Buttz v. James
| Decision Date | 18 December 1915 |
| Court | North Dakota Supreme Court |
Rehearing denied February 23, 1916.
Appeal from the District Court of Benson County, Cowan, J.
Action to set aside a conveyance of real estate as an unlawful preference under the Federal bankruptcy act. Judgment for defendant. Plaintiff appeals.
Reversed.
Judgment reversed, with directions.
Torger Sinnes, Henry G. Middaugh, and Rolla F. Hunt, for appellant.
It is the date of the recording of the deed, and not the date of delivery, that is material in bankruptcy proceedings. Until the actual recording of the deed, the land was subject to levy under attachment or execution at the suit of any creditor of the grantor, the debtor. National Bankruptcy Act § 60a; Rev. Codes, 1905, § 5038, Comp. Laws 1913 § 5594; Benner v. Scandinavian American Bank (1913) 73 Wash. 488, 131 P. 1149, Ann. Cas. 1914D, 702; Telford v. Hendrickson, 120 Minn. 427, 139 N.W. 941; First Nat. Bank v. Connett, 5 L.R.A.(N.S.) 148, 73 C. C. A. 219, 142 F. 33; Note to Loeser v. Savings Deposit Bank & T. Co. 18 L.R.A.(N.S.) 1233; 1 Emerson, Bankr. 1382; 1 Loveland, Bankr. 499; Re Sturtevant, 110 C. C. A. 68, 188 F. 196.
But the transfer was in fraud of creditors under the laws of this state. Bush v. Export Storage Co. 136 F. 918; 30 Stat. at L. 564, § 67e, cl. 3; Comp. Laws 1913, § 7220; Rev. Codes, 1905, § 6640, Comp. Laws 1913, § 7223; 20 Cyc. 439, 461.
Where the transfer is between close relatives the general rule is that the burden of proof is on the defendant to establish fairness and good faith, and adequate consideration. Adoue v. Spencer, 62 N.J.Eq. 782, 56 L.R.A. 817, 90 Am. St. Rep. 484, 49 A. 10; Elwell v. Walker, 52 Iowa 256, 3 N.W. 70; Peterson v. Rone, 76 Iowa 447, 41 N.W. 68; Plummer v. Rummel, 26 Neb. 142, 42 N.W. 336; Bartlett v. Cheesbrough, 23 Neb. 767, 37 N.W. 652; Fluegel v. Henschel, 7 N.D. 276, 66 Am. St. Rep. 642, 74 N.W. 996.
The participation in the fraud of the vendee, even though full consideration be paid, will render the deed and transaction invalid. Wood v. Chambers, 20 Tex. 247, 70 Am. Dec. 382; Craig v. Zimmerman, 87 Mo. 475, 56 Am. Rep. 466; Chapel v. Clapp, 29 Iowa 191; Liddle v. Allen, 90 Iowa 738, 57 N.W. 603; Biddinger v. Wiland, 67 Md. 359, 10 A. 202; Smith v. Collins, 94 Ala. 394, 10 So. 334; Metropolitan Bank v. Durant, 22 N.J.Eq. 35; Hathaway v. Brown, 18 Minn. 414, Gil. 373; Hough v. Dickinson, 58 Mich. 89, 24 N.W. 809; Kansas Moline Plow Co. v. Sherman, 3 Okla. 204, 32 L.R.A. 33, 41 P. 623; Jones v. Hetherington, 45 Iowa 681; Rindskopf v. Myers, 87 Wis. 80, 57 N.W. 967; Dyer v. Taylor, 50 Ark. 314, 7 S.W. 258; Holladay Case, 27 F. 830; Dodd v. Gaines, 82 Tex. 429, 18 S.W. 618; Eureka Iron & Steel Works v. Bresnahan, 66 Mich. 489, 33 N.W. 834; Hanchett v. Kimbark, 118 Ill. 121, 7 N.E. 491.
But the law casts upon the vendee no duty to inquire into the motives or circumstances of his vendor, unless there are brought to his attention or he has knowledge of suspicious facts or circumstances, as seem to have existed here. State ex rel. Peirce v. Merritt, 70 Mo. 276; Baker v. Bliss, 39 N.Y. 70; Stearns v. Gage, 79 N.Y. 102; Woodworth v. Paige, 5 Ohio St. 70; Tuteur v. Chase, 66 Miss. 476, 4 L.R.A. 832, 14 Am. St. Rep. 577, 6 So. 241; White v. State, 103 Ala. 72, 16 So. 63; Kemmerer v. Tool, 78 Pa. 147.
