Hart v. Weiser
| Decision Date | 18 February 1929 |
| Citation | 224 N.W. 308,57 N.D. 849 |
| Court | North Dakota Supreme Court |
Rehearing Denied April 6, 1929.
Appeal from the District Court of Golden Valley County Lembke, J.
Reversed and remanded.
Theodore B. Torkelson and Lawrence, Murphy, & Nilles for appellants.
The exclusive jurisdiction of the bankruptcy court is so far in rem that the estate is regarded as in custodia legis from the filing of the petition. Acme Harvester Co. v. Lumber Co. 222 U.S. 300.
"An attempt to prefer is not to be confounded with an attempt to defraud, nor a preferential transfer with a fraudulent one." Coder v. Arts, 213 U.S. 223, 53 L. ed 772.
"The right of a trustee in bankruptcy under the Act of July 1st., 1898 (30 Stat. at L. 544, chap. 541) § 60b, as amended by the Act of June 25, 1910 (36 Stat. at L. 842, chap. 412, U.S.C. title 11, § 96) to avoid a preferential transfer by the bankrupt, recorded, if by law recording is required, within four months before the bankruptcy proceedings are begun, exists only where the trustee in fact represents or is entitled to take the place of some creditor whose claim actually stood in a superior position to the challenged transfer while unrecorded and within the specified period." Martin v. Commercial Nat. Bank, 245 U.S. 513, 62 L. ed. 441.
"An attempt to prefer is not be confounded with an attempt to defraud." Githens v. Shiffler, 112 F. 505.
"In a preferential transfer the fraud is constructive or technical, consisting in the infraction of that rule of equal distribution among all creditors which it is the policy of the law to enforce when all cannot be fully paid." Re Maher, 144 F. 503.
"The question as to whether a transfer is made with intent to hinder, delay, or defraud, depends upon whether the act done is a bona fide transaction." Loveland, Bankr. 391; Cadagon v. Kennett, 2 Cow. 435; Lansing Boiler & Engine Works v. Ryerson, 63 C.C.A. 253, 128 F. 701.
An intent to defraud is the test of the right to avoid a transfer under § 67e of the Bankruptcy Law. Thompson v. Fairbanks, 196 U.S. 516, 49 L. ed. 577, 25 S.Ct. 306; Coder v. Arts, 213 S.Ct. 780-782.
Bailey v. Baker Ice Mach. Co. 239 U.S. 268, 60 L. ed. 275; Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 56 L. ed. 208; Fairbanks Steam Shovel Co. v. Wills, 240 U.S. 642, 60 L. ed. 841.
"The recording of a conveyance by an insolvent is 'required' by law within the meaning of the provisions of the Bankrupt Act of July 1, 1898 (30 Stat. at L. 562, chap. 541) § 60a, as amended by the act of Feb. 5, 1903 (32 Stat. at L. 799, chap. 487) and § 60b as amended by the act of June 25, 1910 (36 Stat. at L. 842, chap. 412, U.S.C. title 11, § 96) avoiding preferential transfer by an insolvent recorded or registered within four months before the bankruptcy proceedings are begun." Carey v. Donohue, 126 C.C.A. 254, 209 F. 328.
The transfer must have been the act of the bankrupt to come within the provisions of § 60a or § 67e. Western Tie & T. Co. v. Brown, 196 U.S. 502, 49 L. ed. 571; Britton v. Union Invest. Co. 262 F. 111.
"A transferee who acted in good faith and paid a fair consideration and who did not know of the insolvency of the transferor or his intent to defraud his creditors, takes good title as against the trustee." U.S. Weld v. McKay, 134 C.C.A. 495, 218 F. 707; Powell v. Gate City Bank, 102 C.C.A. 55, 178 F. 609, 24 Am. Bankr. Rep. 316; Van Ideratine v. National Discount Co. 98 C.C.A. 300, 174 F. 518.
"The payment of an adequate present consideration by the transferee negatives fraud on the creditors and is sufficient to sustain the transaction." Peterson v. Sabin, 214 F. 234; Vollmer v. Plage, 186 F. 598; Bunnell v. Bronson, 78 Conn. 679, 63 A. 12; Nyers v. Fultz, 124 Iowa 437, 100 N.W. 351; First Nat. Bank v. Sibley County Bank, 96 Minn. 456, 105 N.W. 485.
"Actual as distinguished from constructive fraud must be shown in order to avoid a conveyance as having been made with intent to hinder, delay or defraud creditors." Meservey v. Roby, 198 F. 844; Maffi v. Stephens, 93 S.W. 158.
"Where the bankrupt holds the legal title to the property in which another has the equitable title the trustee in bankruptcy will be required to transfer the legal title to the equitable owner." 2 Collier, Bankr. 1669; Re Garner, 110 F. 125.
