Serr v. Smith

Theodore Serr, trustee in bankruptcy, of the estate of H.F. Smith, a bankrupt, brings this action to set aside a transfer made by the defendant, H.F. Smith, to his son Manley Smith, of the southwest quarter (SW 1/4) of section 9, township 129, range 82, and the assignment of a leasehold interest by the said H.F. Smith, to his said son, Manley Smith, in the southeast quarter (SE 1/4) of section 9, township 129, range 83, Sioux county, North Dakota, for the year 1927, also one McCormick-Deering tractor and tractor plows, and one Studebaker automobile transferred to his son-in-law, Arthur Porter, all transfers made without consideration and for the purpose of defrauding H.F. Smith's creditors. The other defendants all claim liens on the property of the bankrupt which were adjudicated in the trial court and held to be liens against the bankrupt's property, all prior to any claim of the defendant, Manley Smith. The trial court made its findings of fact and conclusions of law, holding that all of said transfers were fraudulent and made with the intention of hindering and delaying the creditors of the bankrupt. Judgment setting said transfers aside was duly entered from which the defendants, Manley Smith and Arthur Porter, appeal.

The first two assignments of error relate to the admission of testimony, and a motion to strike out the testimony in proof of fraudulent conveyances, upon the grounds that the allegations of the complaint were not sufficient to sustain such an action are without merit, as the title to the property of the bankrupt passed in law to the trustee on his appointment and clothed him with authority to bring the action. The other assignments relate to the sufficiency of the evidence to sustain the finding that the sales were fraudulent, without consideration, and for the purpose of hindering and delaying creditors in the collection of their claims. This involves a review of the evidence, which we have carefully examined and which leads us to the conclusion that the defendants, H.F. Smith and Manley Smith, were acting together in an effort to save as much as they could out of the bankrupt's property. We are first impressed with the testimony of Attorney Cameron, attorney for H.F. Smith, who testified: I signed a stipulation in which I apparently appeared for Manley Smith. Manley Smith was with his father, H.F. Smith, at my office prior to the hearing (that is the hearing in bankruptcy). There were several hearings and he was with him and we entered into negotiations with the referee relative to holding the crops for a few days; we entered into this stipulation and after I had signed for my client, H.F. Smith, there was a line put down for Manley Smith, and as I understood it he was the owner of this southwest quarter (SW 1/4) of section 9, and an assignment of the lease on the Indian land and I had counselled with him; I signed as his attorney. I think he was present at the time the stipulation was executed. I believed in good faith that I was entitled to represent Manley Smith at the time that I signed the stipulation. It is my recollection that on the hearing before the referee in bankruptcy, there were several of them; there was a great deal of conversation back and forth between the attorneys and with the referee and I don't know but my recollection is that it was Mr. Zuger's (the referee's) suggestion that they enter into a stipulation; I believe his stenographer drew the stipulation. I think that Manley Smith left the room; where he went I don't know; but my recollection is that H.F. Smith stayed there all the time. I think I did talk to Manley. He was down in the car somewhere on the street. Manley Smith had been with his father in my office on several occasions before this hearing. I represented Mr. H.F. Smith and Manley Smith was with him on most of those occasions. We had this hearing, and the question came up about some way to handle the matter so as to salvage the crops without too much expense. This stipulation was dictated and I signed it on behalf of H.F. Smith, and the question came up about Manley Smith who owned the southwest quarter (SW 1/4) and the Indian land, as we call it, the southeast quarter (SE 1/4) of section 2, as to whether or not this land should not be covered by the stipulation. He was down on the street in the car and I think his brother-in-law was with him, and I started down to the street to see him and Mr. Smith stuck his head out of the window and yelled at him and said: "We want you up here." Then I am supposed to have said, and I believe I did say: "It wont be necessary. I can sign his name. He don't need to come." I signed that stipulation in good faith and I thought I was authorized to sign the stipulation on behalf of Manley Smith.

