Utah Ass'n of Credit Men v. Boyle Furniture Co.

• Decision Date: 17 June 1911
• Docket Number: 2195
• Citation: 117 P. 800,39 Utah 518
• Court: Utah Supreme Court
• Parties: UTAH ASSOCIATION OF CREDIT MEN v. BOYLE FURNITURE COMPANY

117 P. 800

39 Utah 518

UTAH ASSOCIATION OF CREDIT MEN v. BOYLE FURNITURE COMPANY

No. 2195

Supreme Court of Utah

June 17, 1911

Rehearing denied September 27, 1911.

APPEAL from District Court, First District; Hon. W. W. Maughan Judge.

Action by Utah Association of Credit Men against the Boyle Furniture Company.

Judgment for defendant. Plaintiff appeals.

REVERSED, WITH DIRECTIONS TO GRANT NEW TRIAL.

Stephens Smith & Porter for appellants.

Halverson & Pratt for respondent.

FRICK, C. J. McCARTY and STRAUP, JJ., concur.

OPINION

FRICK, C. J.

This action was brought by a trustee in bankruptcy to recover an alleged preference received by one of the creditors of the bankrupt.

The controlling facts, briefly stated, are: That on the 6th day of April, 1909, a petition for involuntary bankruptcy was filed against one William B. Jenson, hereafter called bankrupt, a merchant at Brigham City, Box Elder County, Utah, and that on the 7th day of May following he was adjudged an involuntary bankrupt; that the appellant herein was duly appointed trustee of said bankrupt's estate; that on the 14th day of February, 1909, the bankrupt transferred, or returned, to the respondent, who was one of his creditors, a large part of his stock of merchandise consisting of furniture and other articles usually sold by retail furniture dealers. The bankrupt was called as a witness by appellant, and in substance testified that on the 14th day of February, 1909, he was indebted to respondent; that on said day he transferred to it out of his stock of goods, a large portion of which he had previously purchased from the respondent, merchandise of the value of $ 850 as part payment of an indebtedness amounting to $ 1478.19; that after making said transfer, without making any inventory, he estimated the value of his stock on hand at $ 1000 to $ 1100. From the evidence of the bankrupt when construed most favorably to respondent it may be assumed, for the purposes of this decision, that the bankrupt's assets and liabilities on February 14, 1909, just before the transfer was made were about as follows: Stock on hand, $ 1950; store fixtures, $ 100; household furniture and goods, $ 300; book accounts, $ 300. Total, $ 2650. Liabilities secured, and unsecured, $ 4508. The bankrupt, however, also claimed that he had further assets in the form of real estate of the value of $ 4500 which he said was incumbered to the extent of $ 2600. This left an equity in his favor if construed as an asset, of the value of $ 1900. If this be added to the $ 2650 of personal property, it is claimed that the value of the bankrupt's property at the time of the transfer was at least $ 4550, while his liabilities, secured and unsecured, amounted to only $ 4508. There was, however also evidence from which a jury might find the value of the bankrupt's estate considerably less than the foregoing amount. For instance, the bankrupt in estimating the value of his stock of merchandise at $ 1950 fixed the value of the goods returned to respondent at $ 850. Respondent, however, only gave him credit for $ 679.55, or $ 170.45 less than the bankrupt claimed. This would reduce the value of the stock from $ 1950 to $ 1778. 45. There was also other evidence that the stock of goods, after the transfer had been made, was not of the value of $ 1000 or $ 1100 as claimed by the bankrupt, but that its value was less than $ 300. The goods transferred to respondent were packed and taken from the store of the bankrupt on Sunday, and were transported in its delivery wagons from Brigham City to Ogden, a distance of about twenty miles. The evidence of the bankrupt is also to the effect that, before he transferred the goods to respondent, he informed its manager of his assets and liabilities. According to his testimony, his statement showed his liabilities to be $ 4108.94. The details with respect to his assets as made in the alleged statement are not made to appear, but the bankrupt insists that by including the real estate his assets in excess of his debts at the time he made the statement to respondent amounted to about $ 1700, of which fact he informed respondent's manager. Respecting the ownership of the real estate in question, the undisputed evidence is to the effect that up to July 15, 1908, the bankrupt was the owner thereof, and that on that date he conveyed the same to his wife, which conveyance was on the 8th day of September, 1908, duly recorded in the records of Box Elder County. The consideration expressed in the deed of conveyance is $ 100 and other valuable considerations. Upon this real estate the store building in which the bankrupt carried on his business was situate and in which he lived with his family. The bankrupt also testified that his wife was a partner in the business, but that it had always been conducted in his name. In answer to the question whether his wife invested any cash in the business, he said: "Oh, when we started out, she did. Q. How much? A. Oh, she put in about $ 100 I think." It was also stipulated that respondent allowed the bankrupt credit on his account for the goods transferred to it in the sum of $ 679.55, and that it filed the remainder of the account as a claim against the bankrupt's estate with the referee in bankruptcy, and was allowed the sum of $ 944.87 as the amount due it from the bankrupt. There is also evidence that the bankrupt's unsecured liabilities amounted to $ 3108.94, while the aggregate of his personal property after excluding the real estate was worth $ 2650.

