Wilson v. Cunningham

• Decision Date: 13 December 1901
• Docket Number: 1305
• Citation: 24 Utah 167,67 P. 118
• Parties: E. W. WILSON, Trustee in Bankruptcy of the Estate of John Beck, a Bankrupt, Appellant, v. J. A. CUNNINGHAM, JOSIAH BARNETT, Trustee, ZION'S SAVINGS BANK & TRUST COMPANY, a Corporation, THE SECURITY LOAN & STORAGE COMPANY, a Corporation, THE BULLION-BECK & CHAMPION MINING COMPANY, a Corporation, P. T. FARNSWORTH and A. E. HYDE, Respondents
• Court: Utah Supreme Court

67 P. 118

24 Utah 167

E. W. WILSON, Trustee in Bankruptcy of the Estate of John Beck, a Bankrupt, Appellant, v. J. A. CUNNINGHAM, JOSIAH BARNETT, Trustee, ZION'S SAVINGS BANK & TRUST COMPANY, a Corporation, THE SECURITY LOAN & STORAGE COMPANY, a Corporation, THE BULLION-BECK & CHAMPION MINING COMPANY, a Corporation, P. T. FARNSWORTH and A. E. HYDE, Respondents

No. 1305

Supreme Court of Utah

December 13, 1901

Appeal from the Third District Court, Salt Lake County.--Hon. Ogden Hiles, Judge.

Action by the plaintiff, as trustee in bankruptcy of John Beck against the defendants, to obtain a decree declaring the transfers of certain stocks to defendant Cunningham fraudulent and void as to Beck's creditors and for an accounting as to the amount due upon the alleged pledge of said stock to Josiah Barnett as trustee for certain of the defendants. From a decree in favor of the defendants plaintiff appealed.

AFFIRMED.

A. T Schroeder, Esq., and Messrs. Brown & Henderson for appellant.

The rules of law applicable to this case, and by which this transaction must be tested, are elementary: that a transaction made between a debtor and another person, by which the debtor puts in the hands of that other person property, belonging to him under a transfer which is absolute on its face, but with a secret oral understanding between them that the debtor reserves an interest in the property for his own benefit, is fraudulent and void. This is so elementary and so generally understood that we shall not cite authorities to this proposition, unless there shall be some denial of the principle by the respondents.

Such a transaction as last above stated may be avoided by the creditors, notwithstanding a valuable consideration, if the purchaser was cognizant of the seller's intent. Rogers v. Evans, 3 Ind. 574; Ruffing v. Tilton, 12 Ind. 260; Wadsworth v. Williams, 100 Mass. 126.

If the pretended purchaser has knowledge of the facts sufficient to excite the suspicion of a prudent man as to the fraudulent intent of a debtor, and put him on inquiry, he makes himself a party to the fraud. Bartles v. Gibson, 17 F. 293; Atwood v. Impson, 20 N.J. Eq. 150-156; Baker v. Bliss, 39 N.Y. 70; David v. Burchard, 53 Wis. 492; Hunsinger v. Hafer, 110 Ind. 390; Hedrick v. Strauss, 42 Neb. 485; Bussard v. Bullitt, 64 N.W. 658; Schmidt v. Opie, 33 N. J., Eq. 138.

P. L. Williams, Esq., for respondent, Cunningham.

This respondent has no controversy with the appellant as to the general principles enunciated in the authorities cited, but makes the suggestion that this case does not present an instance for their application. The case here was rightly decided by the court below upon the testimony, and should be affirmed, as this respondent insists, upon that testimony, even though it were to be considered by this court independent of the finding of that. But this court will not disturb the findings of the court below even in an equity case where the testimony upon which that finding was made is conflicting. If counsel for the appellant does not assent to the view entertained and urged by respondent that the preponderance of the testimony is not only not with the appellant, without which he is not entitled to recover, but it is fact with the respondent, still he can not insist that there is not a substantial conflict in the testimony, and if that is true, then by the rule frequently announced by this court, the findings and decree in this case must be affirmed. Wells v. Wells, 7 Utah, 75, 76; Mining Co. v. Haws, 7 Utah 517; Dooly Block v. Rapid Transit Co., 9 Utah 45; Stohn v. Hall, 10 Utah 403; Whitesides v. Green, 13 Utah 351; McKay v. Farr, 15 Utah 264; Klopenstein v. Hays, 20 Utah 56; Irrigation Co. v. Moroni, etc. Co., 21 Utah 238.

Messrs. Brown & Henderson in reply.

