Hunt v. Doyal

Cobb, P. J. (After stating the facts.) A trustee in bankruptcy is expressly authorized bjr 'the bankruptcy act to avoid any transfer by the bankrupt of his property which any creditor might have avoided, and recover the property so transferred, or its value, from — 419 — the one to whom it was transferred, unless such person was a bona fide holder for value prior to the date of the adjudication. 1 Fed. Stat. Annot. 702. The purpose of this portion of the bankruptcy act was to vest the trustee with the same rights which a creditor of the bankrupt would have had under the State laws in the event the debtor had not been adjudicated a bankrupt. That portion of the bankruptcy act which authorizes the avoidance of transfers of a certain character, made by the bankrupt within four months prior to the adjudication, relate to transfers which were in violation of the bankruptcy • act. The four-months’ limitation applicable to such transfers has no reference to transfers made by the bankrupt prior to the adjudication, which were in fraud of the rights of creditors, and which they could have avoided even if no bankruptcy proceedings had been instituted. Bush v. Export Stor. Co., 136 Fed. 924; Beasley v. Coggins (Fla.), 12 Amer. Bankr. Rep. 355; 1 Cur. Law, 317; 3 Id. 448; 5 Id. 379; 7 Id. 400. 2. One ground of the demurrer was that the petition contained a misjoinder of causes of action, in that it attempts to recover real and personal property in the same suit, when the same are in no way connected. The averments of the petition are such as to indicate a purpose on the part of the bankrupt, at the date of the transactions therein referred to, to divest himself of all of the property that he had in favor of his wife, who is alleged to be in collusion with him. To effect this purpose it was necessary to have two transactions ; one the conveyance of the realty, and the other the transfer of the personalty. The date upon which the realty was conveyed is distinctly alleged; and while the exact date of the transfer of the personalty is not stated, it is alleged that it was on or about the same date that the realty was conveyed. The trustee had the right to avoid both of the transfers. It may be that he could have brought separate suits, one for the realty and the other for the personalty. But he was not required to do so; certainly not under the averments of the petition. The conveyance of the realty and the transfer of the personalty were the consummation of one scheme, having for its purpose the defrauding of the creditors of the hus-. band. We see no reason why the trustee should have been compelled to bring two suits for this purpose. If all of the property was transferred in fraud of the rights of the creditors, all could be recovered. The scheme was to deprive the creditors of their rights — 420 — in all of it. If the rights of the defendant as to any of the property were superior to the rights of the creditors, she could be fully protected by a decree in her favor to that extent. Her rights would be as completely protected as if two suits had been brought and she had prevailed in one and lost in the other. It might as well be said that a separate suit should have been brought for each tract of land, or for each mule, or plow. The averments were that all of the property, both the realty and personalty, were embraced in the one scheme to defraud the creditors of the husband. The demurrer upon the ground of the misjoinder of causes of action was not well taken. 3. It was argued that the petition was defective for the reason that the bankrupt was not made a party defendant; that it was an application to set aside a conveyance made by him; and that he was a necessary party. There was no special demurrer on this ground. Counsel seeks to take advantage of this alleged defect in the petition, in a general demurrer and in a ground of the motion for a new trial. A defect in a petition, resulting from the nonjoinder of proper parties, can not be taken advantage of by general demurrer. Ray v. Pitman, 119 Ga. 678, and cases cited. Neither can such a defect be taken advantage of by motion for a new trial. While the question as to whether the bankrupt should have been made a party is not before us for decision, attention is called to the fact that there are rulings to the effect that the bankrupt is not a necessary party, in cases of the character now under consideration. Buffington v. Harvey, 95 U. S. 99; Cox v. Wall, 99 Fed. Rep. 546. See, in this connection, Williamson v. Selden, 54 N. W. (Minn.) 1055. It is claimed that the petition sets forth no cause of action, for the reason that it appears that the transactions were of such character that Hunt could not have set them aside, and therefore his representative, the trustee in bankruptcy, is in ho better position than he is. It is true that the trustee in bankruptcy is the representative of the bankrupt for many purposes, but he is also the representative of the creditors, and he has, in this proceeding, the same rights as the .creditors represented by him would have, and their right to set aside the conveyance is not dependent at all upon whether Hunt could have set it aside. The petition set forth a cause of action, and was not subject to any of the objections set forth in the demurrers. — 421 — 4. Complaint is made, in the motion for a new trial, that the court erred in refusing to allow the defendant to introduce in evidence the discharge in bankruptcy which had been granted to Hunt while the present suit was pending. There was no error in rejecting this evidence. The discharge of a debtor in bankruptcy does not preclude the trustee from recovering property of the bankrupt’s estate which has been fraudulently transferred. In re Pierce, 103 Fed. 64. 