Upon substantially the foregoing evidence the respondent's counsel moved the court to direct the jury to return a verdict for respondent, which was done, and this appeal is from the judgment entered upon said verdict.

The assignments are numerous, but we shall consider only such as we deem material.

One of the material and perhaps the most important one of the alleged errors arises as follows. For the purpose of proving the assets and liabilities of the bankrupt at the time of the transfer, the bankrupt was called as a witness by appellant. Counsel showed by the witness what his assets which were in the form of personal property and the value thereof at said time were. Upon cross-examination, however, counsel for respondent asked the witness with respect to the real property, and, over appellant's objection that said evidence was "immaterial and incompetent" because it had already been shown that the bankrupt did not own the real estate inquired about, or any real estate, was permitted to show by the witness that the value thereof in his opinion was $ 4500. Counsel for appellant strenuously insist that the court committed prejudicial error in admitting this evidence, and in considering the real estate as a part of the bankrupt's estate. Counsel for respondent defend the ruling of the court upon the ground that the business carried on in the name of the bankrupt was in fact owned by himself and his wife as copartners.

In other words, it is contended that the business was owned by a copartnership composed of the bankrupt and his wife, and that the real property, as well as the personal property, constituted the assets of this firm or copartnership. The only evidence of such a partnership was given by the bankrupt, and, when he was required to state how the partnership between himself and his wife was established and what their legal relations in that regard were, he said: "She was simply my partner in my business as any other man's wife is a partner in his life's work." This, and his further statement that she put into the business at some time not disclosed about $ 100, is all the evidence that there was respecting the copartnership. When it is remembered that the business was always conducted in the name of the bankrupt, that he alone is proceeded against as a bankrupt in the bankruptcy proceedings, that there is absolutely no evidence that the wife was ever held out as a partner or claimed to be such, and that the real estate had as early as 1908 been conveyed to her for what upon the face of the deed appears to be a good and sufficient consideration, it may well be doubted whether there was sufficient evidence of the partnership to submit to the jury. But, whether there was or not, the evidence is entirely insufficient to authorize the court to conclude that such a partnership existed as a matter of law, as was apparently done, in directing a verdict. We say apparently done, for this reason: If there was no partnership, then, prima facie, at least, the real estate in question cannot be considered as an asset of the bankrupt and, if it was not an asset of his then his liabilities at the time he made the transfer of the property in question were in excess of the value of all of his property when taken, as the bankruptcy act provides, at "a fair valuation."

The rule to be followed in determining whether a person is insolvent or not is perhaps as well stated by Mr. Loveland in his work on Bankruptcy (3d Ed.), p. 187, as it is stated anywhere. He says:

"In computing the assets of the debtor to determine his solvency or insolvency all his property which has value should be included. It has been held that in determining the question of solvency there should be included property exempt under the state law, and property transferred in payment of or as security for a just debt, irrespective of whether it constitutes a preference or not. But, where property is transferred in fraud of creditors, the statute contemplates that the bankrupt shall not have the benefit of its valuation in determining whether he is solvent."

The real property ostensibly belonged to the bankrupt's wife. The title was in her, and we cannot see how she could be deprived of any right she may have in the...