A grantee who, before making full payment, receives knowledge that the transfer was fraudulent on the part of his grantor, makes further payments to his grantor at his peril, as to such payments he is regarded as a participant in the fraud, and the conveyance may be up pro tanto. Crawford v. Kirksey, 55 Ala. 282, 28 Am. Rep. 704; Rhodes v. Green, 36 Ind. 7; Perkins v. Swank, 43 Miss. 349; Hedrick v. Strauss, 42 Neb. 485, 60 N.W. 928; Davis v. Ward, 109 Cal. 186, 50 Am. St. Rep. 29, 41 P. 1010; Jewett v. Palmer, 7 Johns. Ch. 65, 11 Am. Dec. 401; Frost v. Beekman, 1 Johns. Ch. 298; Arnholt v. Hartwig, 73 Mo. 487; Kitteridge v. Chapman, 36 Iowa 348; Green v. Green, 41 Kan. 472, 21 P. 586, 16 Am. & Eng. Enc. Law, 838, note; Clements v. Moore (Clements v. Nicholson), 6 Wall. 299, 18 L.Ed. 786; Sargent v. Eureka Spund Apparatus Co. 46 Hun, 19.
Notes which are given for the purchase price do not constitute payment as between grantor and grantee, so long as such papers remain in the hands of the grantor. Freeman v. Deming, 3 Sandf. Ch. 327; Partridge v. Chapman, 81 Ill. 137; Baldwin v. Sager, 70 Ill. 503; Rush v. Mitchell, 71 Iowa 333, 32 N.W. 367; Paul v. Fulton, 25 Mo. 163; Dixon v. Hill, 5 Mich. 404; Davis v. Ward, 109 Cal. 186, 50 Am. St. Rep. 29, 41 P. 1010; Daisy Roller Mills v. Ward, 6 N.D. 317, 70 N.W. 271; Coiron v. Millaudon, 19 How. 115, 15 L.Ed. 575; Clements v. Moore (Clements v. Nicholson) 6 Wall. 312, 18 L.Ed. 788; Bean v. Smith, 2 Mason, 252, Fed. Cas. No. 1,174; 18 Myer, F. Dec. 406; Tompkins v. Sprout, 55 Cal. 31; Robinson v. Stewart, 10 N.Y. 189; Lobstein v. Lehn, 120 Ill. 549, 12 N.E. 68.
"If property be conveyed with the design on the part of the vendor, participated in by the vendee, to hinder, delay, or defraud creditors, the vendee's title will not be protected, even though he paid full consideration." Liddle v. Allen, 90 Iowa 738, 57 N.W. 603; Chapel v. Clapp, 29 Iowa 191; Chapman v. Ransom, 44 Iowa 377; Sweet v. Wright, 57 Iowa 510, 10 N.W. 870; Williamson v. Wachenheim, 58 Iowa 277, 12 N.W. 302; Dokken v. Page, 77 C. C. A. 674, 147 F. 438; Kansas Moline Plow Co. v. Sherman, 3 Okla. 204, 32 L.R.A. 33, 41 P. 623; Gress v. Evans, 1 Dak. 387, 46 N.W. 1132; Young v. Harris, 4 Dak. 367, 32 N.W. 97; Shauer v. Alterton, 151 U.S. 607, 38 L.Ed. 286, 14 S.Ct. 442; Wood v. Carpenter, 101 U.S. 135, 141, 25 L.Ed. 807, 809; Kennedy v. Green, 3 Myl. & K. 722, 21 Eng. Rul. Cas. 820; Rev. Codes, 1905, § 4099, Comp. Laws 1913, § 4431; 29 Cyc. 49.
F. G. Kneeland, for respondent.
Many cases hold that recording or registering of deed, under statutes like ours, is not required to complete the transfer, under the application of the bankruptcy act. Re Hunt, 139 F. 283; Re Chadwick, 140 F. 674; Meyer Bros. Drug Co. v. Pipkin Drug Co. 69 C. C. A. 240, 136 F. 396.
