Hofmann v. La Fontaine, 2489.

• Decision Date: 06 August 1936
• Docket Number: No. 2489.,2489.
• Citation: 16 F. Supp. 748
• Parties: HOFMANN v. LA FONTAINE.
• Court: U.S. District Court — District of Wyoming

16 F. Supp. 748

HOFMANN v. LA FONTAINE.

No. 2489.

District Court, D. Wyoming.

August 6, 1936.

C. R. Ellery and A. G. McClintock, both of Cheyenne, Wyo., for plaintiff.

J. A. Greenwood and Wilfred O'Leary, both of Cheyenne, Wyo., for defendant.

KENNEDY, District Judge.

This suit was first filed on the equity side, but subsequently one of the causes of action was dismissed without prejudice by agreement of the parties and the remaining three causes transferred to the law side of the court. When the case was brought to trial, a motion was made requiring the plaintiff to elect upon which cause of action he would proceed, and thereupon the second cause of action was selected.

In the second cause of action it is alleged that on the 22d day of May, 1931, an involuntary petition was filed against Robert N. La Fontaine and that before an adjudication took place therein the bankrupt filed an involuntary petition on April 5, 1932. Thereafter said La Fontaine was adjudged a bankrupt in the voluntary proceeding, saving by order the rights of creditors under the involuntary proceeding and consolidating the two proceedings in bankruptcy as having been commenced on May 22, 1931. Hofmann, the plaintiff, was thereafter appointed trustee of the bankrupt's estate and qualified as such, and in the prosecution of this suit is acting in such capacity. The assets of the estate are alleged to be insufficient to pay the creditors in the amount of some $40,000. On May 7, 1931, the bankrupt is alleged to have paid his wife the sum of $4,165 for the purpose of indemnifying her against loss in connection with a transaction upon which she was one of the signers of a note with the bankrupt and others, secured by a mortgage upon real estate, and that for four months immediately preceding the 22d day of May, 1931, when the first petition in bankruptcy was filed, the said Robert N. La Fontaine was insolvent, which insolvency has ever since existed and still exists. It is further alleged that said condition of insolvency was well known throughout the county of Laramie and to the defendant, Florence B. La Fontaine. The petition then states that the defendant by such payment obtained a greater percentage of her claim than other creditors of the bankrupt of the same class, and that unless said preference is set aside they will not receive more than 22 per cent. of their claims, and that the said defendant in receiving said sum of money from the bankrupt had reasonable cause to believe that he was insolvent. It is further alleged that the transfer was not received by the defendant in satisfaction of any secured claim or any claim having priority under the law, that no consideration was received by the bankrupt from the defendant in return for the amount transferred, and that the transfer was made with intent to hinder, delay, or defraud creditors. Briefly, the defendant by answer admits the allegations as to the bankruptcy proceedings, the position of the defendant in connection with the transaction of signing the note, admits the transfer of the money from Robert N. La Fontaine to herself, but pleads that the money was used to pay the note at the special direction of La Fontaine and was used solely for such purpose. She denies that any act on the part of the defendant was done for the purpose of hindering, delaying, or defrauding creditors.

Upon the trial the plaintiff introduced the formal proofs not admitted by the pleadings concerning the transaction of giving the note and mortgage which the defendant had jointly executed with the bankrupt and others, together with the documentary evidence of a warranty deed by the defendant of the property involved in the transaction with a covenant which warranted the title against encumbrance, except as to taxes and special assessments. The plaintiff then rested, and the defendant moved for judgment upon the ground that the proofs were not sufficient to sustain any verdict for plaintiff in the cause. The motion was overruled, and the defendant thereupon elected to put in her evidence. At the close of the trial each party made a motion for a directed verdict in his favor. Thereupon the court with consent of counsel dismissed the jury from further consideration of the case. The case was orally argued, rulings upon the motions having been reserved, the matter taken under advisement, and trial briefs have been submitted.

From the admissions in the pleadings and the evidence adduced at the trial, the following statement is a brief summary of the pertinent facts: On March 31, 1931, the Investors' Syndicate, a corporation, filed a suit against Robert N. La Fontaine, praying for a judgment in the total sum of approximately $40,000. While said action was pending, the involuntary petition in bankruptcy was filed by the Investors' Syndicate as a creditor, on May 23, 1931, which was thereafter joined in by other creditors of La Fontaine. On February 1, 1932, a judgment was rendered in the Investors' Syndicate suit against La Fontaine for the sum of approximately $39,000. On April 5, 1932, La Fontaine filed his voluntary petition in bankruptcy and an order was made adjudicating him a bankrupt. Thereafter said bankruptcy proceedings were consolidated and treated as one proceeding as having been commenced upon the date of the involuntary proceeding, May 23, 1931. The total claims filed and allowed in said proceeding amounted to about $53,000, and the assets coming into the hands of the trustee from the bankrupt's estate were around $12,000. In April, 1926, La Fontaine and his wife, the defendant, together with one Hartney and his wife, executed a promissory note in the sum of $4,000 to one Harry Farthing, secured by a mortgage on Cheyenne real estate. In June, 1929, the La Fontaines and the Hartneys executed and delivered to one Nan O'Neil a warranty deed of the mortgaged real estate, guaranteeing the same against all encumbrances except taxes and special assessments. At the time the deed was delivered the note and mortgage to Farthing had not been paid and still stood as an encumbrance upon said real estate. Farthing as holder of the note and mortgage pressed his claim for payment, and Nan O'Neil pressed her claim against La Fontaine and the defendant, based upon the warranty in the deed given to her. Miss O'Neil employed an attorney, as did the defendant, in the matter of the claim upon the warranty, which led to the consummation of the transaction here involved, by which La Fontaine delivered over to the defendant in cash the sum of approximately $4,200, which the defendant deposited in her account and by check paid the same to Farthing in satisfaction of his note and mortgage, taking to herself an assignment of such note and mortgage. Such assignment certified that the principal sum remaining due on the note and mortgage was $4,000. The note was indorsed by Farthing without recourse. The assignment of the mortgage and a release of the same were subsequently filed for record in the county clerk's office on June 6, 1932. The proofs further developed that, at the time La Fontaine turned over the money to the defendant, he was carrying a considerable amount of cash in a safety deposit box in one of the local banks, of which the defendant testified she was fully aware. The evidence showed that the real estate upon which Farthing held the mortgage was more than ample to pay the obligation evidenced by the note. The defendant testified that she was not a creditor of La Fontaine and that in the transaction she merely acted as his agent in paying off the Farthing note and mortgage. She also testified that she had read in the papers of an offer made by La Fontaine to compromise with his creditors, appearing a few days before she received the cash from her husband and paid the same to Farthing.

Counsel for the defendant complains that the trial court committed error in not sustaining the defendant's motion for judgment at the close of the plaintiff's case. In overruling this motion the court adopted the theory that,...