Now from this statement, which is uncontradicted, every time that Mr. Smith went to see his attorney about the bankruptcy matters, Manley was with him indicating that their interests were not adverse, but that Manley was doing what he could to help his father and was under his influence. When he was in the car down in the street, his father stuck his head out of the window and told him that he was wanted up stairs. What he was wanted for was, of course, to sign the stipulation, but Cameron who had gone down to get him then said it will not be necessary for I can sign his name for him. If Cameron had not said that, unquestionably Manley Smith would have gone up and signed the stipulation himself. The trial court found upon this testimony that the stipulation was signed with the authority of Manley Smith, and we are of the opinion that he was justified in so finding. This testimony also throws considerable light on the influence that H.F. Smith had on his son, Manley Smith, always bringing him with him; keeping him present while he discussed his bankruptcy proceedings with his lawyer in such a way and to such an extent that the lawyer believed that he was representing both parties and at the trial he was very careful in his testimony not to divulge information that he got in confidence from either party.

According to the testimony of H.F. Smith, the creditors were pressing him very hard in 1926. He had been sued and he owed something over $7,000 that was not secured. He says that when Manley became twenty-one years of age and told him that he would prefer to go out and do for himself, he prevailed upon him to remain at home upon the condition that he was to pay him $200 a year and a little expense money. He worked for four years until he claims there was $800 due him. None of this agreed amount of $200 per year was paid to Manley Smith nor did he ask for any part of it until the fall of 1926 when the creditors were pressing H.F. Smith and there had been a request for another mortgage upon the land, and Manley then said that there was no use in him trying to do anything if everything was to be mortgaged up; then H.F. Smith conveyed to Manley Smith, the southwest quarter (SW 1/4) of section 9, for which he claims Manley paid him by canceling the account for $800 and assuming the mortgage of $3,200 upon the whole half section, the west half (W 1/2) of section 9, which includes the quarter conveyed to Manley, and sometime later the tractor was conveyed to Manley, who assumed the indebtedness against it, and giving a mortgage on the crop to secure its payments. In the spring of 1927, H.F. Smith assigned to Manley Smith the lease of the land known as the Indian land.

At the time of the conveyance of the southwest quarter (SW 1/4) of section 9 to Manley, he had no property but a horse and saddle; at the time the Indian tract was conveyed he had the horse and saddle, a deed to the quarter section of land upon which he owned $3,200, and he owed some $1,300 on the tractor. When the trustee in bankruptcy, under the stipulation, took possession of all crops raised upon the land that year he filed a laborer's lien against the crop raised on the northwest quarter (NW 1/4) of section 9, his father's homestead, apparently in an effort to prevent the creditors from getting that. He lived at home, the same as always, and farmed all the land together with his father.

Arthur Porter testified in substance: That I came to my father-in-law's house in February 1927; that my father-in-law proposed to sell me his automobile for $200 and that I purchased it at that time for that sum. I earned this money working in a radiator shop at Yankton, for one Ferris, who is now in Minnesota; that I got $35 per week; I have a wife and one child; I had a bank account at Yankton in the Dakota National Bank; that I am not positive but I think that I wrote a check when I drew the money out; that I had close to $200, maybe less, when I drew it out in February, or the last part of January; I could not say the exact amount; I did not keep all the money that I had in the bank. I probably had around $25 or $50; I kept it in a tin can in the trunk. I paid the car fare for myself and my wife up to my father-in-law's, at Selfridge, around $10 apiece, and I had somewhere between $200 and $300 when I got to Selfridge. I would not say the exact amount. I don't know exactly; no idea of the exact amount; between two hundred and three hundred dollars. After I drew the $200 out of the bank, I kept it in a tin can. In February I came up to Selfridge from Yankton to live with my father-in-law, H.F. Smith. I took the $200 in money out of the tin can and paid him.

This witness was still living with his father-in-law at the time of the trial in March, 1928, more than a year after he went to live with him. He doesn't know how much money he had when he got to Selfridge, or how much he took out of the bank. He can only tell approximately. But assuming that he did have between two hundred and three hundred dollars when he got to his father-in-law's, at Selfridge; he also had a wife and a child and was out of employment, and is it reasonable that under the circumstances and conditions he would take practically all of the money that he had in the world and invest it in an old secondhand automobile, and that his father-in-law would propose such a deal?

We are of the opinion that the evidence sustains the findings of the trial court and the judgment is affirmed.

BIRDZELL, CHRISTIANSON, and NUESSLE, JJ., concur.