16 F. Supp. 748 | D. Wyo. | 1936
This suit was first filed on the equity side, but subsequently one of the causes of action was dismissed without prejudice by agreement of the parties and the remaining three causes transferred to the law side of the court. When the case was brought to trial, a motion was made requiring the plaintiff to elect upon which cause of action he would proceed, and thereupon the second cause of action was selected.
In the second cause of action it is alleged that on the 22d day of May, 1931, an involuntary petition was filed against Robert N. La Fontaine and that before an adjudication took place therein the bankrupt
Upon the trial the plaintiff introduced the formal proofs not admitted by the pleadings concerning the transaction of giving the note and mortgage which the defendant had jointly executed with the bankrupt and others, together with the documentary evidence of a warranty deed by the defendant of the property involved in the transaction with a covenant which warranted the title against encumbrance, except as to taxes and special assessments. The plaintiff then rested, and the defendant moved for judgment upon the ground that the proofs were not sufficient to sustain any verdict for plaintiff in the cause. The motion was overruled, and the defendant thereupon elected to put in her evidence. At the close of the trial each party made a motion for a directed verdict in his favor. Thereupon the court with consent of counsel dismissed the jury from further consideration of the case. The case was orally argued, rulings upon the motions having been reserved, the matter taken under advisement, and trial briefs have been submitted.
From the admissions in the pleadings and the evidence adduced at the trial, the following statement is a brief summary of the pertinent facts: On March 31, 1931, the Investors’ Syndicate, a corporation, filed a suit against Robert N. La Fontaine, praying for a judgment in the total sum of approximately $40,000. While said action was pending, the involuntary petition in bankruptcy was filed by the Investors’ Syndicate as a creditor, on May 23, 1931, which was thereafter joined in by other creditors of’ La Fontaine. On February 1, 1932, a judgment was rendered in the Investors’ Syndicate suit against La Fontaine for the sum of approximately $39,000. On April 5, 1932, La Fontaine filed his voluntary petition in bankruptcy and an order was made adjudicating him a bankrupt. Thereafter said bankruptcy proceedings were consolidated and treated as one proceeding - as having been commenced upon the date of the involuntary proceeding, May 23, 1931. The total claims filed and allowed in said proceeding amounted to about $53,000, and the assets coming into the hands of the trustee from the bankrupt’s estate were around $12,000. In April, 1926, La Fontaine and his wife, the defendant, together with one Hartney and his wife, executed a promissory note in the sum of $4,000 to one Harry Farthing, secured by a mortgage on Cheyenne real estate. In June, 1929, the La Fontaines and the Hartneys exe
Counsel for the defendant complains that the trial court committed error in. not sustaining the defendant’s nlotion for judgment at the close of the plaintiff’s case. In overruling this motion the . court adopted the theory that, upon the proofs introduced by the plaintiff, the burden had shifted to the defendant, by which she was required to. then show the bona^fides of the transaction, relying upon the' case,' among others, of First National Bank v. Swan, 3 Wyo. 356, at page 373, 23 P. 743, 750, where it is said: “Conveyances made upon a valuable consideration are not presumptively fraudulent, although the grantor’s indebtedness exceeds the value of all his property. The transaction, in the absence of proof to the contrary, is held to be only a change of assets. The rule is different as to voluntary conveyances. These create a presumption of intent to defraud existing creditors, but this presumption is disputable, not conclusive. When a voluntary conveyance is attacked as fraudulent by an existing creditor, the burden is on the opposite party to show by proof the condition of grantor’s affairs at the time, the amount of his indebtedness, and such other facts and circumstances as will tend to rebut the presumption. If this is not done, the presumption of law must govern, and the conveyance held fraudulent. In Dunlap v. Hawkins, 59 N.Y.. [342] 347, the court most excellently summarizes the law on this subject: ‘By proving the pecuniary circumstances and .condition of the grantor, * * * his business, and its risks and contingencies, his liabilities and obligations, absolute and contingent, and his resources and means of meeting and solving his obligations, and showing that he was neither insolvent nor contemplating insolvency, and that an inability to meet his obligations was not and could not reasonably be supposed to have been in the mind of the party, is the only way in which the presumption of fraud, arising from the fact that the conveyance is without a valuable consideration, can be repelled or overcome.’ In harmony with this opinion are Sexton v. Wheaton, 8 Wheat. 229 [5 L.Ed. 603]; Kehr v. Smith, 20 Wall. 31 [22 L.Ed. 313]; Jones v. Clifton, 101 U.S. 225 [25 L.Ed. 908], and many other authorities.”
