Court Opinion

ID: 7366054
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:51:45.066737+00
Date Added: 2024-06-11T16:20:46.040177
License: Public Domain

MAYFIELD, J.—
(dissenting.) — The acnte question presented on this appeal is this: Can a trustee in bankruptcy maintain a bill against a grantee of the bankrupt, to set aside an absolute conveyance of land, made more than four months before the bankruptcy, upon the ground that the conveyance was not recorded before the accrual of the rights of the trustee; there being no judgment creditors of the bankrupt?
Our statute, section 3383 of the Code, provides that all conveyances of real property are void as to purchasers, mortgagees, judgment creditors, etc., unless recorded before the accrual of the rights of such purchasers, judgment creditors, etc. Of course, a trustee in bankruptcy is not a purchaser for value, nor is he a judgment creditor, and therefore does not come within the express terms of the statute. The difficulty arises in the construction of the Bankrupt Act, the question being whether or not it is the effect of that act, to place the trustee in the position of a judgment creditor, and to afford him all the rights and remedies which state statutes may confer upon judgment creditors.
Section 47 of the Bankrupt Act, subdivision 2, in effect provides that all property in the custody, or coming into the custody, of the bankruptcy court shall be deemed vested in the trustee, with all the rights, remedies, and powers of a judgment creditor holding a lien by legal or equitable proceeding; and that as to property not in the custody of said court, the trustee shall be deemed vested with the rights and remedies and powers of a judgment creditor holding an execution duly returned not satisfied.
Section 70 of the act provides that the trustee shall be vested with the title of the bankrupt as of the date he was adjudged a bankrupt, to all the property transferred by him in fraud of his creditors, and also to all *332the property which might have been levied upon and sold under judicial process against the bankrupt. The property in question could unquestionably have been reached bv such judicial process.
Under the former bankruptcy acts, there was no doubt that the trustee could not maintain a bill such as this, because the statutes, state and federal, neither conferred any rights or liens, nor the authority to maintain the bill. This was repeatedly decided by the Supreme Court of the United States. But-Mr. Collier, and a number of federal and state courts, seem to think that the effect of the provisions of the present Bankruptcy Act, above set out, was to place the trustee in the same position that a creditor would be in if he had a judgment, and execution thereon. In fact, the statute so expressly declares, as to property not in the custody of the court. It reads as follows: “As to property not in the custody of said court, the trustee shall be deemed vested with the rights and remedies and powers of a judgment creditor holding an execution duly returned not satisfied.” Mr. Collier, in discussing the first above-mentioned section, says that the trustee, as to the property not in the custody of the court, stands in the position of a judgment creditor holding an execution returned unsatisfied, thus entitling him to proceed against the assets in the same manner as a judgment creditor.— Collier on Bankruptcy, 541 542.
If this be the law and the effect of the Bankrupt Act, then unquestionably the trustee' in bankruptcy may maintain a bill to set aside a conveyance, and to subject the property conveyed thereby to the use of the estate, if the conveyance thereof was void as against such creditors because not recorded as required by section 3383 of the state Code.
*333I have been unable to find any adjudicated case directly in point, as to absolute conveyances rendered void as against certain persons because not recorded. Quite a number of cases may be found collated and referred to in the Decennial Digest (volume 3), under the subject Bankruptcy, section 184 (2). While there seems to be a lack of uniformity in these decisions as to the right of the trustee to reach and subject property which has been mortgaged, or of which the vendor retained the title, or upon which he holds a lien by virtue of other security, when the mortgage,' conditional sale contract, or other instrument securing the lien had not been recorded as required by statute, it is possible that this apparent conflict arises from the different wording of the respective statutes as applicable to the former decisions in the different states; but the weight of authority as to adjudicated cases seems to support the statement of the law by Mr. Collier, above referred to, and it seems to be the better rule for the reason assigned by him.
The creditors are certainly hindered, if not prevented, from reducing their claims and debts to judgment in consequence of bankrupt proceedings. This was probably the reason which brought forth the provision of the act giving the trustee the same rights as judgment creditors have.
I am therefore of the opinion that the bill filed in this case may be maintained, and that the demurrer on this ground was properly overruled.
While the bankrupt may be a proper party in such bankrupt proceedings, he is not a necessary party, for the reason that the trustee evidently succeeds to all his rights, and as between him and his grantee the conveyance was, of course, valid. In my opinion the trial court, in consequence, properly held the plea of respondent setting up non-joinder of the bankrupt as a party, insufficient.