Crocker v. Russell

• Decision Date: 01 May 1930
• Parties: CROCKER v. RUSSELL ET AL. [a1]
• Court: Oregon Supreme Court

287 P. 224

133 Or. 213

CROCKER v. RUSSELL ET AL. ^[a1]

Supreme Court of Oregon

May 1, 1930

Department 2.

Appeal from Circuit Court, Multnomah County; George R. Bagley Judge.

Suit by O. S. Crocker, trustee of the estate of Frank P. Russell bankrupt, against Carrie L. Russell and another. Decree for plaintiff, and named defendant appeals.

Affirmed.

This is a suit by the trustee in bankruptcy of the estate of Frank P Russell, a voluntary bankrupt, to set aside the fraudulent conveyance of his property, which included one hundred shares of the capital stock of the Portland Machinery Company, to his wife, Carrie L. Russell, the appellant. Other personal property was embraced in the conveyance which is not involved upon this appeal. From a decree in favor of plaintiff defendant Carrie L. Russell appeals.

C. M. Hodges, of Portland (Hodges & Gay, of Portland, on the brief), for appellant.

Ralph H. King and Edward J. Clark, both of Portland (McCamant & Thompson, Ralph H. King, and Edward J. Clark, all of Portland, on the brief), for respondent Crocker.

Platt, Platt, Fales & Smith, of Portland, for respondent bank.

BEAN J.

The amended complaint contains the allegations usual to set aside a transfer of property, made with the purpose and intent of hindering, delaying, and defrauding creditors.

It was alleged that on August, 1925, and for a long time prior thereto, Frank P. Russell was the owner in his own right of one hundred shares of the capital stock of the Portland Machinery Company, and that on that date, by a written contract, he agreed to sell said stock to T. H. Comerford and T. J. Gleie for $25,000, and received therefor $7,000 in cash and a promissory note for $18,000, payable at the rate of $1,500 and interest semi-annually; that on June 11, 1926, F. P. Russell was still the absolute owner of the said contract note and collateral, and on that date, with the purpose and intent of hindering, delaying, and defrauding his creditors, made a pretended assignment and transfer of all his interest in said stock, contract, and note to his wife Carrie L. Russell, without receiving any consideration therefor, and that said Carrie L. Russell received the transfer and assignment with full knowledge that such transfer and assignment rendered her husband wholly insolvent, and was accepted by her with the purpose and intent of aiding him to hinder, delay, and defraud each and all of his creditors.

The defendant, Carrie L. Russell, denied all the charges made against her, and alleged as a special defense that during the year 1903 she intrusted to her husband the sum of $5,000 to be invested in the Halladie-Henshaw-Buckley Company, and that he accepted said sum for her use and benefit, and invested it accordingly. On account of the reorganization and change of name of the last named company to the Portland Machinery Company, the amount invested was transferred to the Portland Machinery Company for stock in the last named concern, and that the 100 shares of stock which were on June 11, 1926, held in the name of Frank P. Russell, was but the original $5,000 investment, and the transfer of his property to his wife was but the return of property to Carrie L. Russell, which she had always equitably owned. To this answer a reply was filed, setting up in detail facts as an estoppel of appellant from asserting such claim.

The following appeared upon the trial, and was in substance found by the court:

For a long time prior to March 20, 1925, and down to and including August 1, 1925, Frank P. Russell had been, and then was, the owner in his own right of 100 shares of the capital stock of the Portland Machinery Company, a corporation duly organized and existing under and by virtue of the laws of the state of Oregon. The company was organized in 1904. The venture at first did not prove a success, and in 1906 the assets of the company were inventoried, and it was found that the $5,000 investment of Mr. Russell had dwindled to $2,870. Thereupon Mr. Russell received sixty-five and one-half shares of stock of the company for his original investment. Subsequent to 1906, upon purchase from time to time, Russell acquired, in his own name, the balance of one hundred shares, comprising one-third of the capital stock of the company. Mr. Russell paid for this additional stock, and it was not received as stock dividends. He acted as president of the company, gave practically his whole time thereto, and for all purposes appeared, and was evidently known, as the owner of one hundred shares of stock until the events of 1926. The capital stock was of the reasonable value of $25,000.

About August 1, 1925, Frank P. Russell, by a written contract, agreed to sell this capital stock to T. H. Comerford and T. J. Gleie upon the payment of $25,000, payable $7,000 cash, and semiannual payments of $1,500 each and interest; and a promissory note in the sum of $18,000, at that time executed, evidenced the balance of the purchase price. By the terms of the contract, said contract, stock, and note were placed in escrow in the United States National Bank of Portland, Or., pending the full payment of the purchase price, and all payments thereon were to be made to the bank.

At the time this suit was instituted there remained unpaid on account of the principal of said note and contract the sum of $12,000, with interest thereon from August 1, 1927, at 7 per cent. per annum. The note, contract, and stock certificates referred to, together with the interest accrued from the 1st day of August, 1927, are held by the bank for the person determined to be entitled thereto in this suit.

On August 1, 1925, the said bankrupt was, and thereafter continued to be, obligated and indebted to various persons in a sum totalling about $8,500. Among these obligations was a promissory note signed by Frank P. Russell and Alice R. Stoddard, his daughter, dated March 20, 1925, in favor of Mabel V. Lawson, as payee, and thereafter she sued said Frank P. Russell and Alice R. Stoddard in the circuit court for Multnomah county, and secured judgments against both of them, on October 20, 1927, in the sum of $7,735, and $1,000 attorneys' fees, and costs, $58.65.

On November 4, 1927, Frank P. Russell was adjudicated a bankrupt. Thereupon the said judgment and other claims aggregating a total of $9,293.65 were duly allowed against the bankrupt estate, and no payments have been made thereon.

There are no other assets of the estate other than the property herein sought to be recovered and the balance unpaid upon the contract to sell said stock, approximately $12,000, and the accrued interest thereon, is necessary to create a fund with which to pay the claims against the bankrupt estate and costs and expenses of administration thereof. The reasonable value of the stock, contract, and note, with collateral at the time of the fraudulent transfer and assignment, was and is now $16,500.

About June 11, 1926, Mabel V. Lawson was pressing for a prompt settlement of her note. On that date the bankrupt, with the purpose and intent of hindering, delaying, and defrauding his creditors, including Mabel V. Lawson, of their respective demands and in contemplation of bankruptcy, if necessary, to escape payment of her debt, made a pretended assignment and transfer of all his interest in said stock, contract, and note for the sale and payment thereof, without receiving any consideration therefor, to his wife, Carrie L. Russell, the nominal consideration for the transfer being $1. The transfer rendered him wholly insolvent. Defendant Carrie L. Russell received the transfer and assignment with full knowledge that the same rendered her husband wholly insolvent and without other assets with which to meet any of his obligations, and was accepted by her with the purpose and intent of aiding him to hinder, delay, and defraud each of his creditors, and such creditors were thereby hindered, delayed, and defrauded, and said transfer and assignment was and is void.

As a part of said attempted transfer the note is indorsed by the bankrupt, "Pay to the order of Carrie L. Russell [Signed] Frank P. Russell."

At the time of the transfer, Mrs. Russell knew that her daughter was in arrears in the payment of the note, and that it had been placed in the hands of an attorney for collection, and that the attorney was urging payment of the note and threatening action thereon. On November 4, 1927, Alice R. Stoddard...