Stocker v. Iola H. Church

• Decision Date: 12 June 1925
• Docket Number: 24546
• Citation: 204 N.W. 398,113 Neb. 639
• Parties: ALBERT E. STOCKER, TRUSTEE, APPELLEE, v. IOLA H. CHURCH, APPELLANT: GILBERT E. HANKS ET AL., APPELLEE
• Court: Nebraska Supreme Court

204 N.W. 398

113 Neb. 639

ALBERT E. STOCKER, TRUSTEE, APPELLEE, v. IOLA H. CHURCH, APPELLANT:

GILBERT E. HANKS ET AL., APPELLEE

No. 24546

Supreme Court of Nebraska

June 12, 1925

APPEAL from the district court for Otoe county: JAMES T. BEGLEY JUDGE. Reversed, with directions.

REVERSED.

Burkett Wilson, Brown & Wilson, for appellant.

Pitzer & Tyler, contra.

Heard before MORRISSEY, C. J., DEAN, DAY, THOMPSON and EVANS, JJ and SHEPHERD, District Judge.

OPINION

THOMPSON, J.

Albert E. Stocker, legally appointed and acting trustee in bankruptcy of the estate of Gilbert E. Hanks, brought this suit in the district court for Otoe county against Iola H. Church, sister of Hanks, hereinafter called Mrs. Church, Gilbert E. Hanks, the bankrupt, and his wife, Grace W. Hanks, to cancel and set aside a mortgage executed and delivered to Mrs. Church by the Hanks in the amount of $ 35,480, covering 560 acres of land in Otoe county. The mortgage is dated June 21, 1921, and was recorded August 3, 1923.

At the hearing in this court the following suits were consolidated with this one: Nebraska City Nat. Bank v. Hanks, p. 645, post, in which Mrs. Church and her husband, Luther J. Church, as cross-petitioners, seek to foreclose a mortgage for $ 15,000 given to Mrs. Church by the Hanks, covering lands other than the 560 acres referred to above, dated May 6, 1921, and recorded August 3, 1923; and United States Trust Co. v. Hanks, p. 644, post, wherein Mrs. Church and her husband, Luther J. Church, again as cross-petitioners, seek to foreclose a mortgage in the amount of $ 15,000 given to Mrs. Church by the Hanks, covering lands other than the two tracts hereinbefore referred to, dated June 15, 1921, and recorded August 3, 1923, and also to foreclose a deed given by them to her, which was intended to be, and is, a mortgage, and will be so treated, in the amount of $ 18,966.28, covering the same land as that covered by the last-mentioned mortgage, dated November 1, 1921, and recorded August 3, 1923. Each instrument above mentioned was delivered to Mrs. Church on or about the date of its execution. The issues and evidence in each suit are the same as far as the matters involved herein are concerned, and will be considered and determined in this opinion.

The pleadings filed are somewhat voluminous and will not be set out at length. However, the trustee contends that, at the time these respective mortgages were given, Hanks was insolvent, which was known to Mrs. Church; that such insolvency continued until August 4, 1923, when Hanks was adjudicated a bankrupt; that, notwithstanding her knowledge of the insolvency, she intelligently and collusively withheld her mortgages from record until she learned that Hanks was contemplating bankruptcy, in pursuance of an agreement with Hanks whereby his credit might be preserved; that these mortgages are instruments required by law to be recorded, and that their recordation within four months prior to the filing of the petition in bankruptcy constitutes a preference under section 60a of the federal bankruptcy act, regardless of the date of their execution and delivery.

These contentions of the trustee are denied by Mrs. Church, and she further alleges that these mortgages were given more than four months before the filing of the petition in bankruptcy, and for a then present and valid consideration, and that the same were recorded before the filing of the petition in bankruptcy. In each instance she prays a decree establishing her respective liens, and a foreclosure and sale as by law provided.

Upon the issues thus raised, trial had to the court. Decree entered finding that such mortgages are fraudulent as to creditors of the bankrupt, and are canceled and set aside, and foreclosure thereof denied. From these respective decrees, Mrs. Church appeals.

It will be seen that the trustee challenges these mortgages on the ground that they are void as to the creditors by him represented, under section 60a of the bankruptcy act, because recorded within four months before the filing of the petition in bankruptcy. Section 60a of such act is as follows:

"A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, * * * made a transfer of any of his property and the effect * * * will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. Where the preference consists in a transfer, such period of...