Beasley v. Coggins

• Decision Date: 13 July 1904
• Citation: 37 So. 213,48 Fla. 215
• Parties: BEASLEY v. COGGINS et ux.
• Court: Florida Supreme Court

37 So. 213

48 Fla. 215

BEASLEY v. COGGINS et ux.

Florida Supreme Court, Division A.

July 13, 1904

Appeal from Circuit Court, Madison County; Bascom H. Palmer, Judge.

Bill by D. P. Beasley against P. S. Coggins and Lilla F. Coggins. Decree for defendants, and plaintiff appeals. Reversed.

Syllabus by the Court

SYLLABUS

1. A trustee in bankruptcy, appointed under the provisions of the act of Congress to establish a uniform system of bankruptcy passed July 1, 1898 (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418], occupies a relation similar to that of a judgment creditor of the bankrupt, and may file a bill in equity to set aside a fraudulent conveyance of real estate by the bankrupt, although neither he (the trustee) nor any creditor has reduced any claim against the bankrupt to judgment.

2. Where a bill filed by a trustee in bankruptcy to set aside a fraudulent conveyance of real estate by the bankrupt, made more than four months prior to the adjudication in bankruptcy, alleges that such conveyance was a voluntary one to his wife, through an intermediary trustee, and was in fact a gift, without any valuable consideration; that the bankrupt was largely indebted and insolvent at the time of making such conveyance; that such bankrupt at the time of such conveyance was a merchant, and then intended an indefinite continuance of his mercantile business, and contemplated the creation of further indebtedness; and that said voluntary conveyance was contrived and executed of covin and collusion, for the purpose and intent that the creditors of the bankrupt, both prior and subsequent to its execution, should be delayed defrauded, and defeated in the collection of their just claims--such a bill is not obnoxious to demurrer; and the fact that such voluntary conveyance was recorded on the day after its execution does not impair the right of the trustee as imparting notice to subsequent creditors, for, while such recordation is notice of the execution of the conveyance, it is not of itself notice of the secret and fraudulent purposes of the bankrupt in executing it; and such a conveyance, if fraudulent in fact, will be set aside in favor of the trustee.

COUNSEL

Roberson & Small and C.J. Hardee (R. H. Rowe, on the brief), for appellant.

Chas E. Davis, for appellees. The appellant, D. P. Beasley, filed his bill in the circuit court of Madison county as trustee in bankruptcy of P. S. Coggins, alleging that the said Coggins was adjudged a bankrupt by the United States District Court on July 8, 1902; that he (Beasley) was duly selected and appointed as trustee in bankruptcy of and for all the estate of said Coggins, and was then such trustee, as shown by exhibits attached.

The bill alleges substantially that P. S. Coggins, prior to being adjudged a bankrupt, was engaged in the mercantile business at the city of Madison, in Madison county, and had been so engaged for several years prior thereto, and had then contracted a large amount of indebtedness with various creditors, of about $12,000.

The bill sets forth an indebtedness to several persons, including the Bank of Madison, on several notes, all due on March 8, 1901, and other debts contracted subsequent to March 8, 1901, and all unpaid and due when the bill was filed; that Coggins, being so indebted on March 8, 1901, in a large sum of money, intended a continuance for an indefinite period of his said mercantile business, contemplated the creation of further indebtedness, and was then, on siad March 8, 1901, insolvent; that on said March 8, 1901, said Coggins and his wife, Lilla F., executed a deed of certain landed property to W. F. Parramore upon an alleged and fictitious consideration of $50, and that Parramore on the same day conveyed said property to Lilla F. Coggins for an alleged and fictitious consideration of $50; that said deeds were properly recorded on March 9, 1901; that the lots so conveyed, upon information and belief, are worth $3,500; that said lots of land were on March 8, 1901, the property of P. S. Coggins; that it was the purpose of Coggins, by the recited deeds, to make a gift of said lots of land to his wife, Lilla F. Coggins, without any valuable consideration; that said deeds were made, contrived, and executed of covin and collusion by the parties, to the end, purpose, and intent that the creditors of Coggins, both prior and subsequent, should be delayed, defrauded, and defeated in the collection of their lawful and just debts and demands against Coggins; and that said deeds are fraudulent and utterly void, as against the claims and demands of the creditors of Coggins.

