Boyd v. Arnold

• Decision Date: 01 April 1912
• Citation: 146 S.W. 118,103 Ark. 105
• Parties: BOYD v. ARNOLD
• Court: Arkansas Supreme Court

146 S.W. 118

103 Ark. 105

BOYD v. ARNOLD

Supreme Court of Arkansas

April 1, 1912

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

Decree reversed, and complaint dismissed.

F. G Taylor, for appellant.

The transfer of the note to appellant was in due course of business without any knowledge on his part of any defect therein or insolvency of the firm of Bowen & Boyd. He is an innocent purchaser for value. 65 Ark. 204.

If it be contended that the transfer of the note by G. W. Boyd to appellant was a fraud, there is no circumstance of fraud shown aside from the bare fact that Boyd transferred to his father, and the burden of proof of fraud is on appellees. As to fraud in matters of bankruptcy, see 152 F. 943; 176 F 585.

A firm has the right to sell, mortgage or assign all the assets of the firm for the purpose of securing or paying the debts owing by them individually, especially so where the individual debt is for money borrowed that went to make up the assets of the firm. 29 L. R. A. 681, and cases cited.

G. B Oliver, for appellant.

1. The testimony shows that Bowen & Boyd were insolvent at the time of the sale of the property and the transfer of the note; that the transferred property constituted the entire assets of the firm; that appellant's debt was an individual debt against his son, one of the partners in the firm; that Bowen did not know that his partner was using his note to pay an individual debt, and did not assent thereto but preferred the note to be used in payment of firm debts. This case therefore falls within the rule laid down in Bartlett v. Meyer. Schmidt Gro. Co., 65 Ark. 290.

2. This suit was filed after the transfer of the stock of goods and note, and by intervention the trustee is vested with all the right of action of the creditors that they had when the suit was brought. Collier on Bankruptcy, 767. Where a partnership and also the individual members thereof are in bankruptcy, the law provides that the property belonging to the partnership shall be first applied to the payment of partnership debts to the exclusion of individual debts; and, this being true, the four months' limitation would not apply to creditors of an individual partner, when both are in bankruptcy. 1 Fed. Stat. Ann. 550, and cases cited.

OPINION

MCCULLOCH, C. J.

J. R Bowen and George W. Boyd, as copartners, engaged in the mercantile business at Corning, Arkansas, 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 a thousand dollars, 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 70 of the National bankruptcy act 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 can not 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 months' limitation does not apply to an...