Harvey v. Stowe

• Decision Date: 18 November 1914
• Docket Number: 2401.
• Citation: 219 F. 17
• Parties: HARVEY v. STOWE.
• Court: U.S. Court of Appeals — Ninth Circuit

219 F. 17

HARVEY v. STOWE.

No. 2401.

United States Court of Appeals, Ninth Circuit.

November 18, 1914

Charles S. Wheeler and John F. Bowie, both of San Francisco, Cal for appellant and plaintiff in error.

Bert Schlesinger, E. H. Williams, and A. E. Shaw, all of San Francisco, Cal., for appellee and defendant in error.

Before GILBERT, Circuit Judge, and WOLVERTON and VAN FLEET, District judges.

WOLVERTON District Judge.

J Downey Harvey, having been adjudged a bankrupt by involuntary proceedings, B. S. Stowe was, on November 17, 1911, duly elected trustee of his estate, and subsequently qualified as such. On January 11, 1912, the trustee instituted a suit in equity against Harvey and S. G. Harvey, his wife, to set aside a transfer previously made by Harvey to his wife of 546 shares of the capital stock of the Shore Line Investment Company, claiming said stock to be an asset of Harvey's estate.

The complaint avers that Harvey gave the stock to his wife on the 26th day of November, 1909, and at the time was insolvent and that the gift was without consideration, fraudulent, and inoperative as to his creditors.

Mrs Harvey answers denying that a gift was made to her of the stock on the date stated, but affirms that Harvey, in consideration of natural love and affection, gave her 300 shares of such stock on or about June 26, 1905, 66 shares on or about August 29, 1905, and the remaining 180 shares on or about September 25, 1905, and indorsed and delivered to her the certificates representing such shares when the gift thereof was made; that at the time stated Harvey was solvent and able to pay his debts from his own means; and that his assets taken at a fair valuation were sufficient in amount to pay his just debts and liabilities.

That Harvey was wholly solvent during the year 1905 and for two years or more thereafter there can be no dispute, and that he was insolvent on November 26, 1909, is admitted.

Mrs. Harvey, claiming to have deraigned title from her husband. the common source, has the burden of establishing it in herself. This depends upon whether the gift of the stock was made to her, as she alleges, and at the time or approximately the time stated, and upon the good faith attending the transaction. If the stock was given or transferred at the time as averred by plaintiff, then it is utterly without legal effect and void as to the creditors of Harvey's estate.

The Shore Line Investment Company was organized in May or June, 1905. J. Downey Harvey was chosen one of its directors, and on January 3, 1906, he was also elected president, and since held these positions up to the time he became a bankrupt. Prior to the incorporation of this company, Harvey testifies that he, in company with his wife and others, visited certain lands which were to become the property of the corporation, and its principal holdings, and, continuing, he says:

'I told her at that time that I was going to give her my stock that I would acquire in that land company. After the acquisition of the land, and the organization of the company, the stock was issued to me in June, 1905, one lot, another lot in August, 1905, and two lots in September, 1905. Stock certificates were issued to me, and when I received them I indorsed them and gave them to Mrs. Harvey in conformity to what I told her I was going to do. I took them and handed them to her and told her that they were the certificates of the Shore Line Investment Company that she was interested in as I had promised her, and I told her to keep them and take care of them, that they were of value, and that they were indorsed. And I said to her that the reason I am retaining them in my name is that I am very largely interested in the Ocean Shore Railroad, and these two companies are associated in the development of one another; one depends upon the success of the other. If I keep this stock in my name, which I will want to do, I will show the people that the Ocean Shore Railroad is interested in the success of this land company, and that I am a large holder in it, and that at all times I will be ready to help out the Granada as much as we can. * * *

'In April, 1907, I paid a $10 assessment on that stock. I had no conversation with Mrs. Harvey in regard to the assessment. Mrs. Harvey was East with one of my daughters, and I wrote her the assessment had been levied and that when she returned I would get the stock and have the receipt entered on it. When she returned I did get the stock. I did not say anything to her regarding whether or not I would pay the assessment. When I gave her the stock no assessment was contemplated, and I naturally felt that, since I had given her a gift at that time, I ought to follow it up and pay the obligations that would fall on it. I did pay the assessment and wrote her to that effect to New York when she was there. My intent in paying the assessment was to make an additional gift which would naturally follow this present of stock. I told her if I acquired more stock I would give it to her, and I felt it my duty to take care of the assessment and make a gift of it, as I had of the certificates themselves. The total paid by me for the stock, including the assessment, was $23,000 and some odd dollars, I think $650, or something like that.'

