Crary v. Kurtz

• Citation: 105 N.W. 590,132 Iowa 105
• Parties: GEORGE E. CRARY, TRUSTEE in BANKRUPTCY OF JOSEPH KURTZ, Bankrupt, v. JOSEPH KURTZ and TERSA KURTZ, Appellants
• Decision Date: 13 January 1906
• Court: United States State Supreme Court of Iowa

105 N.W. 590

132 Iowa 105

GEORGE E. CRARY, TRUSTEE in BANKRUPTCY OF JOSEPH KURTZ, Bankrupt, v. JOSEPH KURTZ and TERSA KURTZ, Appellants

Supreme Court of Iowa, Des Moines

January 13, 1906 ^[*]

Appeal from Marshall District Court.--HON. OBED CASWELL, Judge.

ACTION to set aside a conveyance as fraudulent. Decreed as prayed. The defendant Teresa Kurtz appeals. Reversed.

Decree Reversed.

Anthony C. Daly and Boardman, Aldrich & Lawrence, for Appellant.

Meeker & Meeker, for appellee.

LADD J. DEEMER, J., MCCLAIN, C. J. (dissenting).

OPINION

LADD, J.

Suit was begun by Charles A. Buckwalk and F. S. Widl, creditors of Joseph Kurtz, on August 20, 1903, to enforce contribution by the latter as co-surety with them on certain promissory notes of the Kurtz Wagon Company which they had paid. Besides judgment for Kurtz's pro rata share plaintiffs prayed that a certain conveyance of about two hundred and eight acres of land, executed August 11, 1902, by Kurtz to his wife Teresa, be set aside and the judgment be enforced against the same. The defendants filed separate answers October 20, 1903, and on January 11, 1904, Geo. E. Crary, as trustee in bankruptcy of the estate of Joseph Kurtz, moved that he be substituted as party plaintiff in the suit instead of Buckwald and Widl. Attached to the motion was a copy of a petition to the referee in bankruptcy, praying for authority to prosecute the suit to the end that the lien and security acquired by these creditors be preserved for the benefit of the estate, and the order of the referee directing the trustee to procure himself to be substituted as plaintiff and prosecute the case. The court sustained the motion, and ordered that "Geo. E. Crary, trustee in bankruptcy is substituted party plaintiff." But no amendment to the petition nor supplemental pleading was filed, and for this reason appellant insists that plaintiff's petition should have been dismissed. Section 3459 of the Code declares that "every action must be prosecuted in the name of the real party in interest," and section 3476 that "no action shall abate by the transfer of any interest therein during its pendency, and new parties may be brought in, as may be necessary." The method of bringing in new parties is not pointed out, but, where the cause of action has been transferred, this is ordinarily by motion of the party desiring to be substituted as plaintiff. Ferry v. Page, 8 Iowa 455; Lindsey v. Lindsey, 28 Ga. 169; Chicago Legal News Co. v. Browne, 103 Ill. 317; Firman v. Bateman, 2 Utah 268; 20 Ency. of Pl. & Pr. 1050. And, as a general rule, the substituted party takes up the prosecution or defense at the point where the original party left it, assuming the burdens as well as receiving the benefits. Bixby v. Blair, 56 Iowa 416, 9 N.W. 318; Fannon v. Robinson, 10 Iowa 272; 20 Ency. Pl. & Pr. 1061.

There is some difference of opinion, however, as to whether any additional pleading is essential. In Campbell v. West, 93 Cal. 653, (29 P. 219), a supplemental pleading was held to be necessary, and in Ford v. Bushard, 116 Cal. 273, (48 P. 119), the court adjudged that "the assignee is entitled to be substituted upon a showing of probable cause, but the defendant is not thereby precluded from denying such assignment; and, if he does so, the fact must be determined by the preponderance of evidence, as in the case of other issues." But in Campbell v. Irvine, 17 Mont. 476 (43 P. 626), the court, construing a statute of that state, approved a ruling that the action might be continued by the successor in interest without additional pleading. In Virgin v. Brubaker, 4 Nev. 31, after a careful consideration of the question, the court concluded that, as the substitution is with the original plaintiff's consent, supplemental pleadings are unnecessary, saying: "Usually an assignee must allege and prove the assignment to sustain an action in his own name. If it were not so, a pretended assignee might recover a judgment, and afterwards the original owner of the claim recover a second judgment for the same demand. But this could not be in the case where the original plaintiff assents to the substitution. The issues are between the original parties, and no change of pleading is required. If the judgment goes for plaintiff, it is simply entered up in the name of the assignee, instead of being entered for the original plaintiff, and then assigned after judgment, as it would have been under the old practice."

