In re Webb

• Decision Date: 25 February 1958
• Docket Number: No. IP57-B-12.,IP57-B-12.
• Citation: 160 F. Supp. 544
• Parties: In the Matter of Harold V. WEBB, Bankrupt.
• Court: U.S. District Court — Southern District of Indiana

160 F. Supp. 544

In the Matter of Harold V. WEBB, Bankrupt.

No. IP57-B-12.

United States District Court S. D. Indiana, Indianapolis Division.

February 25, 1958.

COPYRIGHT MATERIAL OMITTED

Stump & Emswiller, by Charles E. Barker and Albert Stump, Indianapolis, Ind., for intervenor.

Bamberger & Feibleman, by Thomas D. Titsworth, Indianapolis, Ind., for Arthur W. Banta, Trustee in bankruptcy.

HOLDER, District Judge.

This is an action brought by Verneice Geraldine Webb against the Trustee in bankruptcy of the estate of Harold V. Webb, a bankrupt. She seeks to have an equitable lien, or a judgment lien adjudicated against the funds derived from the sale of real estate by the Trustee.

The form of Mrs. Webb's proceeding was by way of an intervening petition in a proceeding to sell real estate by the Trustee in the bankruptcy estate of Mr. Webb before the Referee in bankruptcy. Evidence was heard and based thereon findings of facts and conclusions of law were filed by the Referee and judgment was rendered allowing the lien claim of Mrs. Webb on the ground that there was a judgment lien.

The Trustee in bankruptcy timely filed his petition for review to this court, pursuant to 11 U.S.C.A. § 67, of the Referee's findings of facts, conclusions of law thereon and judgment thereon.

The findings of facts, conclusions of law and the judgment of the Referee are hereby vacated and set aside. The briefs of both parties were silent on the issue of whether an equitable lien was created by the transactions of the parties. The parties and Referee's attention was diverted only to the question of whether a judgment lien was created by a divorce decree on October 9, 1954 which merely recited, confirmed, and approved a property settlement contract of August 25, 1954 as modified on October 4, 1954 five days before the divorce decree. The Referee made no findings, conclusions of law, or judgment on the equitable lien issue presented by Mrs. Webb's intervening petition item 6 page 5 which reads in part as follows:

"6. The final total amount to be paid to the intervenor from the proceeds of the sale of the apartment realty represents and reflects the interest the intervenor has in the said real estate and Constitutes A Lien In Her Favor Against It; * * *." (Italics added.)

The Referee rendered findings, conclusions of law, and judgment for Mrs. Webb on the basis that there was a valid judgment lien at law resulting from the divorce decree of October 9, 1954. The court finds this action of the Referee to be erroneous since there was no judgment lien at law. The divorce decree merely confirmed and approved the property settlement contract and modification thereof but did not render judgment thereon as would be necessary to create a judgment lien under the statute of Indiana and to enforce the contracts would require an action based thereon and not an action based on the judgment. Indiana Acts 1881 (Spec.Sess.) ch. 38, §§ 587, 601, 857(11), p. 240, as amended 1929, ch. 83, §§ 1, 2, p. 278 (§§ 2-2520, 2-2706, 2-4701(11) Burns' Ind.Stat.Anno. (1946 Repl.); Ind.Acts 1873, ch. 43, § 22, p. 107, as amended 1949, ch. 120, § 3, p. 310 (§ 3-1218, Burns' Ind.Stat.Anno.1946 Repl.); Davis v. Davis, 1951, 229 Ind. 414, 99 N.E.2d 77; 17 Am.Jur. Divorce and Separation § 907; 27 C.J.S. Divorce § 301. The divorce decree was not a final decree for a recovery of money for the contracts which it approved provided for an uncertain amount of money which could only be determined definitely at some uncertain date in the future after the entry of the final decree of divorce on October 9, 1954. However, the validity of each of the contracts was established by the decree. Davis v. Davis, supra.

There are no judgment liens known to common law in Indiana and the foregoing statutes of Indiana control. 3 Collier on Bankruptcy, (14th ed.) § 60.11, pages 794-798.

The facts of the case, primarily within the Webbs' contracts, appear confusing on first analysis because of their inability to sell the real estate and the reading of the two contracts together for construction. The questions in this action would not have arisen if the Webbs had sold the said property as contemplated under the terms of this first contract of August 25, 1954. There would have been a money judgment pursuant to Ind.Acts 1873, ch. 43, § 22, p. 107, as amended 1949, ch. 120, § 3, p. 310 (§ 3-1218, Burns' Ind.Stat.Anno. 1946 Repl.) because the exact amount of the debt would have been ascertained before divorce, or the contract would have been approved by the court and the amount paid and there would have been no intervention of general creditors of Mr. Webb.

However, the Webbs' plans were changed when they were unable to sell the property with the trial of the pending divorce action imminent. Five days before the divorce trial they altered their plans by a supplemental contract, which placed Mrs. Webb in possession and management of the real estate to be sold until it was sold and which contract was also subject to the approval of the court and the granting of a divorce.

