months prior to the adjudication of bankruptcy,616 and irrespective 50; Minott v. Johnson (Me. Sup. Ct.), 46 Am. B. R. 583, 113 N. W. 464. Transfer not avoidable by creditor. - Where the creditor of a bankrupt, could not avoid a transfer of property to the debtor's wife, because it had elected, by allowing the wife to purchase property sold on execution, to treat the money paid for such property as the funds of the wife, the trustee in bankruptcy of the debtor cannot avoid the conveyance. Durrett v. Harris (Ark. Sup. Ct.), 46 Am. B. R. 499, 228 S. W. 386. In an action by a trustee in bankruptcy to recover property transferred by the bankrupt corporation to its president and principal stockholder, evidence examined and held that the various transfers were executed in good faith and for full consideration and prior to the creation of the existing debts of the corporation, and there is no evidence that at the time credit was extended the creditors did not have notice of the transfer and were induced by fraud to extend credit on the faith of the ownership of the bankrupt. Under such circumstances, subsequent creditors cannot attack the transfers. Phillips v. Carter (D. C., Ga.), 46 Am. B. R. 33, 266 Fed. 444. A trustee on behalf of creditors, may attack bills of sale or trust agreements which are void as to the bankrupt's creditors because they have not been filed, and because possession of the property has not been changed. Matter of Gerstman and Bandman (C. C. A., 2d Cir.), 19 Am. B. R. 145, 157 Fed. 550. In Manning v. Evans (D. C., N. Y.), 19 Am. B. R. 217, 223, 156 Fed. 106, Judge Lanning said: "It will be observed that in this section there is no four months' limitation as in the other sections above referred to (60 and 70). Its effect is to subrogate the trustee to the rights of creditors. Its distinguishing feature is that it au thorizes a trustee in. bankruptcy to invoke the relief furnished by State laws to creditors for annulling transfers of property by their debtors." Purchase by corporation of its own stock while insolvent.-A trustee in bankruptcy of a corporation may bring a suit in equity against stockholders to set aside as fraudulent, and void transactions whereby said stockholders sold their stocks to the corporation and received payment therefor from the funds of the corporation with knowledge of its insolvency. Sherrill v. Mutson (Ala. Sup. Ct.), 32 Am. B.. R. 532, 65 So. 538; Henderson v. Garner (Ala. Sup. Ct.), 39 Am. B. R. 792, 75 So. 387. Making improvements on another's land. Where a bankrupt, in fraud of creditors, uses money in making improvements upon the property of another his trustee is entitled to a lien upon the property to the extent of the increased value added to it by the improvements, and not to the extent of the amount of money used in making the improvements. Garland v. Arrowood (N. Car. Sup. Ct.), 45 Am. B. R. 440, 103 S. E. 2. 616. In re Mullen (D. C., Mass.), 4 Am. B. R. 224, 101 Fed. 413; Lewis v. Bishop, 47 N. Y. App. Div. 554, 62 N. Y. Supp. 618; Beasley v. Coggins, 12 Am. B. R. 355, 48 Fla. 215, 57 So. 213; Bush v. Export Storage Co. (C. C., Tenn.), 14 Am. B. R. 138, 136 Fed. 918; In re Gray, 3 Am. B. R. 647, 47 N. Y. App. Div. 554, 62 N. Y. Supp. 618; Ruhl-Koblegard Co. v. Gilespie, 22 Am. B. R. 643, 61 W. Va. 554, 56 S. E. 898; Hull v. Hudson (Ch. Ct., Del.), 26 Am. B. R. 725, 80 Atl. 674; Hobbs v. Frazier (Fla. Sup. Ct.), 26 Am. B. R. 887, 55 So. 848; Blick v. Nimmo (Md. Ct. of App.), 30 Am. B. R. 770, 88 Atl. 116; Holbrook v. International Trust Co. (Mass. Sup. Ct.), 33 Am. B. R. 808, 107 N. E. 665; of the financial condition of the bankrupt at the time it was made.617 The question whether a particular transfer is fraudulent under § 70-e must be determined by the laws of the State which govern the transfer in question.618 The discharge of a bankrupt is personal and does not release his fraudulent grantees from liability for the fraud committed by them nor in any way preclude the trustee from recovering property of the estate which has been fraudulently transferred.619 A conveyance of real estate. by a debtor to another to be held wholly or partly in trust for him is a fraud on creditors whether so intended or not, and may be void both as to existing and subsequent creditors, the fraud being a continuing one, and the property may be recovered by his trustee in bankruptcy." 