"The trustee does not acquire title to property, the legal title to which is in the bankrupt as trustee." 7 C.J. 129.
"The taking of the claimant's own property in the actual possession of the bankrupt on the date of adjudication does not constitute a preference." Re Wright-Dana Hdw. Co. 205 F. 335.
"The return of stock by an insolvent stockbroker to the true owner does not constitute a voidable transfer." Richardson v. Shaw, 209 U.S. 365, 52 L. ed. 835.
It is necessary, in order to set aside a conveyance or transfer of property as fraudulent against creditors, that the fraud must have been participated in by the vendee or purchaser, as well as vendor. Hocking v. Bank (Neb.) 94 N.W. 805; Coolidge v. Ayers (Vt.) 57 A. 970; Re Mullen, 101 F. 413.
"A trustee in bankruptcy cannot recover land conveyed by the bankrupt prior to adjudication on the mere ground that the deed has not been recorded." Deupree v. Watson, 216 F. 483; Re Boyd, 213 F. 774; Telford v. Hendrickson, 120 Minn. 427, 139 N.W. 941.
The general issue is that a present consideration does not necessarily consist of money. It may consist in the substitution of one security for another. Collier, Bankr. 1565.
To constitute an equitable estoppel, there must exist false representation or concealment of material facts; it must have been made with knowledge, actual or constructive, of the facts, and the party to whom it was made must have been without knowledge or the means of knowledge of the real facts. 16 Cyc. 726; Gjerstadengen v. Hartzell, 9 N.D. 268, 83 N.W. 230.
John Keohane and Albert M. Kuhfeld, for respondent.
A trustee may avoid a conveyance as fraudulent although it is not fraudulent as to all of the bankrupt's creditors. It is enough that he represents creditors who could avoid it. Cartright v. West, 185 Ala. 41, 64 So. 293; Duncan v. Lum (Ala.) 77 So. 718; Treseder v. Burgor, 130 Wis. 201, 109 N.W. 957. And in general the trustee may enforce in the bankruptcy court rights which exist in certain creditors only and which rest on an equitable estoppel. Re Bothe, 173 F. 597, 97 C.C.A. 547; Re Desnoyers Shoe Co. (D.C.) 210 F. 533. Bergin v. Blackwood, 141 Minn. 325, 170 N.W. 508.
He who asserts must prove. 7 C.J. 270 (88); Rogers v. Page, 140 F. 596; Bentley v. Young, 210 F. 202.
"Where defendant sets up as a defense that the payment was in satisfaction of a debt secured by a mortgage given four months prior to the bankruptcy proceedings, the validity of said mortgage is in issue, and the burden of such issue is on defendant." 7 C.J. 270 (88).
"Where mortgage is kept off the record in order that the credit of the mortgagor may not be impaired, the mortgagee is estopped to assert priority as against creditor becoming such on the faith of the record." 56 N.D. 681, 218 N.W. 644.
"Where bank intentionally withheld deed from record deposited with it for security and creditor extended credit on ostensible ownership of grantor, grantee is estopped to assert deed as a prior right over claims of creditors who relied on such record of ownership." Duke v. L.Y. Stayton Co. (Wash.) 231 P. 171.
The doctrine of equitable estoppel may preclude a person from asserting title to his own property. Baid v. Stephan, 52 N.D. 568, 204 N.W. 188.
Real owner is estopped by vesting apparent title in another as against creditor, who has relied on such record ownership. Noe v. Smith (Okla.) 169 P. 1108; Havel v. Costello (Minn.) 175 N.W. 1001.
"A corporation cannot, any more than an individual, involve others in onerous engagements by its representations or silence, and then defeat the calculations and claims its own conduct has superinduced." Bissell v. Jeffersonville, 16 L. ed. 664.
"A corporation may be divested of its property by the negligence of its officers." 14a C.J. 414.
The burden of proof rests upon the persons asserting, namely, on the appellants in this case, to show that they are bona fide purchasers. Shonsey v. Clayton (Minn.) 187 N.W. 113; Erret v. Wheeler, 26 L.R.A.(N.S.) 816, 163 N.W. 1032; 27 R.C.L. 475.
"In a suit by a trustee in bankruptcy to set aside an alleged fraudulent transfer to property by the bankrupt through the son to his wife, the burden is upon the defendant to show valid consideration and good faith." Adams v. Osley, 42 Am. Bankr. Rep. 665, 255 F. 117.
"The essential elements of a bona fide purchaser are, first: The payment of a valuable consideration; second, good faith and absence of purpose to take unfair advantage of third persons; and third, absence of notice, actual or constructive, of outstanding rights of others." Trumbo v. Vernon, 22 N.D. 191, 133 N.W. 296.
A purchaser of land has constructive notice of all the facts affecting the title, which he would have learned had he examined the records. Gress v. Evans (Dak.) 46 N.W. 1132.
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