Houck v. Christy

• Decision Date: 25 March 1907
• Docket Number: 2,350.
• Citation: 152 F. 612
• Parties: HOUCK v. CHRISTY et al.
• Court: U.S. Court of Appeals — Eighth Circuit

152 F. 612

HOUCK v. CHRISTY et al.

No. 2,350.

United States Court of Appeals, Eighth Circuit.

March 25, 1907

W. G Fairchild, for appellant.

David Ritchie and Kos Harris, for appellees.

Before VAN DEVANTER and ADAMS, Circuit Judges, and PHILIPS, District judge.

VAN DEVANTER, Circuit Judge.

This is an appeal from a decree dismissing a bill by a trustee in bankruptcy to recover property, or the value thereof, which it is conceded, was transferred to the appellees by the bankrupt with the intent and purpose on his part to hinder delay, and defraud his creditors, and within four months prior to the filing of the petition in bankruptcy. The master, to whom the case was referred, with instructions to take and report the evidence with findings of fact, found that the appellees were purchasers in good faith and for a present fair consideration. An exception by the trustee to this finding was overruled by the court, and the finding approved.

Without any conflict the evidence discloses these facts: Stephenson the bankrupt, was a country merchant at Scott, Kan. Christy one of the appellees, was the cashier of a small bank at Scott, and Cover, the other appellee, owned and conducted a small hotel at that place. Stephenson's property consisted of a store building and lot, a stock of general merchandise, book accounts, and a homestead. The homestead was of very little value by reason of the uncertain nature of the title, was exempt from execution, and is not in controversy. Stephenson approached Christy one morning with a proposal to sell the entire property. During the day brief negotiations were had between Stephenson and Christy, and between Christy and Cover, in which no difficulty was experienced in agreeing on satisfactory terms, and that evening between 9 and 10 o'clock the transfer was effected; the homestead and book accounts going to Christy, and the store building and lot, with the stock of merchandise, going to Cover. All three were present when the transfer was effected, and participated therein; it being understood that Christy was primarily the purchaser of the entire property, and that Cover was a subpurchaser of what was transferred to him. For the entire property Christy was to pay Stephenson $2,200 in cash, which was 75 per cent. of its fair value, if allowance be made for two mortgages on the store building and lot, the payment of which was assumed by the purchaser. For the property transferred to him, Cover conveyed his hotel to Christy, executed a note to him for $750, and assumed the payment of the two mortgages. The next morning Christy paid Stephenson $2,200 in this way: He handed him $1,280 in currency, $720 in six drafts made payable to persons living in Scott, placed $48 to the credit of Christy's brother in the bank, and applied $152 in payment of a note of Stephenson's held by the bank. The largest draft was for $400, and was made payable to Stephenson's wife. Although Stephenson was accustomed to deposit his money in the bank and to pay it out by checks, there was no explanation of why this money was not placed to his credit in the usual way, or of why drafts were taken in favor of his wife and other residents of Scott; and, although only $2,200 was paid, or intended to be paid, Christy wrote out a check to Stephenson for $2,700, which was indorsed by him and retained by Christy. Stephenson was insolvent at the time; his obligations to nonresident creditors, such as wholesale merchants, being in excess of the fair value of his property. Some time before he had mortgaged the store building and lot to a local creditor for $300, and shortly thereafter had again mortgaged it to the same person for the further sum of $200. He had also given a chattel mortgage for $50 upon the stock of merchandise two or three months before. These mortgages were shown upon the public records at Scott, which were examined by both Christy and Cover. Within 40 days Christy's bank had returned unpaid two drafts drawn on Stephenson by mercantile creditors for $102.34 and $126.94 actually due them, and another such draft for $170.44 was in the bank for collection at the time of the transfer. For over four months Stephenson's balance in the bank had been very small, and practically all of his deposits had been checked out soon after they were made. His balance was $5.40 at the time of the transfer. The bank also held his note for $152, which was long past due. A surety thereon had asked to be relieved of his obligation, saying that the note had run as long as it ought to, and, acting upon this, Christy had obtained from Stephenson and his wife, as additional security, a deed for the store building and lot and another for the homestead; the name of the grantee being left blank in each. When the transfer was made, Christy, in the presence of Stephenson and Cover, inserted Cover's name in one deed and his own in the other. Before the transfer Christy and Cover made only a cursory examination of the stock of merchandise, as by walking through the store, and a new consignment of goods amounting to $375, which was then unopened, was not noticed. Christy merely glanced at the book accounts, and made no calculation of their amount, or of what proportion of them was collectible. No inventory of the merchandise was made; nor was there an examination of the original invoices, or of the books, to...