219 F. 122 | 8th Cir. | 1914
This suit was brought by Folsom, as trustee in bankruptcy of the partnership estate of Davis & Son, and the individual estates of Ernest Davis and Ernest B. Davis, the members of the firm, against Albert Amundson, to set aside a transfer to him of a stock of merchandise and fixtures as having been made with intent to hinder, delay, and defraud creditors (Bankr. Act July 1, 1898, c. 541, § 67e, 30 Slat. 564 [Comp. St. 1913, § 9651]), and to recover the property or its value. The case was referred to a master, who made exhaustive findings of fact in favor of the trustee. The trial court approved the findings and rendered a decree against Amundson, the defendant, for the value of the property and interest. This appeal followed.
The trial court and master found that the scheme of Davis & Son, in which the defendant knowingly aided and participated, was to put the partnership assets so far as they could beyond the reach of their mercantile creditors. The principal facts found were as follows:
The firm of Davis & Son, in which Ernest Davis and Ernest B. Davis, his son, were equal partners, conducted a general merchandise business in the town of Take Andes, S. D., for several years prior to December 29, 1911. At the latter date their stock and fixtures were worth $10,305, iheir outstanding credits not exceeding $1,200, and all other property not more than $200. Ernest B. Davis, the son, individually owned a house, with two lots, in the town of Lake Andes, subject to a mortgage of $800, leaving an equity of not more than $350. The firm and also the partners individually were insolvent, and had been so for some time. Creditors were pressing for payment of their claims. The amount of their indebtedness is approximately indicated by the fact that claims aggregating $11,729 were proved and allowed in subsequent bankruptcy proceedings. In addition, Davis & Son were also indebted on an unsecured note for $3,000 given a local bank, of which the defendant was president. A note for that amount had been given in July, 1911. The defendant and the cashier of the bank indorsed it personally, and the bank indorsed it without recourse and discounted it in Iowa. . When it matured October 7, 1911, it was not paid by Davis & Son, but was renewed, indorsed in the same way, and again discounted. The maturity of the renewal note was Jamrary 7, 1912. During the year 1911, and until the latter part of December, many drafts drawn by creditors on Davis & Son came to defendant’s hank for collection. Most of them were returned unpaid. In December of that year creditors became insistent. On December 28th, Ernest Davis, the father, attended a meeting with some of the creditors in Sioux City, Iowa, where the condition of the firm was discussed. He claimed that the firm had more of a stock than the creditors thought it had, and it was agreed that an inventory should be taken to see whether his claim was correct, and that to assist in the work they would send a representative to Lake Andes the following day.
Davis then returned home, arriving the evening of December 29, 1911. He went at once to the store, and that night verbally agreed with his son to dissolve the firm and to sell him his half interest in the
The trial court and the special master found from the evidence that the various transactions were steps in a single plan designed to hinder, delay, and defraud the creditors -of Davis' & Son, that the dissolution of the firm and- the transfér from the father to the son were intended only to give the latter an apparent personal title to partnership assets, to enable him to secure a personal exemption which otherwise the law allowed neither of them, and that defendant, knowing the situation, not only secured a preferential payment of the note on which he was an indorser, but aided the Davises in accomplishing their own design.
No useful purpose would be gained by reciting the facts in greater detail or pointing out the inferences reasonably to be drawn from specific facts established. We think the evidence fairly sustains the findings of the master and the confirmation of the court. It is too
Counsel invoke the indulgence with which courts regard the homestead right (In re Letson, 84 C. C. A. 582, 157 Fed. 78), but it may be pushed to an unconscionable extreme. The right is not upheld when secured by the fraudulent conversion of nonexempt assets. The case here is materially different from Sargent v. Blake, 87 C. C. A. 213, 160 Fed. 57, 17 L. R. A. (N. S.) 1040, 15 Ann. Cas. 58. There it was affirmatively found that the dissolution of the firm was without fraudulent intent, and that the subsequent preference of the individual creditor was neither fraudulent nor voidable. We agree with the trial court that the defendant here ktiew of the insolvency and the purposes of the Davises, or, which is legally equivalent, willfully closed his eyes to information within his reach. By indorsement of their note he was their creditor (Kobusch v. Hand, 84 C. C. A. 372, 156 Fed. 660, 18 L. R. A. [N. S.] 660), and to obtain a payment of the note, which was unsecured, except by his indorsement and that of the cashier of his bank, he knowingly aided them in what they set out to accomplish. The trial court correctly saved defendant the right to prove a claim on the note in the bankruptcy proceedings.
We have considered the other questions presented, and think no error was committed with respect to them.
The decree is affirmed.