Schafer v. Hammond
| Citation | 456 F.2d 15 |
| Decision Date | 14 March 1972 |
| Docket Number | No. 71-1380.,71-1380. |
| Parties | Roscoe T. SCHAFER, Trustee for the Estate of Gibson Products of Durango, Inc., a Colorado corporation, a bankrupt, Appellee, v. Charles HAMMOND, Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
John W. Overholser, Montrose, Colo., for appellee.
Donald P. MacDonald, Denver, Colo., for appellant.
Before SETH and BARRETT, Circuit Judges, and MECHEM*, District Judge.
Roscoe T. Schafer, trustee in bankruptcy for Gibson Products of Durango, Inc., a Colorado corporation, brought this action against Dr. Charles Hammond, Lester E. Kelgard and Gertrude Richards to recover assets of the corporation for the benefit of its creditors under Section 67d(2) (a) of the Bankruptcy Act. The property in question is a tract of land in Durango know as the "By-Pass" property. The lower court dismissed Mrs. Richards as a party defendant for want of jurisdiction and entered judgment against Hammond and Kelgard in ruling that the "By-Pass" property is a part of the bankrupt's assets. Dr. Hammond presents these issues on appeal:
1. Whether there was substantial evidence to support the finding that the bankrupt, Gibson Products of Durango, Inc., was insolvent on the material dates in question.
2. Whether the Court violated Mrs. Richards' right to due process in holding that she was not a bona fide purchaser of the "By-Pass" property when it did not have jurisdiction over her person.
3. Whether there was substantial evidence to support the finding that Dr. Hammond was not a bona fide purchaser.
4. Whether there was substantial evidence as a matter of law to grant the relief under Section 67d(2) (a) of the Bankruptcy Act.
The facts are basically not in dispute. Lester Kelgard was the principal stockholder of Gibson Products of Durango, Inc., its president and manager. The unimproved "By-Pass" property was acquired by the bankrupt on December 7, 1965 from I AM, INC. for $10,000 as a possible new site for the bankrupt's store. As part of a plan to gain financing for the building construction, the property was conveyed by the bankrupt to Mrs. Richards, Lester Kelgard's mother, in exchange for $10,000 of par value stock of the Gibson store which Mrs. Richards owned. This transfer was not approved at a stockholders' meeting of the bankrupt and only Lester Kelgard's signature appeared on the conveyance. This transfer was effected on March 7, 1967. The Gibson franchise for the Durango store had been revoked the previous day. The involuntary petition in bankruptcy was filed on April 10, 1967.
On April 3, 1967, Mrs. Richards contacted Dr. Hammond by telephone. He agreed to purchase the "By-Pass" property. He was to pay $2,000 down and execute a note for $8,000. He accepted a warranty deed from Mrs. Richards without checking the title. A receipt for the $2,000 down payment and the $8,000 note was executed on May 19, 1967 but backdated to April 3, 1967. Gibson Products of Durango, Inc. was adjudged a bankrupt on April 26, 1967. The value of the property was disputed but the trial court found, and we agree, that the value of the property was about $18,000.
Section 67d(1) (d) of the Bankruptcy Act defines insolvency as: "* * * a person is `insolvent' when the present fair salable value of his property is less than the amount required to pay his debts; * * *". The record discloses that the corporation's liabilities during March and April of 1967 exceeded $170,000. Lester Kelgard's estimate of the value of the bankrupt's assets was $167,000. However, the bankrupt's own bookkeeper valued its assets at only $114,385.75. The inventory taken by Trustee Schafer disclosed the value of the assets at $96,885.75. There is evidence that the bankrupt was having trouble paying its current bills for a period of several months before the involuntary bankruptcy proceedings were commenced. Kelgard testified that he had informed his mother that the company was having trouble meeting its obligations.
Dr. Hammond argues that the court did not have jurisdiction over Mrs. Richards and that any judgment affecting her property interests is without due process. Without deciding whether he has standing to raise this issue, we hold that the lower court had jurisdiction over the property in question. Under Section 67d(2) (a) of the Bankruptcy Act, any transfer of property by a debtor within one year of the filing of a petition in bankruptcy is fraudulent as to creditors existing at that time if the transfer is made without fair consideration and if the debtor is insolvent. The title to property transferred in violation of Section 67d(2) (a) is held by the trustee. He is obligated to recover the property from anyone who is not a bona fide holder for value. Schneider v. O'Neal, 243...
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...presented by § 548(a)(2)(A). 6 The only case cited by Durrett in support of its extension of fraudulent transfer doctrine, Schafer v. Hammond, 456 F.2d 15 (CA10 1972), involved a direct sale, not a 7 We are unpersuaded by petitioner's argument that the 1984 amendments to the Bankruptcy Code......
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...the price received at a foreclosure sale is less than 70% of valuation. As authority for this position, the Court cited Schafer v. Hammond, 456 F.2d 15 (10th Cir.1972) where it was held that approximately 50% of value received in a sale was insufficient consideration and, as a result, was I......
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...case, § 548(a)(2)(A). 10 The sole case cited in Durrett with respect to the 70% rule was the Tenth Circuit's decision in Schafer v. Hammond, 456 F.2d 15 (10th Cir. 1972). In Schafer, the Tenth Circuit affirmed the district court's holding that a sale of property for approximately 50% of the......
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