Cunningham v. Mitchell

• Decision Date: 05 September 1923
• Docket Number: 17971.
• Citation: 218 P. 386,126 Wash. 294
• Court: Washington Supreme Court
• Parties: CUNNINGHAM v. MITCHELL.

218 P. 386

126 Wash. 294

CUNNINGHAM v. MITCHELL.

No. 17971.

Supreme Court of Washington

September 5, 1923

Department 2.

Appeal from Superior Court, Benton County; John Truax, Judge.

Action by Glenn E. Cunningham, as trustee in bankruptcy, in the matter of Charles Rury, bankrupt, against W. B. Mitchell. From a decree for plaintiff, defendant appeals. Affirmed.

W. B Mitchell and George D. Ayers, both of Spokane, for appellant.

Lloyd E. Gandy, of Spokane, Andrew Brown, of Prosser, and W. W Zent, of Spokane, for respondent.

PARKER J.

The plaintiff, Cunningham, as trustee in bankruptcy in the matter of the estate of Charles Rury, a bankrupt, commenced this action in the superior court for Benton county, seeking in the interest of creditors of Rury the setting aside of conveyances of real property situated in that county, made by Rury to the defendant, Mitchell, more than four months prior to the filing of his voluntary petition in bankruptcy and the adjudication of his bankruptcy in the federal court of the Eastern district of this state. A trial in the superior court on the merits resulted in a decree being rendered awarding to the plaintiff, as trustee in bankruptcy, relief as prayed for, from which the defendant has appealed to this court.

The controlling facts, as we view them, may be summarized as follows:

On April 8, 1920, there matured an indebtedness owing by Rury to Mary Bowen, evidenced by a promissory note which he had theretofore executed. A day or so prior to that date attorneys for Miss Bowen advised Rury, by letter addressed to and received by W. B. Mitchell, his then attorney, this defendant and appellant, that payment of the indebtedness so evidenced would be insisted upon at maturity, and, if not then promptly paid, suit would be brought against him looking to the enforcement of such payment. The indebtedness not being paid at maturity, on April 10, 1920, Miss Bowen commenced an action upon the note in the superior court for Spokane county against Rury, seeking a judgment against him for the amount due thereon, with attorney's fees as provided therein, and for her costs and disbursements. On the same day Rury executed and delivered to appellant, who, as we have seen, was then his attorney, the deeds, conveying several parcels of real property situated in Benton county, which are here in question. The property so conveyed was then of the value of more than $6,000. At that time the total indebtedness owing by Rury to appellant did not exceed $250, which was for legal services, and which, if justly measured, was probably less than that amount. While appellant claims such indebtedness formed a part of the consideration for the conveyances, he insists that there were other additional considerations; but he is not at all specific as to what the other additional considerations were, though he seems to regard a somewhat indefinite understanding with Rury touching his compensation for future services to be rendered, as constituting sufficient additional consideration to support the conveyances; that is, to support the conveyances as against the creditors of Rury.

At that time Rury was indebted to Miss Bowen upon the note above mentioned in the sum of approximately $1,200, and probably indebted to others in additional sums, though we do not regard that of serious moment in our present inquiry. It seems probable that, until these conveyances were executed by Rury, he was not insolvent; but we think the evidence clearly warrants the conclusion that the execution of these conveyances rendered him insolvent, in the sense that he did not have sufficient remaining funds or property to satisfy his indebtedness, whether such funds or property be voluntarily applied by him to the payment of his indebtedness, or whether such funds or property be by process of law subjected to the payment of his indebtedness. All this, it seems clear to us, was well known to appellant, who, again let us be reminded, was then attorney for Rury. Without further comment upon the facts and circumstances attending the making of these conveyances as disclosed by this record, we deem it sufficient to say that we are convinced, as the trial court manifestly was, though it made no special findings, that the conveyances were made and received with comparatively no substantial consideration, in furtherance of a purpose on the part of appellant and Rury to dispose of this property with a view of defrauding Rury's creditors, and that the conveyances had and will continue to have that effect, should the decree of the trial court setting them aside be reversed by this court.

On October 28, 1920, judgment was rendered by the superior court for Spokane county in favor of Miss Bowen and against Rury in the action above mentioned, awarding her recovery in the sum of approximately $1,350, including principal, interest, attorney's fees, and costs. This judgment became final in the superior court on December 2, 1920, by the overruling of Rury's motion for a new trial. We note that appellant was attorney for Rury as defendant in that action. On December 9, 1920, Rury filed in the federal court for the Eastern district of this state his voluntary petition in bankruptcy, and on the same day he was adjudged a bankrupt. He scheduled assets of very small apparent value, which assets proved to be of no value. He also scheduled as one of his potential ultimate debts, the judgment rendered in favor of Miss Bowen and against him in the action above mentioned. We note that appellant was attorney for Rury in the filing of his petition in bankruptcy and in procuring the adjudication therein. On December 22, 1920, Miss Bowen filed her claim in the bankruptcy proceedings for the indebtedness owing her upon the judgment above mentioned. Rury, by his attorney, this appellant, objected to the allowance of that claim on the sole ground that the judgment had been appealed from by Rury to this court wherein a reversal was being sought.

For this reason alone the referee in bankruptcy delayed the formal approval of Miss Bowen's claim, though the judgment of the superior court had in no manner been superseded pending the appeal, and it was therefore at that time enforceable as fully as though no appeal had been taken therefrom. On January 2, 1921, this suit was commenced by the respondent trustee seeking the setting aside of the conveyances. On March 27, 1922, judgment upon which the claim of Miss Bowen was rested having been affirmed by this court, her claim was by the referee in bankruptcy formally allowed. On November 1, 1922, after a trial of this cause upon the merits, the decree setting aside the conveyances was rendered by the superior court, from which this appeal is prosecuted. We think the foregoing is a fair summary of the principal controlling facts as disclosed by the record of this cause, though counsel for appellant vigorously contends to the contrary touching the question of Rury's insolvency at the time and immediately following the making of the conveyances, and the good faith and fair consideration attending their making.

It is contended in behalf of appellant that the record of this cause shows that respondent as trustee in bankruptcy is not authorized to maintain this action, because the conveyances he is seeking to set aside were made and recorded more than four months prior to the filing of Rury's petition in bankruptcy, and there is no allowed or allowable claim against the bankrupt estate, other than this claim of Miss Bowen. The time of the making and recording of the conveyances, it is true, as...