H. Beall, she paying nothing herself. Later, about March 15, 1942, Beall, who dealt in gas fixtures and equipment, transferred to Mrs. Beall $500 worth of such fixtures, she paying nothing therefor. The general allegation that this was all done "to avoid creditors," and "for the purposes of defrauding his (Beall's) creditors and hindering and delaying the collection of the indebtedness due the Bank" was denied by the answer, which, as amended, averred that the money against which the check to Smith was drawn was a special account raised by borrowing $5,000 from another bank which was later repaid by funds distributed to Beall from his father's estate; that Beall was on December 1, 1941, and for many years before had been, the head of a family residing in Florida which consisted of his wife and son then twelve years old, and was entitled under the Constitution of Florida to a homestead; that the property purchased was of the sort named in the Constitution and laws of Florida relating to homesteads and was purchased for a home for the family, which moved into the house as soon as it was readied for occupancy about February 1, 1942, and he and his wife and son have ever since lived there, except that Beall has since October 6, 1943, been in a federal prison; the gas fixtures were added as an improvement of the home about February 15, 1942; if the deed had been made to Beall his creditors could have had no right or claim against the property as his homestead, and the taking of the title in the name of Mrs. Beall was not a fraud on any creditor and does not in law hinder or delay any of his creditors in the collection of their debts; and if said property be Beall's it is his homestead. The decree recites the substance of these alleged facts and holds that there is no genuine issue of material fact, and that only a decree for plaintiff is possible. The decree does not mean that apparent issues are not genuine because not sustained by any evidence, but rather that the facts denied by the answer and the additional facts therein alleged are not material.

The suit is brought by the trustee in bankruptcy in the district court by reason of the jurisdiction, concurrent with that of the State court, established by the Bankruptcy Act, 11 U.S.C.A. § 110, sub. e(3). But the right to be tried is one which is to be tested by State law, as provided by Sect. 110, sub. e(1): "A transfer made or suffered or obligation incurred by a debtor adjudged a bankrupt under this title which under any Federal or State law applicable thereto, is fraudulent as against or voidable for any other reason by any creditor of the debtor, having a claim provable under this title, shall be null and void as against the trustee of such debtor." No federal law is applicable to the transactions, but only the State law applying to transactions fraudulent and void as to creditors, and the receiver of the Bank of Malone is the only creditor mentioned. The sole invalidity alleged is that Beall had the transfers "made for the purposes of defrauding his creditors and hindering and delaying the collection of indebtedness due the Federal Deposit Insurance Corporation." The precise question therefore is: Could this creditor under Florida law avoid these transfers on this ground?

We preliminarily emphasize two other matters. First, it is to be remembered that the trustee is not asserting an equitable title in himself because any of the misappropriated money of the Bank is traceable into this property. The money used to buy the home was free of any charge or equity, the undoubted money of Beall. Second, the argument by appellee that under the bankruptcy law Beall's homestead can in no event be enjoyed because he did not claim the exemption in his schedule, and because having transferred it to his wife in fraud of creditors it cannot be exempted under 11 U.S.C.A. § 24, is premature. Whether Beall has transferred his property in fraud of creditors is the thing to be tried in this case. Whether he is too late to claim an exemption in bankruptcy can only arise in the bankruptcy proceedings. In this plenary suit the only question is whether the transfers to Mrs. Beall were or were not made for the purpose of delaying or defrauding creditors and specifically the debt due the Bank.

The statute of Florida touching transfers in fraud of creditors is an adoption on Jan. 28, 1823, of the old English Statute of Elizabeth and is now found in Florida Statutes, Ann. § 726.01. From its verbosity these applicable words are taken: "Every * * * transfer and assignment * * * by writing or otherwise * * * made or executed, contrived or devised of fraud, covin, collusion or guile, to the end, purpose or intent to delay, hinder or defraud creditors or others of their just and lawful actions, suits, debts * * * shall be from henceforth as against the person or persons * * * so intended to be delayed, hindered or defrauded, deemed, held, adjudged and taken to be utterly void, frustrate and of none effect * * *." The Florida Supreme Court declares that there must be a creditor to be defrauded, a debtor intending fraud, and a conveyance of property applicable by law to the payment of the debt. Bay View Estates Corporation v. Southerland, 114 Fla. 635, 154 So. 894, 900. But there are circumstances and situations which have been called "badges of fraud," and for a debtor to transfer his property without consideration to his wife, to the detriment of his creditors, is generally such. What happened here is that Beall, having borrowed $5,000 for this special purpose, did not transfer the money to his wife, but bought this house, becoming immediately on paying the price, the equitable owner of it; but instead of taking title to himself he had it made to his wife. What he thus transferred was his equitable right in the property. Were these the only facts, a case of transfer in fraud of existing creditors would be prima facie made out, and a creditor could in equity trace his debtor's money into the purchase and subject the property to his debt. Alston v. Rowles, 13 Fla. 117, 118; Roper v. Hackney, 15 Fla. 323; Florida Loan and...