620 b. Voluntary transfers; transfers to wife or children.-A voluntary transfer by a person indebted is at least presumptively fraudulent as against creditors; 621 if made to a wife or child, however meri Manders v. Wilson. (D. C., Cal.), 36 Am. B. R. 739, 230 Fed. 536; Cooper Grocery Co. v. Penland (C. C. A., 5th Cir.), 40 Am. B. R. 589, 247 Fed. 480; Baldwin v. Kingston (D. C., N. J.),, 40 Am. B. R. 641, 247 Fed. 163; Stellwagen v. Clum (U. S. Sup Ct.), 41 Am. B. R. 1, 245 U. S. 605, citing Collier on Bankruptcy (11th Ed.), 1178; Riggs v. Price (Mo. Sup. Ct.), 43 Am. B. R. 413, 210 S. W. 420; Neuberger v. Felis (Ala. Sup. Ct.), 43 Am. B. R. 703, 82 So. 172; Scales v. Holje (Cal. Ct. of App.), 44 Am. B. R. 127, 183 Pac. 308. 617. Baldwin v. Kingston (D. C., N. J.), 40 Am. B. R. 641, 247 Fed. 163. 618. In re Mullen (D. C., Mass.), 4 Am. B. R. 224, 101 Fed. 413; Holbrook v. International Trust Co. (Mass. Sup. Ct.), 33 Am B. R. 808. 220 Mass. 150, 107 N. E. 665; Engstrom v. Lowell (C. C. A., 1st Cir.), 49 Am. B. R. 61, 281 Fed. 973. Real property.- The law of the state where real property is located and where a transfer thereof is recorded determines whether said transfer is one "which any creditor of such bankrupt might have avoided." Hall. v. Glenn (D. C., Cal.), 39 Am. B. R. 54, 247 Fed. 997. ་ In Massachusetts, in order to set aside a transfer because in fraud of creditors, it must be shown that the purchaser, if paying a valuable consideration, had actual knowledge of or participated in the fraudulent purpose of the seller. Engstrom v. Lowell (C. C. A., '1st Cir.), 49 Am. B. R. 61, 281 Fed. 973. 619. Stevenson v. Bird (Ala. Sup. Ct.), 25 Am. B. R. 909, 53 So. 92. 620. McKey v. Cochran (Sup. Ct., Ill.), 33 Am. B. R. 78, 104 N. E. 693, holding that although the general rule is that where the purchase money of land is paid by one person and the title taken in the name of another, such person holds the title in trust for him who paid the purchase money, the purchase by a husband in the name of his wife will prima facie be presumed to be an advancement or settlement and not a trust; but such presumption may be either supported or rebutted by proof of antecedent or contemporaneous act or facts so soon after the purchase as to be fairly considered a part of the transaction. 621. Smith v. Reid, 134 N. Y. 568, 31 N. E. 1082; Kerker v. Levy, 206 N. Y. 109, 99 N. E. 181, the latter expressly overruling a contrary opinion in Kain v. Larken, 131 N. Y. 300, torious, it must be shown to be in good faith and without intent to defraud or injure creditors.622 Transactions between husband and wife or children to the prejudice of the husband's creditors will be closely scrutinized by the courts to see that they are fair and honest and not mere contrivances resorted to for the purpose of placing the 30 N. E. 105; Baldwin v. Kingston (D. C., N. J.), 40 Am. B. R. 641, 247 Fed. 163, and New Jersey cases cited. When fraudulent intent presumed.— Under the laws of Minnesota a creditor may avoid a transfer made with intent to hinder, delay, or defraud creditors. Such intent of the debtor is essential to the fraudulent character of the transfer. A volun tary conveyance is presumptively fraudulent as to existing creditors, but not conclusively so. Where the debtor is solvent, and retains sufficient property to amply satisfy the claims of existing creditors, in the absence of an actual intent to hinder, delay, or defraud creditors, such a transfer is valid. Underleak v. Scott (Minn. Sup. Ct.), 28 Am. B. R. 926, 134 S. W. 731. In Kentucky a conveyance by a bankrupt to his wife, without consideration but not actually fraudulent, is voidable only as against debts which the bankrupt owed at the time of the conveyance. Pace's Trustee v. Pace (Ky. Ct. of App.), 33 Am. B. R. 834, 172 S. W. 925. 