Boyd v. Arnold

• Decision Date: 01 April 1912
• Citation: 146 S.W. 118
• Parties: BOYD v. ARNOLD.
• Court: Arkansas Supreme Court

146 S.W. 118

BOYD v. ARNOLD.

Supreme Court of Arkansas.

April 1, 1912.

Appeal from Clay Chancery Court, Western District; Edward D. Robertson, Chancellor.

Action by Sam W. Arnold, trustee, against James Boyd. From a judgment for plaintiff, defendant appeals. Reversed, and complaint dismissed.

F. G. Taylor, of Corning, for appellant. G. B. Oliver, of Corning, for appellee.

McCULLOCH, C. J.

J. R. Bowen and George W. Boyd were, as copartners, engaged in the mercantile business at Corning, Ark., and sustained a loss of the greater portion of their stock of goods by fire. Boyd had purchased an interest in the business a few months before the fire occurred, and paid for his said interest the sum of $1,000, which he had borrowed from his father, James Boyd. After the fire occurred, they sold the remnant of the stock of goods to one Hawks for the sum of $1,480.80, taking in payment the two negotiable promissory notes of the latter for equal sums; one note being payable to Bowen and the other to George W. Boyd. Bowen collected his note, and used the greater portion of the amount in paying partnership debts. Boyd assigned his note to his father in satisfaction of said debt for borrowed money, and the latter collected the amount of the note from Hawks. The sale to Hawks and the assignment of the note to James Boyd occurred in April, 1909, and on May 28, 1909, certain creditors of the copartnership instituted this action in the chancery court of Clay county against James Boyd to recover the amount collected by him, as aforesaid. George W. Boyd and Bowen were made parties defendant. More than four months thereafter, the firm of Bowen & Boyd filed a petition in bankruptcy, and subsequently obtained their discharge. Appellee, Sam W. Arnold, was elected trustee by the creditors, and was afterwards, on his own motion, joined as plaintiff in this action. It is alleged in the complaint that Bowen & Boyd were insolvent at the time of the assignment of said note to James Boyd, and that said note was wrongfully and unlawfully assigned to him by George W. Boyd in payment of an individual debt. The answer denies that the assignment of said note was wrongfully or unlawfully made. On final hearing, the chancellor decreed in favor of the trustee against James Boyd for the recovery of the sum of $824.40, the amount collected on said note, with interest. The latter appealed.

Section 70e of the national bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 566 [U. S. Comp. St. 1901, p. 3452]) provides that 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." The trustee cannot sue to set aside a preference given more than four months before the petition in bankruptcy was filed (section 60, bankruptcy act); but the four-month limitation does not apply to an action to cancel a fraudulent conveyance made by the bankrupt. General creditors, by filing a bill to cancel a fraudulent conveyance of their debtor, acquire a specific lien on the property conveyed, and gain thereby a priority in the distribution of the fund recovered. Jones v. Arkansas Agricultural Co., 38 Ark. 17; Stix v. Chaytor, 55 Ark. 117, 17 S. W. 707; Senter v. Williams, 61 Ark. 189, 32 S. W. 490, 54 Am. St. Rep. 200; Plummer v. School District, 90 Ark. 236, 118 S. W. 1011, 134 Am. St. Rep. 28, 17 Ann. Cas. 508.

The trustee's suit did not displace the preference thus acquired by the creditors in a suit begun more than four months before the filing of the petition in bankruptcy. Taylor v. Taylor, 59 N. J. Eq. 86, 45 Atl. 440.

If the case involved a controversy between such...