207 F. 180 | N.D.N.Y. | 1913
The only objection to a discharge requiring attention is that subsequent to the first day of the four months immediately preceding the filing of his petition in bankruptcy the said Ernest D. Wakefield transferred, or concealed, or permitted to he concealed, certain of his property, real estate, with intent to hinder, delay, or defraud his creditors, or that while a bankrupt he concealed from his trustee such real property, which, it is alleged, belonged to his estate in bankruptcy. See sections 14 and 29 of the act entitled “An act to create a uniform system of bankruptcy in the United States and territories,” approved July 1, 1898, as amended.
Ernest D. Wakefield, the bankrupt, filed his voluntary petition on the 13th day of July, 1907, and on the 16th day of July, 1907, he was adjudicated a bankrupt accordingly. On the 17th day of. August, 1907, he filed his petition for a discharge, and the order to show cause was returnable September 17, 1907. Objections were filed by Lewis H. Bramer, a judgment creditor, and the evidence has been taken and the case submitted.
April 15, 1905, Bramer obtained a judgment against Wakefield and others for the sum of $20,146 damages and costs, no part of which has been paid. This action was commenced September- 24, 1903, but ’ was not tried until April, 1905. It is a debt or claim released by a discharge in bankruptcy.
“One-half (%) that tract and parcel of land,” etc., being the premises at 512 Geddes street and described in such deed “with the appurtenances, and my one-half (%) the estate, title, and interest therein of the said property of the first part.”
Then follow the usual covenants of warranty, etc. This deed was recorded September 4, 1903, having been held by Bell in the meantime. April 14, 1905, and some two years and three months prior to July 13, 1907, when the petition in bankruptcy was filed, Wakefield executed, acknowledged, and delivered to said James A. Bell a quitclaim deed of all his title and interest in said lands and premises, on the theory the premises were held by Wakefield and wife as tenants by the entirety; and it is also claimed that this was done to insure the passing of the title absolute to Bell on the consideration referred to. This deed was recorded on the 15th day of April, 1905. December 4, 1908, said James A. Bell and wife deeded the said premises to May E. Wakefield, and this deed was recorded February 27, 1909.
“In order to establish a fraudulent concealment, it must appear that the property concealed belongs to the bankrupt's estate. It must be shown Hint the transfer was merely a temporary expedient to place the property beyond the reach of the trustee, the title to be resumed by the bankrupt as soon as prudence will permit. In other words, it must be proved that a secret trust exists in her favor, and that her son is under agreement, expressed or implied, to recouvey the property to her when the danger of attack by the creditors has passed. Were we permitted to indulge in speculation and guesswork, and to substitute suspicion for proof, it would not be difficult to sustain the creditors’ contention; but the burden is upon them to establish by clear and convincing evidence that the bankrupt has been guilty of the offenses alleged.’’
In Collier on Bankruptcy (9th Ed.) 331, 332, it is said:
“The ordinary rules of evidence control. Proof must be strict and convincing, but not necessarily to the limit required in proving a crime. Evidence will be confined to the specifications. The burden of proof is upon the opposing creditor, unless the question presented is the construction of the statute. It is not necessary that the alleged ground for refusing a discharge be proved beyond a reasonable doubt, as in the case of the trial of a criminal offense, although the conscience of the court should be satisfied by clear and convincing testimony that the bankrupt, is not entitled to his discharge. If the ground depended upon is an offense for which the bankrupt may be punished, it is probable that a greater degree of proof should be required.”
“At any time subsequent to the first day of the four months immediately preceding the filing of the petition, transferred, removed, destroyed, or con coaled, or permitted to be removed, destroyed, or concealed, any of his properly, with intent: to hinder, delay, or defraud his creditors,” the judge shall deny a discharge.
Personally I would remove the limitation to the four months preceding the filing of the petition; but courts do not legislate, and here there is no opening-for a construction of the language.
That the first deed of this property from Ernest D. Wakefield to James A. Bell, the one dated January 1, 1903, acknowledged September 4, 1903, and recorded the same day, was a mortgage merely, and so given, received, and held, is plainly shown by the evidence of Ernest D. Wakefield in his testimony before Brainerd, Referee, when he said that he and his wife took title, and that it stayed in him until January 1, 1903, when he deeded it to James A. Bell, and then, after stating the consideration for conveyance, his indebtedness to Bell on account of Bell having furnished board, etc., and paid the two notes of $200 each, he said:
“Q. How did you come to convey to Mm (Bell)? Á. At the üme I deeded the property to him, I was not able to pay the notes, and he took the deed as security, and I owed him money besides that. Q. How much did you owe him besides that? A. Pretty close to $250> Q. So you owed him altogether, as you stated, about $650? A. Yes, sir. Q. And to secure that indebtedness you turned over your half interest in the block to him; is that right? A. That’s right. Q. And he now holds that block under that arrangement? A. Yes, sir.”
