Cartwright v. West

• Decision Date: 18 December 1913
• Citation: 185 Ala. 41,64 So. 293
• Parties: CARTWRIGHT et al. v. WEST.
• Court: Alabama Supreme Court

64 So. 293

185 Ala. 41

CARTWRIGHT et al. v. WEST.

Supreme Court of Alabama

December 18, 1913

Rehearing Denied Feb. 5, 1914

Appeal from Chancery Court, Morgan County; W.H. Simpson, Chancellor.

Bill by Marvin West, as trustee in bankruptcy of the estate of Herbert Cartwright, against Emma D. Cartwright and others to set aside certain conveyances of the bankrupt. Decree for complainant, and defendants appeal. Affirmed as to one conveyance, and reversed as to another, and decree rendered that the latter conveyance was not inoperative and void as to creditors of the bankrupt.

Dowdell Mayfield, and Sayre, JJ., dissenting in part.

O Kyle, of Decatur, for appellants.

Callahan & Harris and Marvin West, all of Decatur, for appellee.

ANDERSON J.

This is the third appeal in this case. 155 Ala. 619, 47 So. 93; s. c 55 So. 917. Upon the first appeal the bill failed to charge that the conveyances made were with a covinous intent, and could therefore be assailed only by existing creditors, and it was therefore necessary for the bill to charge a fraudulent intent, or else that the creditors were existing or antecedent. In other words, the bankruptcy act gives the trustee the power to set aside any conveyance that could be avoided by a creditor; therefore, if the conveyance is attacked as being only voluntary, the bill by the trustee must show that there were existing creditors, as this is essential to defeat such a conveyance. If, however, the bill charges such a fraudulent intent as would avoid the sale by subsequent creditors, we do not think it necessary for the bill to name all of said creditors, or to specify and describe their respective debts. The adjudication of bankruptcy is a determination of the insolvency of the bankrupt and the existence of creditors, not necessarily creditors antecedent to the conveyance, but at least subsequent thereto. Neither is it essential, in a bill filed by the trustee, to aver that the demands are due. The averment is essential when the bill is filed by a creditor, as he has no right to institute the suit until the obligation matures; but such is not the case as to a trustee in bankruptcy, for the reason that the debts of the bankrupt mature, under the terms of the act, immediately upon the adjudication. It may be true that the trustee can avoid only those conveyances of the bankrupt which could be avoided by a creditor. Section 70e of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 565 [U.S. Comp.St. 1901, p. 3451]). If the property was conveyed in fraud of the act, the trustee had the right to recover the same for the benefit of the bankrupt estate, and all that is necessary is to show the existence of such a creditor or creditors as could avoid the conveyance. If the bill does not charge a fraudulent conveyance, but simply a voluntary one, then it should show an existing creditor or creditors; but, if it charges a fraudulent conveyance, it would be invalid both as to existing and subsequent creditors, and the existence of one or more would give the trustee the right to avoid the sale, and to recover the property as an asset of the estate to be distributed by the bankruptcy court. It is not necessary for the bill to set up a schedule of all of the creditors, or to describe all of the debts, as it is not only not practical, but the act does not require it. In the first place the creditors have a year within which to file and prove their claims, and to require the trustee to give a list and description of all creditors in his bill would necessitate a possible delay. When such a bill is filed in a state court, the trustee need only show a right to set aside the conveyance, that is, that there was such a creditor as could avoid same, and all that the state court can do is to set it aside, and which vests all title or interest in the trustee to be administered and distributed in the bankrupt court. Dickens v. Dickens, 174 Ala. 305, 56 So. 808.

The Supreme Court of the United States, in the case of Eau Claire Nat. Bank v. Jackson, 204 U.S. 522, 27 Sup.Ct 391, 51 L.Ed. 595, shows very clearly that it is an immaterial consideration in a suit by a trustee as to how the fund is to be administered, or who is to get the benefit of it. It is there said: "This action, as we have indicated, is simply one of trover to recover the value of property which, as is alleged, was, in fraud of the bankrupt act, wrongfully converted by defendant to its own use. Whether there was one or more classes of creditors, and in what manner the property is sought to be recovered, would, if the suit were successful, be administered, did not vary in the least nor in the slightest degree the legal rights of the plaintiff. If the property was obtained by the defendant in fraud of the bankrupt act, plaintiff was entitled to recover the same, and this is the only question involved. The bank also contends in effect that in such suit the validity of all other claims against the bankrupt can be litigated, and, whether they have received voidable preferences, and have not been required to surrender them, the broad effect of the contention repels it as unsound. To yield to it would transfer the administration of a bankrupt's estate from the United States District Court to the state court." We do not question the soundness of the holding upon the first appeal (155 Ala. 619, 47 So. 93), that, so long as the bill did not charge fraud, it had to show existing creditors; but we do question the holding in so far as...