The bill, among other things, prays a decree declaring said deeds to be fraudulent and void against the claims and demands of creditors; that the real estate thereby attempted to be conveyed be sold, and the proceeds paid to the trustee in bankruptcy, to be disposed of in the regular administration of the estate of the bankrupt. Copies of the deeds are made exhibits to the bill, and also a copy of the order appointing the complainant as trustee in bankruptcy.

The defendants demurred to this bill on the following grounds, in sunstance, viz.: (1) That the bill does not make out a case entitling complainant to discovery or relief.

(2) That it does not show any judgment or lien upon the property.

(3 and 4) That it does not show that complainant has exhausted his legal remedies, and that he has a full and adequate remedy at law.

(5) That the clauses alleging the several deeds were made to hinder and delay creditors, etc., are demurred to because: First. The same are impertinent.

Second. That all persons who became creditors after March 8, 1901, had notice of them, and that the trustee cannot claim said deeds void as to such creditors.

Third. That said deeds can only be avoided, if at all, by creditors whose claims existed at the date of said conveyances.

Upon a hearing this demurrer was sustained, and from this order an appeal was taken.

The assignments of error are, first, that the court erred in making the order sustaining the demurrer to the bill; and, second, that the court erred in holding that complainant must allege and prove a judgment at law before the bill of complaint could be maintained.

OPINION

HOCKER, J. (after stating the facts).

It does not appear upon what ground the court below sustained the demurrer to the bill, but presumably all the grounds were sustained.

The general rule is that, before a creditor can maintain a bill in equity to set aside a conveyance by his debtor of his real estate on the ground of fraud, the creditor must reduce his claim to judgment, or its equivalent, a decree for a balance remaining after a foreclosure sale of mortgaged property, creating a lien on such real estate; and, when personal property or equitable assets are pursued, he must have an execution issued and returned nulla bona. Robinson v. Springfield Company, 21 Fla. 203. But does this rule apply to such a suit by a trustee in bankruptcy?

Section 70 of the act of Congress to establish a uniform system of bankruptcy, passed July 1, 1898 (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3451]), provides: 'The trustee of the estate of a bankrupt, upon his appointment and qualification, and his 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 * * * (4) property transferred by him in fraud of his creditors.' In addition to the foregoing, paragraph 'e,' § 70 (30 Stat. 566 [U. S. Comp. St. 1901, p. 3452]), provides: 'The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred or its value from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication,' etc. Section 67e (30 Stat. 564 [U. S. Comp. St. 1901, p. 3449]) treats of conveyances, transfers, etc., made by a bankrupt within four months prior to filing the petition, with intent to hinder, delay, or defraud creditors.

Some of the federal courts have found difficulty in reconciling these sections of the bankrupt act, but it seems to us that the views expressed in In re Mullen (D. C.) 101 F. 413 text, 416, are substantially correct. It is there said that section 70e, 30 Stat. 566 [U. S. Comp. St. 1901, p. 3452], was intended to provide simply that the trustee in bankruptcy should have the same right to avoid conveyances as was possessed by creditors, or any of them, and this with especial reference to the statute of 13 Elizabeth. Under the bankruptcy act, when one is thereunder adjudged a bankrupt, creditors are not permitted to attack fraudulent conveyances of their debtor, made more than four months of the adjudication of bankruptcy; and, if the trustee could not do so, then the act would constitute 'a device to permit fraudulent conveyances to take effect with impunity in case they are successfully concealed for the specified four months.' Lewis v. Bishop, 47 A.D. 554, text, 558, 62 N.Y.S. 618. It is only by holding that the trustee is subrogated to the rights of creditors against a fraudulent conveyance that full effect and operation can be given to the statute of 13 Elizabeth against fraudulent conveyances, from which our statute (section 1991, Rev. St. 1892) is substantially taken. In Wall v. Cox, 101 F. 403, 41 C. C. A. 408, the second headnote is as follows: 'A trustee in bankruptcy seeking to set aside and annul a bill of sale and transfer of property previously made by the bankrupt, and...