Bell testified two or three times that he took that deed as security, and that he treated' both deeds in the same light is demonstrated by his evidence to the effect that when he was paid he expected to give a deed back, and that when Mrs. Wakefield paid him some $800 he did deed to her. The evidence before Brainerd was given in July, 1908, and at that time the objecting creditor was fully informed of the situation. The title, whatever it was, under that and the subsequent deed'of April 14, 1905, was then in Bell, and suit could have been and should have been instituted to reclaim the property, if there was any equity in it. At that same time, however, Wakefield testified that he had deeded absolute at a date later than January 1, 1903, to Bell, and that he so deeded under advice of counsel. Bell ought to have been examined at that time, and some effort made to reclaim the property for the benefit of the estate, if there was any equity in the property.. In December, 1908, Bell and wife deeded to their daughter, May F. Wakefield, the wife of Ernest 'D. Wakefield, and who owned an undivided one-half interest in the property. Here we have Wakefield, during the pendency of the bankruptcy proceedings, disclosiiig the situation under oath, just as he now claims it to be and to have been. His claim was and is that the second deed transferred title absolute, and was so intended by him, and so understood. There is no evidence of any secret understanding or agreement between Wakefield and Bell, by which Wakefield reserved any secret interest, or by which at a subsequent period he was to have a deed, or that Bell did not pay the notes and have a just claim for the $250 board, etc.
It is, of course, repugnant to our fine sense of generous action to find a well-to-do father making such charges for such a purpose against his son-in-law of no pecuniary ability, at that time, in his affliction; but we cannot doubt the legal right to make the charge and
“Q. Now, does that transaction remain as It did, as security for the repayment of $650? A. Yes, sir. Q. And is that property in the hands of a trustee? A. No; he has possession. I do not understand what you mean. Q. Well, according to your statement, he has security for the repayment of that $650, and that he still holds the property in that way? A. I deeded it to him absolute. Q. Did you sell an account for the repayment of the $650? A. I did, of the first deed. Q. Oh; you made another deed; when was that? A. I cannot say the date.”
Then the time of giving the second deed was fixed as the day of the trial of the action referred to, and then this:
“Q- Hid your father-in-iaw ask you for a deed of the properly? A. No. Q. Then you voluntarily gave him a deed of the property, without his asking for it? A. I gave it to Mm on the advice of my counsel. Q. Mr. Emerson advised you to give him a deed? A. Yes, sir. Q. Why? A. lie claimed that the deed I gave him, the deed of the property, was a joint deed, and the deed that I gave to my father-in-law was my individual one-half interest, and Mr. Emerson said 1 should give him a deed of my whole interest in the property. Q. Why was it done at all? A. On the advice of my counsel. * * * Q. And from that time you never have had anything to do with the property? A. No, sir. Q. Have you received the rents? A. No, sir. Q. Have you rented the stores? A. I have practically had the management of the property since that time.”
The receipt of rents by the wife and her father, and their division of them, is testified to, and it does not appear that Wakefield had any part thereof. I think and hold that the deed of January 1, 1903, was a mortgage merely, and intended as such, but that the attorney,
“retained possession, of said real property and received the rents, issues, and profits thereof; that said Ernest D. Wakefield has made no reference to the said 'real property in the schedules filed in this court showing the property owned and possessed l)y him, and the same does not appear as an asset to his estate herein.”
Evidently it was the purpose of the objector' to assert that the alleged transfer was fraudulent, merely colorable, and not intended to pass title, and that Wakefield, remaining in possession, had in fact, by some agreement or understanding, retained the ownership and was then the owner of such real property. This is plainly suggested by the specifications of objection, and, under the rule referred to, the question is fairly raised and presented, and has been carefully considered.
The trustee in bankruptcy was vested with the right to set aside this transfer, made more than four months prior to the filing of the petition, as made in fraud of creditors. Section 70a and section 70e, where it is provided that a trustee in bankruptcy upon his appointment and qualification shall be vested by operation of law with the title of the bankrupt “(4) property transferred by him in fraud of his creditors,” and (sec. 70e)—
‘•the trustee may avoid any transfer by tile bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication,” etc.
But this has nothing to do with the question this court is called upon to decide, which is; Did Wakefield retain any title in this property knowingly and conceal the facts ? If the last deed was in fact in equity but a mortgage, and Wakefield knew it, or there was any secret trust, which, of course, he knew, if there was one, he is not entitled to his discharge; otherwise, under the law as it stands, lie is. As already stated, the burden of proof was on the objecting creditor, and there must he convincing and satisfactory proof, not suspicious circumstances only. The equities are all with the objecting creditor; but he is not able to make proof, and the law is with the bankrupt.
There will be an order granting the discharge prayed for.