The deed here in question was valid, and its earlier record as against no person was required by the laws of this state,--the laws which here govern. Comp. Laws 1913, § 5594; Ildvedsen v. First State Bank, 24 N.D. 227, 139 N.W. 105; Telford v. Hendrickson, 120 Minn. 427, 139 N.W. 941.
Where a preference under the bankruptcy law is claimed, the burden of proof is upon the plaintiff to establish such preference. Re Chappell, 113 F. 545; Benjamin v. Chandler, 142 F. 217; Tumlin v. Bryan, 21 L.R.A.(N.S.)960, 91 C. C. A. 200, 165 F. 166.
No presumption arises from the adjudication in bankruptcy that the bankrupt was insolvent for four months, or for any period, before his petition was filed, and hence it is incumbent on the trustee to prove the insolvency. Re Chappell, supra; Collier, Bankr. 3d ed. 46.
If, at the time the deed was given and delivered, it was not intended by either party as a preference, a failure to record it until such a time as the maker becomes insolvent would not make it a preference. Bradley, C. & Co. v. Benson, 93 Minn. 91, 100 N.W. 670; Halbert v. Pranke, 91 Minn. 204, 97 N.W. 976; Dean v. Plane, 195 Ill. 495, 63 N.E. 274; Re New York Economical Printing Co. 49 C. C. A. 133, 110 F. 514; Re Thompson, 122 F. 174; Re Antigo Screen Door Co. 59 C. C. A. 248, 123 F. 249; Seager v. Lamm, 95 Minn. 325, 104 N.W. 1; Loeser v. Savings Deposit Bank & T. Co. 18 L.R.A.(N.S.) 1234, note; Loveland, Bankr. 3d ed. § 203a, p. 622.
A judgment, to be upheld, must be supported by a sufficient pleading. Satterlund v. Beal, 12 N.D. 122, 95 N.W. 518; 23 Cyc. 816; 38 Cyc. 1970; Fifer v. Fifer, 13 N.D. 28, 99 N.W. 763.
Where one seeks to set aside a deed for fraud, his proof must be clear and convincing. The burden here is on plaintiff. Englert v. Dale, 25 N.D. 587, 142 N.W. 169; McKillip v. Farmers' State Bank, 29 N.D. 544, 151 N.W. 287.
The fact that the parties to the deed are relatives raises no presumption of fraud. Fluegel v. Henschel, 7 N.D. 276, 66 Am. St. Rep. 642, 74 N.W. 996.
The fact that a grantor is insolvent nearly five months after the date of his deed, is no evidence of insolvency at the date thereof. Re Chappell, 113 F. 545; 20 Cyc. 458; Kain v. Larkin, 131 N.Y. 300, 30 N.E. 105; Hyde v. Chapman, 33 Wis. 391; Bishop v. State, 83 Ind. 67; Nevers v. Hack, 138 Ind. 260, 46 Am. St. Rep. 380, 37 N.E. 791; Greer v. Richardson Drug Co. 1 Tex. Civ. App. 634, 20 S.W. 1127; Windhaus v. Bootz, 92 Cal. 617, 28 P. 557; Fluegel v. Henschel, 7 N.D. 276, 66 Am. St. Rep. 642, 74 N.W. 996.
Insolvency must exist at the time of the transfer. Greer v. Richardson Drug Co. 1 Tex. Civ. App. 634, 20 S.W. 1127; Kain v. Larkin, 131 N.Y. 300, 30 N.E. 105; Sherman v. Hogland, 54 Ind. 579; Windhaus v. Bootz, 92 Cal. 617, 28 P. 557; McCole v. Loehr, 79 Ind. 432; Whitesel v. Hiney, 62 Ind. 168.
Without regard to the time of the occurrence of two transactions, if they are shown to be independent, distinct, substantive transactions, the fraud of the one cannot be visited on the other, shown to be free from fraud. Nelms v. Steiner Bros. 113 Ala. 562, 22 So. 435; Kock v. Bostwick, 113 Mich. 302, 71 N.W. 473; Muir v. Miller, 103 Iowa 127, 72 N.W. 409; Kickbusch v. Corwith, 108 Wis. 634, 85 N.W. 149; McKillip v. Farmers' State Bank, 29 N.D. 541, 151 N.W. 287; 20 Cyc. 413.
Conveyances such as the one shown by the record here to have been are universally upheld by the courts. McKillip v. Farmers' State Bank, 29 N.D. 544, 151 N.W. 287.
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