622. The law recognizes legal obligations to creditors as superior to the moral obligations one is under to a wife or child. That one engaged in hazardous pursuits owes a sacred duty to his wife and children to set apart a reasonable portion of his estate to secure them against the ills of poverty is not denied. But in the discharge of moral obligation to wife and children one is not at liberty to forget that he is under legal as well as moral obligations to his creditors. The law will not allow him to hinder, delay or defraud the latter. It is not that the law is oblivious to the moral obligations due from the husband to his wife. It is only that in discharging them he must not be dishonest. Klinger v. Hyman (C. C. A., 2d Cir.), 34 Am. B. R. 338, 223 Fed. 257; McCrory v. Donald (Miss. Sup. Ct.), 43 Am. B. R. 181, 80 So. 643; Lyon v. Wallace (Mass. Sup. Ct.), 35 Am. B. R. 688, 108 N. E. 1075; Baldwin v. Kingston (D. C., N. J.), 40 Am. B. R. 641, 247 Fed. 163. Cross reference. See also under section 67, ante, subtitle "Transfers to relatives." An antenuptial settlement, though made by fraudulent design by the settler should not be annulled without the clearest proof of the wife's participation in the intended fraud, for upon its annulment there can follow no dissolution of the marriage which was the consideration of the settlement. Robertson v. Schlotzhauer (C. C. A., 7th Cir.), 40 Am. B. R. 237, 243 Fed. 324. Where a husband and wife exchange businesses and the transfer is void under State laws, the husband is not liable to pay to the trustee in bankruptcy of the wife in an action to recover the property transferred, the amount of money which the wife has paid in satisfying debts against the business transferred to her by the husband. McCabe v. Guido (Miss. Sup. Ct.), 41 Am. B. R. 178, 77 So. 801. Intent to defraud.- Evidence sufficient. Osley v. Adams (C. C. A., 5th Cir.), 46 Am. B. R. 40, 268 Fed. 114. husband's property beyond the reach of creditors.623 But a transfer by a bankrupt to his wife made in good faith more than two years before bankruptcy and while the bankrupt was solvent in payment of an antecedent loan is not fraudulent.624 If the bankrupt's intent, in taking conveyance in the name of his wife, daughters, or other relatives, was actually fraudulent, the trustee in bankruptcy need not show that the grantees participated in such intent, if they paid no part of the consideration named.625 A transfer to a wife after separation and in lieu of support is based on a valuable consideration and not merely a voluntary one." In a suit to set aside a transfer from a bankrupt husband to his wife, while the husband is insolvent, the burden is upon the wife to show good faith. 623. Klinger v. Hyman (C. C. A., 2d Cir.), 34 Am. B. R. 338, 223 Fed. 257; Shaver v. Mowry (Pa. Sup. Ct.), 43 Am. B. R. 101, 105 Atl. 505. Land bought on joint credit.-A conveyance by a bankrupt to his wife is not fraudulent as to his creditors where it appears that when the property in question was purchased by the bankrupt the consideration therefor in addition to the mortgage against the property at the time of the purchase was obtained by a loan, part of which was on a second mortgage securing a bond executed by the bankrupt and his wife, and the remainder was borrowed on a written obligation of the bankrupt and his wife, and where it does not appear that any part of the debts owing by the bankrupt at the time of the conveyance were in existence at the time when he became a bankrupt, for none of the bankrupt's money went into the property and the liability of the wife on the bond and the other obligation furnished sufficient consideration for the conveyance. Gray v. Breckheimer (N. Y. Sup. Ct.), 46 Am. B. R. 23, 193 App. Div. 231, 183 N. Y. Supp. 748. Mere relationship not a badge of fraud. In considering an alleged fraudulent conveyance by a debtor to his wife. their relationship is not a badge of fraud, but is a mere circumstance, dependent for its value upon other 626 627 circumstances. McCrory v. Donald (Ala. Sup. Ct.), 35 Am. B. R. 696, 68 So. 306. 