The stock, as Harvey affirms, has been in her possession ever since, except at one time, at his request, she delivered to him a block of 66 shares which he had put in the name of one J. A. Folger in order to qualify him to act as a director of the company. As to this he says:

'It was in December, 1906, that I first got this stock from Mrs. Harvey. It was transferred from my name unto that of J. A. Folger, where it remained until December, 1907, when it was retransferred into my name and was indorsed and delivered to Mrs. Harvey by me. Mrs. Harvey had Mr. Folger's certificate indorsed by him. The transfers were attended to by me. I got the certificate on each occasion from Mrs. Harvey and took it to the secretary and returned it to her. There was no other transfer of this stock between the time that I gave it to Mrs. Harvey and its actual transfer in November, 1909. At that time I had the stock in my possession; that is, I did not have it in my possession except for that purpose.'

And at another time, when the company was negotiating for a loan, being early in November, 1909, it was contemplated that the stockholders would be required to sign an agreement pledging themselves with their stock to meet the obligations. Of this Harvey testifies:

'I was then notified by the general manager that it would be necessary for me to produce these certificates of stock, as he wanted to see how much stock he could acquire for this purpose. * * * I got the stock from Mrs. Harvey and turned it over to Mr. Fay, general manager of the Shore Line Investment Company, who was negotiating for the loan. * * * I gave this stock to Mr. Fay. They were in my name, but had my indorsement on them. I received them back from Mr. Fay around the 26th of November, or a little before. As negotiations were still going on, and the same obligation would be insisted upon by any bank making a loan, I had the stock transferred to Mrs. Harvey's name.

'I receipted for the stock, but Mr. Corbet said: 'I will have to have Mrs. Harvey's receipt. I will give you a receipt.' He dictated one to his stenographer, which he handed to me, and which I took or sent to Mrs. Harvey. This was returned to me and the certificates were given to Mrs. Harvey later. The negotiations for the loans kept up until some time in December. On December 9th we levied an assessment. We did not make the loan, because our payments commenced to come in and we were able to discharge our obligations and collect sufficient money to satisfy our creditors. It was while these negotiations were pending that I had the stock transferred to Mrs. Harvey's name. At the conclusion of the negotiations I sent the stock to Mrs. Harvey. I either sent the stock to Mrs. Harvey, or took it down to her myself to Del Monte. I have never had the certificates in my possession, except as I have testified here, from the time they were first delivered until this action was commenced.'

On cross-examination Harvey further said:

'The reason that I did not have these shares of stock transferred to Mrs. Harvey in 1905 was, as I have testified, that we had just formed these two companies, and the Shore Line Investment Company depended upon the building of the Ocean Shore Railroad. I was the largest stockholder in both companies, and thought that my association and prominence would held the Shore Line Investment Company. There was a great deal of rivalry down that way as to this land business, and, if we could make an association between the two, it would make the people who purchased at Granada feel that they were going to get a good railroad service, and, if there was any favoritism or help to be had from the association with the railroad, we wanted to get it. If I was not connected with the Shore Line Investment Company, its position would be just the same as the other companies not associated with the railroad. * * * It afterwards turned out to be of immense benefit that I retained my identity as a stockholder in the Shore Line Investment Company. As a matter of fact, the men who furnished the money to build the Ocean Shore Railway Company put up the money to finance the Shore Line Investment Company.

'There was a close connection between the two companies through the people who formed them. There was no money connection between the two companies. The original stockholders were the same.'

Mrs. Harvey first gave her testimony before the referee in bankruptcy. On the subject of the gift she says:

'In 1

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