Walker v. Connell

• Decision Date: 17 July 1933
• Docket Number: No. 6124.,6124.
• Citation: 63 N.D. 622,249 N.W. 726
• Parties: WALKER v. CONNELL et al.
• Court: North Dakota Supreme Court

63 N.D. 622

249 N.W. 726

WALKER

v.CONNELL et al.

No. 6124.

Supreme Court of North Dakota.

July 17, 1933.

Syllabus by the Court.

1. In an action to recover on a promissory note and to set aside a transfer of real property, the record is examined, and it is held, for reasons stated in the opinion, that the evidence is sufficient to sustain the trial court's finding that the transfer was without consideration and with the intent to defraud the grantor defendant's creditors and hinder and delay them in the collection of their debts, and that the grantee defendants had knowledge of such facts as to charge them with notice of the grantor's fraudulent purpose and intent.

2. The provisions of section 67f of the Bankruptcy Act (11 USCA § 107 (f), annulling liens obtained through legal proceedings less than four months prior to the adjudication, may be invoked only by the trustee and those claiming under him, where the property involved is nonexempt.

Appeal from District Court, Ramsey County; C. W. Buttz, Judge.

Action by Eva S. Walker against Grace Lewis Connell and others. Judgment for plaintiff, and defendants appeal.

Affirmed.

W. M. Anderson, of Devils Lake (John A. Jorgenson, of Los Angeles, Cal., of counsel), for appellants.

Traynor & Traynor and F. R. Stevens, all of Devils Lake, for respondent.

NUESSLE, Chief Justice.

The defendants are residents of California. On November 1, 1930, defendant Connell executed her promissory note for $3,500, and interest, payable to the plaintiff Walker one year from the date thereof. This note evidenced a debt of many years' standing originally incurred by the defendant Connell to obtain money to protect her title to 520 acres of land in Ramsey county, N. D. When the note was executed plaintiff suggested that it be secured by a mortgage on the land in question. Mrs. Connell was reluctant to execute such a mortgage. She said that all the parties had been friends for a good many years; that the plaintiff Walker would get her money so far as the farm could produce it; that she owed no other bills; and that she did not want to mortgage the land if she did not have to. She said, however, that she would consider the matter and talk it over with her son, the defendant Merle C. Adams. However, nothing was done in the way of giving security. On June 12, 1931, Mrs. Connell deeded the land to the defendants Merle C. Adams and Mary Adams, his wife, for a stated consideration of $10. It is stipulated in the record that the land is worth $5,000. The note in question was not paid. On December 1st plaintiff began this action in Ramsey county to recover on it and the land was attached.

In her complaint in this action plaintiff set out the fact of the execution and delivery of the note and its nonpayment; that she was the owner thereof; that the defendant Connell owned the land in Ramsey county which was later attached; that the indebtedness covered by the note represented money loaned to defendant Connell for the purpose of discharging mortgages thereon; that on June 12, 1931, the defendant Connell fraudulently and without consideration, and with intent to cheat and defraud her creditors and to hinder and delay them in the collection of their debts, deeded the said land to the defendants Adams; that the defendants Adams accepted and received the said deed with the knowledge of the fraudulent intent and purpose of the defendant Connell; that the defendant Connell had no other land or property within the state of North Dakota or elsewhere; and that such transfer rendered her wholly insolvent. And the plaintiff demanded judgment against the defendant Connell for the amount of the note with interest and costs, and against all of the defendants that the transfer of the said land from the defendant Connell to the defendants Adams be set aside and declared null and void, and that the plaintiff have a first and prior lien on and to the said premises in the amount of said indebtedness by virtue of any attachment that might issue. Plaintiff thereupon procured the issuance of a writ of attachment on the ground that the defendants were nonresidents, and the land was duly attached.

Service was had upon the several defendants, and on December 28, 1931, they served their joint answer upon the plaintiff, verified by the defendant Connell, wherein they admitted all of the allegations set out and contained in the plaintiff's complaint, excepting only that they denied that the transfer of the land in question was made with any intent to cheat or defraud any creditor of the defendant Connell or to hinder or delay any creditor in the collection of any debt, and denied that said transaction was conducted fraudulently. In that behalf they alleged that said transaction and conveyance were in good faith and for value. They admitted that the defendant Connell had no other land or property within the state of North Dakota or elsewhere out of which the plaintiff could realize on her claim, but denied that the transfer thereof rendered the defendant Connell insolvent. On the 29th of February, 1932, the defendants served their joint amended answer, wherein they reiterated the allegations and denials of their original answer, and further alleged that on the 24th of February, 1931, the defendant Connell filed her voluntary petition in bankruptcy in the District Court of the United States for the Southern District of California, accompanied by duly verified schedules setting out and containing true and correct statements of her debts and the names and residences of her creditors and accurate inventories of all of her property, together with such further statements as were required by the provisions of the Bankruptcy Act (11 USCA); and that on said date she was duly adjudicated a bankrupt; and the defendants demanded that the action either be dismissed or that all proceedings therein be stayed until the final disposition of the bankruptcy proceedings.

Thereafter on the 7th day of March, 1932, the defendants moved that all proceedings in the action be stayed until the final disposition of the bankruptcy proceeding in the United States District Court. This motion was predicated upon the verified amended answer of the defendants and the affidavit of their counsel setting forth substantially the same matters and things as were set out and contained in the answer. Plaintiff resisted this motion and it was denied.

The case came to trial on the issues as made by these pleadings. The plaintiff offered evidencein support of her complaint. The defendants appeared by counsel and objected to the jurisdiction of the court to hear and determine the question on the grounds that the defendant Connell had been adjudicated a bankrupt and that the bankruptcy proceeding was still pending; that such adjudication in bankruptcy had been within less than four months after the date of the attachment; that therefore the attachment had become and was ineffective and null and void; and that accordingly though the transfer was fraudulent, nevertheless the plaintiff was in no position to challenge the same or to maintain her action to set it aside. This objection being overruled, counsel for the defendants participated in the trial and cross-examined witnesses, but offered no evidence in defendants' behalf other than by requesting the court to take judicial notice of the bankruptcy proceeding and the files and records therein. Counsel, however, offered no copies thereof other than a copy of the adjudication and order of reference.

The trial judge, after considering the evidence offered, adhered to his ruling on the challenge to the jurisdiction of the court and to the validity of the lien of the attachment. With respect to the lien of the attachment he held that the provisions of section 67f of the Bankruptcy Act (11 USCA § 107 (f) could be invoked only by the trustee of the bankrupt or those claiming under him. On the evidence the court found that the transfer of the land in question was without consideration and with the intent to defraud the grantor's creditors and hinder and delay them in the collection of their debts; that the defendants Adams had knowledge of such facts as to charge them with notice of the fraud; and that accordingly the transfer was null and void as against the attaching creditor. Accordingly, the trial court ordered judgment that the transfer be set aside; that the plaintiff be held to have a valid lien on and against the land by virtue of the attachment, and that her claim be satisfied out of the land, so far as it was possible to do so, but that she have no general personal judgment as against the defendant Connell. Thereupon the defendant perfected the instant appeal.

[1][2] We will first consider the defendants' contention that, in any event, the evidence is insufficient to sustain the trial court's finding and holding that the transfer was fraudulent as to the plaintiff and that the defendants Adams were chargeable with notice of the fraud. We have examined the record with this contention in mind. We are of the opinion that the evidence amply sustains the trial court in these respects. The debt evidenced by the note in question was of long standing. Concededly the note was past-due and unpaid. When...