5. In several of the grounds of the motion for a new trial error is assigned- upon the rulings 'of the judge admitting evidence as to the value of the property, which was the subject of the transfers, on the date of such transfers; the objection to such evidence being that the value of the property was not set forth in the petition. The petition alleged that the property was transferred as the result of a scheme to hinder and delay the creditors, and the value of the property was a circumstance to be considered by the jury in determining whether the transaction was one of good faith, or whether it was tainted with fraud. 6. Error is assigned upon the following extracts from the charge of the court: “If W. P. Hunt owed his wife $1,800 or other sum (and I do not intimate to you- that he did) at the time he made this deed to his wife, on February 11, 1902, and if in order to settle this debt he conveyed the land described in said deed to his wife, then you will find for the defendant, provided you find that this deed was a bona fide transaction between the .husband and wife, and not a deed made for the purpose of defrauding and defeating the creditors in this case.” “If W. P. Hunt used the money of his wife to purchase the land in question, then I charge you that even though • he took the title to himself, the law would put the beneficial title in his wife; and if you find that he did use the money of his wife in the purchase of these lands, then you will find for the defendant, provided, as I have just stated, you find that this deed was a bona fide transaction, and not made for the purpose of defrauding his creditors.” The objection to these extracts of the charge -is that they in effect authorized, the jury to find in favor of the plaintiff that the eonveyance was void, even though they might be satisfied, from the evidence, that the land was purchased with the money of the wife; and simply for the reason that at the time the husband made the •deed, his controlling motive was not to recognize her equitable in — 422 — terest therein, bnt to defraud his creditors. If the land was purchased with his wife’s money, it was, in equity, her land. She could have compelled the husband to convey the same to her, and he could voluntarily do that which the law would have compelled him to do. Her interest therein could not have been affected by any improper motive that influenced him at the time the conveyance was made. As was said by Mr. Justice Simmons, in Dodd v. Bond, 88 Ga. 360; “Whatever may be the true view of the law where a debtor conveys his own property to a creditor, we are satisfied that where one conveys property not his own, which he wrongfully holds, to the rightful owner, the law does not require the latter to yield his rights and decline taking it because the person who has withheld it wrongfully may, in returning it, intend thereby to keep his own creditors from getting it. One who takes merely what is his own is not punished for considerations which may operate upon the mind of the party who gives it up.” The instructions complained of were erroneous, and were so prejudicial as to require a reversal of the judgment. If the money of the wife was used in the purchase of the land, but the deed was taken in the name of the husband, and the wife knew that he was holding himself out to the world as the owner and obtaining credit thereon, the rights of the creditors who extended the credit upon the faith of the land as the property of the husband would be superior to the rights of the wife as the holder óf a secret equity recognized by the husband after the credit was extended. Kennedy v. Lee, 72 Ga. 39. But the deed from the husband to the wife would not'be fraudulent and void, and the rights of the creditors would not be affected by the deed, if the credit was extended on the faith of the land at a time when the wife allowed the husband to hold out to the world that he was the owner of the property. When the husband conveyed to the wife in recognition of her equitable right in the property, he performed both a legal and a moral duty, and there was no fraud in such a transaction, but the wife would take the title subject to 'the rights of such creditors of her husband as were misled by her conduct in allowing the'husband to deal with the property as his own. Error is assigned upon the same portions of the charge of the court, for the reason that they were not authorized by the pleadings or the evidence. It is not necessary to deal specifically with this — 423 — assignment, as the ease will have to be tried again, and on another trial the judge will adjust his instructions to the exact facts of the ease as they then appear in the pleadings and evidence. The manner in which Hunt dealt with the property sold by Mrs. Hunt to ^ganders was a circumstance to be considered by the jury in dealing with the question as to the manner in which the wife had allowed the .husband to deal with her property as his own. This evidence is of little probative value, but was admissible for the purpose above referred to. Judgment reversed. All the Justices concur.