However, whether the court was right ór wrong in that ruling, the point cannot be availed 'of here, inasmuch as the 'defendant' elected to introduce evidence and therefore . waived ány right -. which' she might have to stand upon her contention of insufficiency of proof.' McParland-Scanlon Lumber Co. v. J. J. Newman Lumber Co., 5 F.(2d) 949 (C.C.A.5).
It is again contended by counsel for defendant that this suit is being prosecuted under section 67e of the Bankrupt Act (11 Ü.S.C.A. § 107' (e), while counsel for plaintiff maintains that it is being primarily-prosecuted under section'70e (11 U.S.C.A.
It will be seen that by this provision of the act (1) a trustee may avoid any transfer by a bankrupt of his property which a creditor may have avoided and may recover the property or its value; (2) in order to avoid the statute it is required that the transferee must be a bona fide holder for value of the property or money transferred; and (3) the property transferred or its value may be recovered except from a bona fide holder for value.
Section 70e has been held available to trustees in bankruptcy for the purpose of avoiding transfers made in contravention of state law. In Stellwagen v. Clum, 245 U.S. 605, at page 614, 38 S.Ct. 215, 218, 62 L.Ed. 507, in speaking of this particular section, the Court says: “This section as construed by this court gives the trustee in bankruptcy a right of action to recover property transferred in violation of state law. - Security Warehousing Co. v. Hand, 206 U.S. 415, 425, 426, 27 S.Ct. 720, 51 L.Ed. 1117, 11 Ann.Cas. 789; Knapp v. Milwaukee Trust Co., 216 U.S. 545, 548, 557, 30 S.Ct. 412, 54 L.Ed. 610.”
It is therefore pertinent to inquire whether or not a creditor of La Fontaine might have avoided the transfer in question, under the state law, and have effected a recovery of the transferred moneys in the event bankruptcy had not ensued. In this connection it may be observed that in Wyoming we have the Uniform Fraudulent Conveyance Act, in which that portion known as section 48-107, W.R.S.1931, reads as follows: “Conveyances made with intent to defraud. Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.”
By this provision it is seen that conveyances as here under consideration must be made with actual intent to hinder, delay, or defraud creditors, as distinguished from intent as presumed in law. Therefore, to sustain the claim of plaintiff under this section, a consideration of the facts in the case is necessary to determine whether or not they are sufficient to show actual intent to hinder, delay, or defraud the creditors of the bankrupt; for, if this avenue was open to a creditor to void the transfer and recover the property or its value, it is, under the bankruptcy section quoted, available to the trustee. While the defendant testified that she was in no sense a creditor of the bankrupt and merely acted as his agent in using his money to pay off the Farthing note and mortgage, the physical facts developed by the testimony can scarcely be reconciled with this assertion. The defendant was a joint maker of the note to Farthing and thereby liable upon it. It was therefore to her advantage to see that this note was paid, else she would be liable upon ' her obligation. In answer to this contention, it may be said that the security by virtue of the mortgage upon the real estate was more than sufficient to liquidate the indebtedness, so that her liability could be considered at most remotely contingent. But we are again confronted with the situation developed by the evidence that upon this same real estate the defendant had given a warranty deed with covenants against encumbrances, except taxes and paving assessments, and the mortgage still stood as against this property. She was being pressed for a settlement upon the covenants contained in her. deed and retained a lawyer to guide her in the premises. It was under these circumstances that the transfer by La Fontaine, the bankrupt, to the defendant, his wife, was made. If the transfer be permitted to stand, the net analysis of the result is that the defendant is not only released from her obli
Many pages of the briefs have been taken up by a discussion of section 67e of the Bankrupt Act, and much might be said as to the relationship between that section and section 70e. There is much literature in the books in the comparison of these two sections. In the view which this court takes of the particular transaction here involved, it comes clearly within the purview of section 70e in connection with the state statute condemning fraudulent conveyances, and it would therefore seem unnecessary in this instance to discuss section 67e.
For the reasons stated herein, the motion for judgment by plaintiff will be sustained, and the motion for judgment by defendant will be overruled, reserving exceptions to the defendant, and the court will find generally for the plaintiff in the sum of $4,165 (the amount claimed in the pleadings), with interest from the 7th day of May, 1931, at the statutory rate, which will be computed and added to the principal, with costs to the plaintiff.