The statutes of this State in equity cases gives the right to appeal to this court upon the facts. It is a substantial right. We concede that in doubtful cases, where it requires nice balancing of the testimony, that the court will give weight to the determination of the court that heard the testimony and saw the witness. But this rule does not mean in an equity case, that the court is to give the same presumption that it does to a judgment in a suit at law. This court is required to weigh the testimony, and to take up the question that was tried below as an original question in this court, and if the testimony fairly and reasonably preponderates in favor of the appellant he is entitled to a judgment from this court accordingly. If on the other hand the question of fact presented is one that is difficult, and depends upon the nice balancing of opposing testimony, weight will be given to the determination of the court below, and may determine the question by upholding the judgment appealed from. Godfrey v. Moser, 66 N.Y. 250; Worrall's Appeal, 110 Pa. St. 349; Benne v. Schnecko, 13 S.W. 82; Bank v. Stapp, 30 S.W. 1000; Chamberlain v. Raymond, 3 Utah 119.

MINER, C. J., delivered the opinion of the court. BASKIN and BARTCH, JJ., concur.

OPINION

MINER, C. J.

STATEMENT OF FACTS.

This is an action brought by the appellant, as trustee in bankruptcy of John Beck, against the defendants, to obtain a decree declaring the transfer of 51,000 shares of the stock of the Bullion-Beck & Champion Mining Company and 50,000 shares of the capital stock of the Indian Creek Gold Mining & Milling Company to the defendant J. A. Cunningham fraudulent and void as to Beck's creditors, and for an accounting as to the amount due upon the alleged pledge of said stock to Josiah Barnett as trustee for certain of the defendants. It is alleged that all of said stock was deposited with Josiah Barnett, as trustee, to secure certain claims, according to a contract executed by Beck and said creditors; that thereafter the equity of John Beck was levied upon under an execution issued upon two judgments in favor of Sarah Everard, and was advertised for sale on the eleventh day of May, 1899, at 12 o'clock noon, under said execution. The plaintiff claims that on that day Beck agreed with Cunningham that the latter would advance the money necessary to pay said judgments and execution and protect the equity of Beck therein, and that the latter should repay Cunningham the amount so advanced, together with $ 15,000 as a bonus, and that when this was paid the stock would belong to Beck, subject to the trustee's lien; but, for the purpose of keeping the stock beyond the reach of certain other creditors of Beck, a bill of sale absolute in form was made, and the said stock delivered to Cunningham, with Beck's right to redeem. The defendants contend that the bill of sale of the stock was not only absolute in form, but was intended by the parties to carry all the equities of Beck in said stock, in consideration of $ 24,500 then advanced by Cunningham to pay off the attachment liens thereon in favor of Mrs. Everard, and denied that the stock was to be held for Beck's benefit, or that Beck reserved any right or benefit therein. The case was tried before the court upon the issue made, as to whether the bill of sale of the stock was absolute, conveying all of Beck's equity therein, or whether it was made with a secret agreement by which Beck reserved an interest in it after all the liens thereon were paid; in fact, whether the sale was absolute or conditional. The trial court found all the equities in favor of the defendants, and decreed a dismissal of the complaint. The plaintiff appeals from the decree.

The question now for determination is whether Mr. Cunningham's purchase of Beck's equity in the stock in question was absolute or not. The bill of sale reads as follows: "For and in consideration of twenty-four thousand five hundred and forty-eight and sixty-eight one-hundredths dollars, lawful money, to me paid by J. A. Cunningham, receipt of which is hereby acknowledged, I do hereby bargain, sell, assign, transfer, set over, and deliver unto said Cunningham, his heirs and assigns, forever, all the shares of capital stock represented by stock certificate No. 338 of the Bullion-Beck & Champion Mining Company, a corporation, to-wit, 51,000 shares, together with the certificate representing the same, which is now in the custody of Josiah Barnett as trustee, and as security for the payment of certain claims and demands thereupon, aggregating about $ 284,000, and interest. To have and to hold unto said Cunningham, his heirs and assigns, forever. Witness my hand and seal at Salt Lake City, Utah, May 11, A. D. 1898. John Beck. Signed in the presence of William C. Hall."

It appears, in substance, that on or about the sixteenth day of August, 1897, Beck, the owner of the stock, was indebted to several parties, and, in order to secure them, entered into the agreement referred to, wherein Mr. Barnett was made trustee, and the stock was transferred to him to secure the payment of the claims, aggregating in all about $ 284,000. At this time Mrs. Everard had levied upon Beck's equity in the stock so in the hands of Mr. Barnett, upon a claim amounting to $ 24,000; and the sale was to take place on the eleventh day of May, at 12 o'clock noon. Mr. Beck had made many fruitless efforts to procure the money with which to pay off the liens of Mrs. Everard, by giving security upon his equity in the stock. Having failed, he made application to Mr. Cunningham some time before the sale, and was refused. He again made application to Cunningham for the money about an hour before the sale was advertised to take place. He testified, in substance, among other things, that at this time he offered Cunningham $ 15,000 bonus to pay off the Everard claims against the stock, including about $ 17,500 in addition to which he owed Mr. Cunningham on two notes. He states that he...