Bergin v. Blackwood
| Decision Date | 03 January 1919 |
| Docket Number | No. 20933.,20933. |
| Citation | 141 Minn. 325,170 N.W. 508 |
| Court | Minnesota Supreme Court |
| Parties | BERGIN v. BLACKWOOD. |
OPINION TEXT STARTS HERE
Appeal from District Court, St. Louis County; Bert Fesler, Judge.
Action by William M. Bergin, as trustee in bankruptcy, against John A. Blackwood. Judgment for plaintiff, and defendant appeals. Reversed.
An owner who permits his real property to appear of record in the name of another knowing that he is engaged in business and buying on credit, and such other represents himself to be the owner and obtains credit upon the faith of his apparent and asserted title, may be equitably estopped as against creditors extending credit on the faith of such apparent and asserted ownership from claiming that his title is not subject to their claims, though he makes no representations himself and knows of none being made by the debtor.
The trustee in bankruptcy, when there are creditors entitled to invoke the estoppel, may maintain an action to appropriate the property to the extent of the claims of such creditors.
The trustee may appropriate the property to no greater extent than the creditors might have appropriated it had bankruptcy not intervened. When his action is brought in a state court the measure of his relief is in the first instance determined there. The state court is not concerned with the distribution of the proceeds. That is for the bankruptcy court.
A judgment setting aside a conveyance made by the bankrupt to the defendant, and adjudging that the trustee is the owner and that the defendant has no interest, grants too extensive relief in a case such as stated. John H. Norton, of Duluth, for appellant.
Courtney & Courtney, of Duluth, for respondent.
Action by the plaintiff as trustee in bankruptcy of George E. Blackwood against John A. Blackwood to set aside a conveyance of real estate. There was judgment for the plaintiff and defendant appeals. There is no settled case. There is before us only the judgment roll.
[1] 1. On June 22, 1913, George E. Blackwood was adjudicated a bankrupt, and the plaintiff was appointed his trustee. A few days before this he conveyed to the defendant, John A. Blackwood, who is his brother, the east half of a certain quarter section, and the conveyance was recorded before the filing of the petition in bankruptcy. This quarter was acquired in the name of the bankrupt in 1902, but it was in fact owned by himself and his brother, who were engaged as partners in logging, as partnership property. Afterwards and long before the bankrupt went into the saloon and hotel business as hereinafter noted an agreement for a division of this quarter was made. The bankrupt was to take the west 80 and the defendant the east 80. No deed was given. When the conveyance here in question was made the bankrupt had in contemplation going into bankruptcy and the purpose was to put the title to the 80 in the defendant to whom it really belonged.
For more than two years prior to his bankruptcy the bankrupt was engaged in the saloon and hotel business in Duluth and purchased merchandise on credit and at the time of his bankruptcy was indebted therefor in excess of $10,000. His assets were insufficient to pay any considerable portion of this indebtedness. The bankrupt represented to merchandise dealers that he was the owner of the east half of the quarter and obtained credit for a portion of the indebtedness upon such representations. The defendant knew that his brother was in business and was buying merchandise on credit; but he made no representations relative to the ownership of the quarter nor did he have knowledge that his brother did. From these facts, which are specifically found, the court concluded that the defendant was equitably estopped to assert title to his 80 free of the claims of the creditors who relied upon title in the bankrupt.
That an estoppel may arise in favor of creditors who extend credit upon the faith of an apparent and asserted ownership in their debtor against one who allows the record title of property in fact his to be in such debtor knowing that he is obtaining credit, though he does not know that he is asserting title, is generally held. Goldberg v. Parker, 87 Conn. 99, 87 Atl. 555,46 L. R. A. (N. S.) 1097, Ann. Cas. 1914C, 1059;McCormick v. Perkins, 135 Iowa, 64, 110 N. W. 15;Mertens v. Schlemme, 68 N. J. Eq. 544, 59 Atl. 808;Pierce v. Hower, 142 Ind. 626, 42 N. E. 223;Sears v. Davis, 40 Or. 236, 66 Pac. 913;Roberts v. Bodman, 84 Ark. 227, 105 S. W. 258;Hopkins v. Joyce, 78 Wis. 443, 47 N. W. 722; Singer, etc., Co. v. Stephens, 169 Mo. 1, 68 S. W. 903;Rieschick v. Klingelhoefer, 91 Mo. App. 430;Greer v. Mitchell, 42 W. Va. 494, 26 S. E. 302;Budd v. Atkinson, 30 N. J. Eq. 530.Chadbourn v. Williams, 45 Minn. 294, 47 N. W. 812, is in harmony. Underleak v. Scott, 117 Minn. 136, 134 N. W. 731, is not opposed.
Some of the cases refer the creditor's right to reach the property to the ground of fraud, or in upholding the right say that it would be a fraud upon the creditors to permit the real owner to assert his title contrary to the representation which he has permitted. Back of the creditor's right to reach the property is the representation of title made by the debtor and the acquiescence of the true owner and the reliance of the creditor upon the apparent and asserted title; and these are elements of equitable estoppel. See 2 Pom. Eq. Jur. § 803 et seq.; Goldberg v. Parker, 87 Conn. 99, 87 Atl. 555,46 L. R. A. (N. S.) 1097, Ann. Cas. 1914C, 1059, and cases. The cases illustrating equitable estoppel grade readily into cases where apparent title is given and asserted through active fraud and where the creditor's remedy is easily referable to the head of fraud. The cases are not always easy of classification. The legal theory which gives relief to a creditor on the ground of equitable estoppel arising from the misrepresentation which the debtor has made and the true owner permitted and from which the creditor has suffered differs little from that which holds that the act of the owner when he asserts his ownership against the creditor who is deceived by the apparent owner's assertion of title is fraudulent.
The term ‘fraudulent’ used in this connection characterizes an act inequitable and unconscientious in result rather than one actually dishonest or intentionally wrongful; and some of the cases having in mind the similarity in effect of a case of active fraud and the remedy applicable say that the act of the true owner, though not actually wrongful, is constructively fraudulent.
It may be noted that in most of the cases cited the doctrine is applied to situations where the property of the wife appears in the name of her husband and the husband's creditor relies upon his asserted ownership. This is but an incident. The marriage relation, because of the mutual confidence reposed, results in frequent occasions for the application of an estoppel, but the law is apart from the relationship. Indeed, it has sometimes been questioned, particularly in jurisdictions where the wife was under a common-law disability to convey, whether she could lose her land by equitable estoppel. See 2 Pom. Eq. Jur. § 814.
Various applications of the doctrine of equitable estoppel to the holding out of one on the public records as the true owner are readily found. 16 Cyc. 774, 775; 10 R. C. L. 743, § 62; note 30 L. R. A. (N. S.) 1; note 22 L. R. A. 256; note 57 Am. St. Rep. 175; note 33 Ann. Cas. 1066; 19 Cent. Dig. Estop. §§ 189-191; 10 Dec. Dig. Husb. & W. § 129.
From the facts found the court properly enough concluded that the doctrine of equitable estoppel was applicable.
2. A creditor in position to invoke an estoppel against the defendant could, had bankruptcy not intervened, have gotten a judgment against the bankrupt and subjected the 80 of the defendant to its satisfaction. The question is made whether the trustee in bankruptcy representing creditors some of whom are in a position to invoke an estoppel, though not all, may reach the property.
There should be a remedy. If the trustee cannot maintain this action it is likely that the creditors would be permitted to proceed in the state court so far as...
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