In Smith v. Zalinski, 94 N.Y. 519, the court in construing the statutes of that State held that unless the court in ordering substitution directs the amendment of the pleadings, the right to be substituted cannot thereafter be raised. It is not to be doubted that in every case the defendant is entitled at some time and in some way to contest, if he shall please, the title of the transferee, but, if he is granted that opportunity, he has no right to complain, if refused it a second time. Such a transfer of interest is usually a formal matter in which the defendant has no concern, except to be protected from a double claim. In all other respects the issues in litigation ordinarily remain unchanged, and they only are to be tried. The application for substitution raises the issue as to whether there has been a change in ownership such as is alleged, and, unless this is admitted, it must be established by competent evidence before the order of substitution will be entered. Chisholm v. Clitherall, 12 Minn. 375 (Gil. 251); Smith v. Harrington, 3 Wyo. 503, (27 P. 803); Kemper v. King, 11 Mo.App. 116; Smith v. Zalinski, 94 N.Y. 519. This may be upon terms, and, where the right of substitution is contested, the court may well require the new party to file a supplemental pleading alleging the facts upon which the transfer of the original party's interest is predicated. If these are put in issue by the answer, or the transfer is questioned therein or by amendments thereto, in the absence of a supplemental pleading, the substituted party's right to maintain the action must be established the same as any other issue. Ferry v. Page, 8 Iowa 455; Ford v. Bushard, 116 Cal. 273, (48 P. 119).

But where the transfer of interest is admitted, or at least not disputed in the hearing on the motion, and no objection thereto is thereafter raised, we perceive no reason for not regarding the ruling on the application for substitution as an adjudication of the question, and thereafter treating the substituted party as standing in the place and stead of the original party. In Firman v. Bateman, 2 Utah 268, an assignee in bankruptcy was substituted for the original plaintiff. On the trial evidence of the assignment in bankruptcy was objected to, but the court held such proof unnecessary, as no objection had been made to the order of substitution. To the same effect see Virgin v. Brubaker, 4 Nev. 31. Also see Keller v. Miller, 17 Ind. 206.

In the case at bar the applicant for substitution was a trustee in bankruptcy. His right thereto was purely one of law. The court in ruling on the motion necessarily determined first that Kurtz, the debtor, had been adjudged bankrupt, and, second, that Geo. E. Crary had been duly appointed the trustee of his estate. No more than the bare allegation of his representative capacity would in any event have been necessary, and this could not have been put in issue, save by pleading the facts relied on. Sections 3627, 3628, Code. The order determined the legal capacity in which the trustee was substituted as plaintiff, and in the absence of any subsequent question as the correctness of the ruling we think it should be regarded as final.

II. Exception is taken to the omission of an allegation in the petition that Kurtz was insolvent at the time he executed the conveyance to his wife. This was unnecessary. Rounds v. Green, 29 Minn. 139 (12 N.W. 454. Kain v. Larkin, 141 N.Y. 144 (36 N.E. 9). Nor was it necessary to prove insolvency at that time. Banning v. Purinton, 105 Iowa 642, 75 N.W. 639. Such evidence, however, is often very material in ascertaining the purpose of the conveyance.

III. The conveyance of the land by Kurtz to his wife was without consideration. At that time he was liable as surety on the notes of Kurtz Wagon Company. The payment of these by his co-sureties is presumed to have been upon his implied request and promise to contribute his just portion, and therefore the debt due them grew out of, and in a sense was, a continuation of a part of his original obligation as surety. This being true, and it appearing from the adjudication that he was a bankrupt, that he was insolvent at the time of the trial, the conveyance is presumed to have been fraudulent. In other words, a voluntary conveyance which, if allowed to stand, will defeat the collection of an indebtedness existing at that time, because of the present insolvency of the debtor, is presumed, in the absence of evidence to the contrary, to have been executed for that purpose. Strong v. Lawrence, 58 Iowa 55; Elwell v. Walker, 52 Iowa 256, 3 N.W. 64; Carson v. Foley, 1 Iowa 524. The burden of proof was upon the defendant to show that Kurtz retained ample means after the conveyance to satisfy all his debts, and that the gift was not unreasonable in view of his financial situation. No evidence of the kind was introduced, and for this reason the presumption as to the fraudulent character of the transfer prevails.

IV. The claims of Buckwald and Widl were never reduced to judgment. Evidence tending to establish Kurtz's indebtedness to them and others was introduced, but, as judgment could not have been entered in favor of the trustee, there was no necessity of interposing a defense, even though one existed. Nor was it made to appear that the claims of any creditors had...