624. Johnson v. Wilson (D. C., Ga.), 33 Am. B. R. 518, 217 Fed. 99. The title to an insurance policy assigned by a husband to his wife is not affected as against his trustee in bankruptcy by the fact that he paid premiums thereon, and that she had loaned the policy to him for the purpose of raising money, but it was reassigned to her three years prior to the bankruptcy. Longbottom Emery (Pa. Sup. Ct.), 42 Am. B. R. 248, 104 Atl. 561. V. 625. Reed v. Chase (Mass. Sup. Jud. Ct.), 46 Am. B. R. 638, 130 N. E. 257. 626. Baldwin v. Kingston (D. C., N. J.), 40 Am. B. R. 641, 247 Fed. 163. 627. Stroecker v. Patterson (C. C. A., 9th Cir.), 34 Am. B. R. 287, 220 Fed. 21; Adams v. Osley (D. C., Ga.), 42 Am. B. R. 665, 255 Fed. 117. The rule stated in the text relates only to creditors whose rights accrued at the time the wife acquired title and not to those whose rights accrued many years thereafter. Longbottom v. Emery (Pa. Sup. Ct.), 42 Am. B. R. 248, 104 Atl. 561. Burden of proof.- Where a bankrupt purchased property and took title thereto in the name of himself and wife as tenants by the entireties, the wife when sued by the trustee in c. Bulk sales.628- Sales of goods in bulk otherwise than in the ordinary course of trade, are presumptively fraudulent and void. under the statutes of many States,629 and the title to such property passes to the trustee in bankruptcy free from such void transfer.630 If the property has been disposed of the trustee is entitled to recover its value from the purchaser.631 As a trustee's title relates back to the beginning of the bankruptcy proceedings,652 the fact that a purchaser of property from the bankrupt in violation of a bulk sales law had sold the property prior to the trustee's appointment does not bar the trustee from recovering the value thereof in an action in trover. 633 In such an action the trustee has the burden of proving bankruptcy of the husband to recover the land, has the burden of showing that her husband's debts were not out of proportion to his estate at the time of the conveyance. Shaver v. Mowry (Pa. Sup. Ct.), 43 Am. B. R. 101, 105 Atl. 505. 628. Cross reference.-See also under section 67, ante, subtitle "Purchasers in good faith and for present fair consideration." 629. In re Calvi (D. C., N. Y.), 26 Am. B. R. 206, 185 Fed. 642; Bentley v. Young (D. C., N. Y.), 31 Am. B. R. 506, 210 Fed. 202; Brown v. Kossove (C. C. A., 8th Cir.), 43 Am. B. R. 408, 255 Fed. 806. See also Am. B. R. Dig. § 634. Sales in bulk. In the case of Matter of Farrell Co. (Ref., N. Y.), 9 Am. B. R. 341, it was held, where the provisions of the New York statute, L. 1902, chap. 528, entitled "An act to regulate the sale of merchandise in bulk," are willfully and deliberately ignored by an alleged bankrupt, upon such a sale made by him within the four months' period, the transfer is void under subsection e of section 67. Where bankrupt, a few days prior to the filing of the petition, transferred by bill of sale his entire stock of merchandise in a retail store to his sister, who failed to make the inquiries or give notice to his creditors as required by the New Jersey "Sales in Bulk" Act, the sale was voidable under said Act, and it appearing that the transfer was contrived and consummated in fraud of bankrupts creditors, it came within the inhibition of subsection e of section 67 and was void as to such creditors. In re Lipman (D. C., N. J.), 29 Am. B. R. 139, 201 Fed. 169. Sale of part of stock. A sale by bankrupts of the greater portion of their stock in trade, on three different days within two weeks before bankruptcy, is not a "sale in bulk" within the meaning of the Massachusetts statute. Carpenter v. Karnow (D. C., Mass.), 28 Am. B. R. 21, 193 Fed. 762. 630. Parker v. Sherman (D. C., Vt.), 29 Am. B. R. 862, 201 Fed. 155, affd. 32 Am. B. R. 393, 212 Fed. 917; Matter of Clayton (D. C., N. J.), 43 Am. B. R. 687, 259 Fed. 911; Matter of Thompson (D. C., Wash.), 40 Am. B. R. 82, 242 Fed. 602; Brown v. Kossove (C. C. A., 8th Cir.), 43 Am. B. R. 408, 255 Fed. 806; Philoon v. Babbitt (Me. Sup. Jud. Ct.), 45 Am. B. R. 489, 109 Atl. 817. 631, Parker v. Sherman (D. C., Vt.), 29 Am. B. R. 862, 201 Fed. 155, affd. 32 Am. B. R. 393, 212 Fed. 917; Philoon v. Babbitt (Me Sup. Jud. Ct.), 45 Am. B. R. 489, 109 Atl. 817. 632. See under this section, ante, subtitle "Time of vesting." 633. Philoon v. Babbitt (Me. Sup. Jud. Ct.), 45 Am. B. R. 489, 109 Atl. 817. |