Manders v. Wilson

• Decision Date: 05 September 1916
• Docket Number: 2671.
• Citation: 235 F. 878
• Parties: MANDERS v. WILSON et ux. In re PETERSON et al.
• Court: U.S. Court of Appeals — Ninth Circuit

235 F. 878

MANDERS v. WILSON et ux.

In re PETERSON et al.

No. 2671.

United States Court of Appeals, Ninth Circuit.

September 5, 1916

In a suit brought by the appellant, Manders, as trustee in bankruptcy, against the appellees to set aside a conveyance the court below sustained a demurrer for want of equity to the bill of complaint which alleged, in substance, the following facts: That on October 31, 1914, a petition in bankruptcy was filed against the partnership of Peterson &amp Wilson, and the individual partners, and on January 26, 1915 they were adjudged to be bankrupt; that on September 27 1911, and for a long time prior thereto, G. Hazelton Wilson, one of the bankrupts, was the sole owner of and in the actual possession of the real property described in the complaint; that on that date he executed and delivered to the appellees, his father and mother, a deed to the said property, either in payment of an alleged pre-existing indebtedness of $2,000, or as a mortgage to secure that sum; that the deed remained in the possession of the grantees, and unrecorded from September 27, 1911, to October 23, 1914; that during all that period the grantor was in the open, notorious, and exclusive possession of said real estate, and was the reputed and apparent owner thereof, and neither of the grantees ever had possession of the same or was reputed to be the owner thereof; that the deed was withheld from record by the appellees in order not to impair the credit of the said bankrupt and the credit of the bankrupt partnership, and in order to enable the bankrupt partnership to extend its credit upon the reputed and apparent ownership of the said real property in the said G. Hazelton Wilson; that on or about July 6, 1914, the partners and G. Hazelton Wilson falsely and fraudulently represented to the New England Casualty Company that the said partnership was the owner of and in possession of said real estate through said G. Hazelton Wilson, and that the title was unincumbered; that, relying solely upon said representations and without knowledge of their falsity, and without knowledge of the transfer to the appellees, the corporation extended credit to the bankrupt partnership; and the complaint set forth the transaction whereby said corporation suffered a loss of more than $2,500. The complaint alleged the value of the real estate to be $2,000, that the claim against the bankrupt partnership was $25,000, and that the total assets did not exceed $4,000, and the prayer of the bill was that the said real estate be declared a part and parcel of the estate in bankruptcy. The court below sustained the demurrer for want of authority under state decisions to avoid a deed not otherwise fraudulent, because of the failure to record it, and because the rule in California is that failure to record a transfer of real property renders such transfer void only as against subsequent purchasers or incumbrances in good faith and for value.

Reuben G. Hunt, of San Francisco, Cal., for appellant.

Harold L. Levin and H. I. Stafford, both of San Francisco, Cal., for appellees.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

GILBERT Circuit Judge (after stating the facts as above).

On the question of law presented upon the appeal, the leading case is Blennerhassett v. Sherman, 105 U.S. 100, 26 L.Ed 1080. In that case it was held that a mortgage executed by an insolvent mortgagor to a creditor who knows of the insolvency, and who, for the purpose of giving him a fictitious credit, actively conceals the mortgage, and withholds it from record, and...