Court Opinion

ID: 6850466
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:35:19.741341+00
Date Added: 2024-06-11T16:05:03.256253
License: Public Domain

MORTON, Circuit Judge
(dissenting).
The majority opinion dismisses the petition on the ground that the fraudulent conveyance relied on as the act of bankruptcy did not have lliat effect, because at the date of it the petitioning creditor’s claim liad not yet become provable in bankruptcy. The conveyance in question was a voluntary one, and was made with the express purpose of defeating this claim — an intentional, carefully prepared fraud. It is not disputed that the claim became provable before the petition was filed.
Conveyances in fraud of creditors have been recognized and invalidated by our law for some hundreds of years. They always involve two essential elements: (1) The transfer with the fraudulent intent; (2i) a creditor who was thereby defrauded. What constitutes a person a “creditor” with the right to attack such a conveyance has been settled by many decisions. There is no doubt that this petitioner was such a creditor. Smith v. Vodges, 92 U. S. 183, 23 L. Ed. 481; McLaughlin v. Bank, 7 How. 220, 12 L. Ed. 675; Yardley.v. Torr (C. C.) 67 F. 857; Thomson v. Crane (C. C.) 73 F. 327.
.My brethren hold that the fraudulent conveyance which is made an act of bankruptcy by section 3 is not the classic fraudulent conveyance of the 'Statute of Elizabeth and our common law, but something different and narrower, viz., a conveyance by which creditors having claims provable under the Bankruptcy Act were hindered, delayed or defrauded. I am unable to accept this view. I think that the Bankruptcy Act adopted the fraudulent conveyance as known in our law and made it an act of bankruptcy, and that the word “creditor” in that connection takes its meaning from the old law and not from the defining section of the new statute in which it was used.
This conclusion is, I think, authoritatively approved in Coder v. Arts, 213 U. S. at page 242, 29 S. Ct. 436, 444., 53 L. Ed. 772, 36 Ann. Cas. 1008-, where the court said: “Wo are of opinion that Congress, in enacting section 67e [11 USCA § 107 (e)] and using the terms ‘to hinder, delay, or defraud creditors,’ intended to adopt them in their well-known meaning as being aimed at conveyances intended to defraud. In section 60 [31 USCA § 96] merely preferential transfers are defined, and the terms on which they may be set aside are provided; in section 67e, transfers fraudulent under the well-recognized principles of the common la,w and the statute of Elizabeth are invalidated. The same terms are used in section 3 [a.], subdivision 1 [11 USCA § 21 (a) (1)], in which it is made an act of bankruptcy to transfer property with intent to hinder, delay, or defraud creditors.” Day, J. The opinion then quotes with approval, “The language of subsection 1, of section 3, is the familiar language of the statutes against conveyances fraudulent as against creditors, and we think there can be no doubt that Congress intended the words employed should have the same construction and effect as have for a long period of time been attributed to those words.” Severens* J., Lansing Boiler Wks. v. Ryerson, 128 F.701 (C. C. A. 6).
*834Preferential transfers stand, of course, on an entirely different footing. The invalidity of them is created only by the Bankruptcy Act; and the term “creditor” in that connection has the meaning defined in the act. Richardson v. Shaw, 209 U. S. 365, 381, 28 S. Ct. 512, 52 L. Ed. 835, 14 Ann. Cas. 981. See too Seales v. Holje, 41 Cal. App. 733, 183 P. 308.
In view of Williams v. U. S. F. & G. Co., 236 U. S. 549, 35 S. Ct. 289, 59 L. Ed. 713 (which, like the present case, involved an agreement by the bankrupt to idemnify a surety), I incline to think that the petitioner’s claim was provable in bankruptcy at the date of the fraudulent conveyance; but it is unnecessary to express a definite opinion on this difficult question. See too Thomson v. Crane, supra.