The divorce was granted on October 9, 1954 and the court merely approved the Webbs' contracts as to validity.

There being no judgment lien on these facts, for the reason above recited, Mrs. Webb must look to her rights upon the theory of an equitable lien otherwise she joins the ranks of the general creditors of her husband.

The validity of the postnuptial contracts in contemplation of divorce between the Webbs and approved by the court upon granting the divorce is unquestioned in Indiana. Ind.Acts 1873, ch. 43, § 20½ as added by 1949, ch. 120, § 2, p. 310 (§ 3-1219a Burns' Ind.Stat. Anno.1946 Repl.); Davis v. Davis, 1951, 229 Ind. 414, 99 N.E.2d 77.

The contracts having been adjudicated valid and the amount of the debt owing Mrs. Webb by Mr. Webb having been stipulated an examination of the contracts discloses that there was no express creation of a lien security for the debt.

The findings of facts further disclose, attendant circumstances with the express executory written contracts between the Webbs based upon a valuable and adequate consideration; that the parties clearly indicated their intention to charge the particular described real estate; and that they provided for the sale thereof and appropriated the property by placing Mrs. Webb in actual possession and management of the property until sale thereof. All of which clearly discloses an intention of the parties to create an equitable lien on said property in favor of Mrs. Webb to secure said debt owing by Mr. Webb. Barnes v. American Fertilizer Co., 1925, 144 Va. 692, 130 S.E. 902; Root Mfg. Co. v. Johnson, 7 Cir., 1914, 219 F. 397, affirmed 241 U.S. 160, 36 S.Ct. 520, 60 L.Ed. 934; Hauselt v. Harrison, 1882, 105 U.S. 401, 26 L.Ed. 1075; Fourth Street National Bank v. Yardley, 1897, 165 U.S. 634, 17 S.Ct. 439, 41 L.Ed. 855; Exchange State Bank v. Federal Surety Co., 8 Cir., 1928, 28 F.2d 485, 487; Geddes v. Reeves Coal & Dock Co., 8 Cir., 1927, 20 F.2d 48, 54 A.L.R. 282; Connolly v. Bouck, 8 Cir., 1909, 174 F. 312; Columbia Graphophone Co. v. 330 West Ninety-Fifth Street Corp., D.C.S.D.N.Y.1920, 269 F. 190; Goodnough Mercantile & Stock Co. v. Galloway, D.C.Or.1909, 171 F. 940; Sonneman v. Tuszynski, 139 Fla. 824, 191 So. 18; Carmichael v. Arms, 1912, 51 Ind.App. 689, 100 N.E. 302; Application of Mach, 71 S.D. 460, 25 N. W.2d 881; 33 Am.Jur., Liens, §§ 18, 19, 20, 21; 53 C.J.S. Liens § 4 a, b, c. To hold otherwise would be to permit Mr. Webb and those claiming under him including the Trustee in bankruptcy and his general creditors to be unjustly enriched and equity will consider as done that which was intended to be done by the parties and the court finds an equitable lien existed. Restatement of the Law of Restitution § 161; 53 C.J.S. Liens § 4 a.

Mrs. Webb under Indiana law thus possessed with the security of an equitable lien against the real estate and the funds from the sale thereof to secure her claim, she has only to contend with the claims of the Trustee and general creditors. Since the Trustee in bankruptcy under Indiana law is not a bona fide purchaser for value without notice of her lien and debt, her lien is prior and superior to the Trustee's interests therein. And since the general creditors under Indiana law have no lien claim on said property or said fund her lien is prior and superior to their interests therein. Robertson v. Schlotzhauer, 7 Cir., 1917, 243 F. 324; In Matter of Cox, 7 Cir., 1943, 132 F.2d 881; 3 Collier on Bankruptcy (14 ed.) § 60.40; Restatement of the Law of Restitution, §§ 173 j, 306 and 307.

The Trustee in bankruptcy contends that the equitable lien was not perfected under the bankruptcy act as amended in 1950 by Chap. 70, § 1 within the meaning of paragraph (2) of subsection (a), (64 Stat. p. 24, 11 U.S.C.A. § 96) which provides in part as follows:

"* * *. A transfer of real property shall be deemed to have been made or suffered when it became so far perfected that no subsequent bona fide purchase from the debtor could create rights in such property superior to the rights of the transferee. If any transfer of real property is not so perfected against a bona fide purchase, or if any transfer of other property is not so perfected against such liens by legal or equitable proceedings prior to the filing of a petition initiating a proceeding under this title, it shall be deemed to have been made immediately before the filing of the petition."

Mrs. Webb had not filed and recorded the contracts with the Recorder of Hancock County, Indiana, which the Trustee says the State of Indiana required by the provisions of Ch. 3, § 1, p. 18 of Ind.Acts 1923, (§ 56-119, Burns' Ind. Anno.Stat.1951 Repl.) which provides as follows:

"Every conveyance or mortgage of lands or of any interest therein, and every lease for more than three (3) years, shall be recorded in the recorder's office of the county where such lands shall be situated;

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