Case Name: C. L. Barks, Trustee, Appellant, v. Lena Kleyne, Appellee
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1926-02-16
Citations: 201 Iowa 308
Docket Number: 
Parties: C. L. Barks, Trustee, Appellant, v. Lena Kleyne, Appellee.
Judges: De GrRAEE, C. J., and EvANS and Albeíít, JJ., concur.
Reporter: Iowa Reports
Volume: 201
Pages: 308–310

Head Matter:
C. L. Barks, Trustee, Appellant, v. Lena Kleyne, Appellee.
February 16, 1926.
G. T. Ilatley and James B. Linsday, for appellant.
Elay & Klay, for appellee.

Opinion:
Morling, J.
The bankrupt transferred his bank account to the name of his wife, the defendant, and afterward deposited his money in that account. By understanding with her, he signed her name to cheeks (though she signed some herself). He attended to the business. He was a farmer. Defendant says that, about a year before the transfer, she knew he was going to have trouble with Meynei's over a land deal; -that her husband said he was going to put the money in her name, to keep Sleyners from getting it. Cheeks on this account were drawn, to the amount of $1,055.98, and paid, leaving on deposit a balance of $403.39. There is no controversy over this balance, but the plaintiff claims that he is entitled to judgment for the full amount of the deposit, regardless of the cheeks paid. The ground of his claim is that the transfer of the bank account was for the purpose of defrauding creditors, and absolutely void.
$192.50 was paid for a husking machine, and $400 for attorneys' fees for preparing and filing bankruptcy petition. Other sums were paid to merchants for clothes, family necessities, and merchandise. Sums were paid out for hail and fire insurance premiums, for threshing, and for help in the family. Other sums were paid apparently to merchants. The purpose for which some of the checks were drawn is not shown. No claim is made that any of the payments were made to persons to whom the bankrupt was under no obligation, or that any payments were for purposes improper or fraudulent in themselves.
The transfer of the bank account under these circumstances could not be sustained against an attack by existing creditors. The funds in the wife's name would, at the suit of such a creditor, be declared to be held in trust for the husband, to the extent necessary for the payment of his debts. If the transfer had not been made, and the account had remained, in the name of the bankrupt, he could, and for all that is shown to the contrary would, have continued his business and made the same deposits and the same payments that were made. By becoming indebted he did not forfeit his right to continue in business, to purchase property for use in conducting it, to incur obligations for insurance, labor, or other expenses, and to pay for them and defray the expenses of his family. Defendant and other members of the family did not forfeit their right to support. It was not a fraud on his creditors for the debtor to continue in business. It is.not shown that any creditor was prejudiced or defrauded by the manner in which the bank account was kept. Creditors had- no lien upon the bank account, whether it was in the name of one or the other. Until they took some action which would effectuate a charge upon the funds, the defendant and her husband might use them; though, of eourse, she could not, without liability, put them to a use that would of itself be a fraud upon creditors. It is not shown that any of the expenditures were made in the perpetration of a purpose to defraud any creditor, or that any creditor was defrauded or prejudiced by any of the payments. The transfer of the account to the name of the wife for the purpose of defrauding creditors' would not render fraudulent payments made from it in good faith hi payment of just obligations. As stated in Clements v. Moore, 6 Wall. (U. S.) 299, 312:
"The cardinal principle in all such cases is that the property of the debtor shall not be diverted from the payment of his debts to the injury of his creditors, by means of the fraud."
We are of .the opinion that the plaintiff has not shown himself entitled to recover, except for the balance on hand at the time of the filing of the petition in bankruptcy. See Davidson v. Dwyer, 62 Iowa 332; Johnston v. Jickling, 141 Iowa 444; Oriental Bank v. Haskins, 3 Metc. (Mass.) 332 (37 Am. Dec. 140); Hutchins v, Sprague, 4 N. H. 469 (17 Am. Dec. 439); Leque v. Stoppel, 64 Minn. 74 (66 N. W. 208, 212).
The judgment is affirmed.- — Affirmed.
De GrRAEE, C. J., and EvANS and Albeíít, JJ., concur.