Borgfeldt v. Curry

The plaintiff brought this suit to quiet her title to two pieces of real property in San Francisco theretofore conveyed to her in consideration of love and affection by her husband Christoph J. Borgfeldt. F. H. Curry, the defendant, claimed an interest in the property by virtue of the levy of an attachment thereon in an action which he, as assignor of the Bancá Svizzera Americana of Locarno, brought upon two joint and several promissory notes theretofore made by said Christoph J. Borgfeldt, and three other persons or corporations, to said bank, it being claimed by said Curry that the transfer of said real property to plaintiff was fraudulent as against the holder and owner of said promissory notes.

In the present action Curry answered, setting up the execution of the notes to the bank, and the assignment thereof to him, and pleaded that the said transfer was made by said Borgfeldt while insolvent or in contemplation of insolvency, and was therefore void as to him and his assignor by virtue of the latter’s ownership of the promissory notes hereinbefore mentioned at the time of said transfer.

Upon the trial the court found the facts in accordance with the allegations of the defendant’s answer with the exception of the allegation that the transfer was fraudulent as to creditors, and accordingly quieted plaintiff’s title to the real property. It denied the defendant’s motion for a new trial, and the appeal is from such order and from the judgment.

It is contended by the appellant that the evidence does not support the judgment inasmuch as it shows that said transfer was in fact made by plaintiff’s husband while insolvent or in contemplation of insolvency.

The law applicable to the question is found in sections 3439 and 3442 of the Civil Code. Those sections read respectively as follows:

Section 3439. “Every transfer of property or charge thereon made, every obligation incurred, and every judicial proceeding taken, with intent to delay or defraud any creditor or other person of his demands, is void against all creditors of the debtor, and their successors in interest, and against any

person upon whom the estate of the debtor devolves in trust for the benefit of others than the debtor.”

Section 3442. “In all cases arising" under section twelve hundred and twenty-seven, or under the provisions of this title, except as otherwise provided in section thirty-four hundred and forty, the question of fraudulent intent is one of fact and not of law; nor can any transfer or charge be adjudged fraudulent solely on the ground that it was not made for a valuable consideration; provided, however, that any transfer or encumbrance of property made or given voluntarily, or without a valuable consideration, by a party while insolvent or in contemplation of insolvency, shall be fraudulent, and void as to existing creditors. ’ ’

("We need not consider sections 1227 and 3440 referred to in the last quoted section, as it is not claimed that they have any bearing upon the question before us.)

These sections, in common with the remainder of the code, should be liberally construed with a view to effecting their purpose. That purpose undoubtedly is to prevent debtors from placing property which legitimately should be available for the satisfaction of demands of creditors beyond their reach, or, in other words, to compel a person engaging in business to take the hazards and risks thereof as well as the chances for profit. If misfortune should overtake him he must face it himself, and not attempt to saddle it on to those who have extended him credit and trusted in his commercial integrity.

In the case at bar the transfer of the property involved was made about three weeks after the great earthquake and fire which occurred in San Francisco on April 18, 1906. At the time of the catastrophe Borgfeldt was engaged in a grocery and retail and wholesale liquor business with a brother as partner, and in addition owned an interest in another business. Both of these businesses were entirely wiped out by the fire, and the customers widely dispersed. The books of the grocery and liquor concern showed accounts payable amounting to ten thousand dollars, and accounts receivable amounting to about nine thousand dollars. It subsequently turned out that the firm collected ninety per cent of these accounts, and also collected a certain amount of insurance; but it is a matter of common knowledge that at the time in question retail merchants in San Francisco whose businesses were located in the burned area did not expect to be able to collect any such

That the object of the transfer was to save the property from the claims of creditors rather than to make an absolute gift of it to the plaintiff, may also be legitimately inferred from the fact that six months after the transfer the plaintiff borrowed upon the security of the property the sum of five thousand dollars, which was placed in the business enterprise above mentioned in which her husband had embarked, stock in the concern however being taken in the plaintiff’s name.

The principal argument in the briefs of both appellant and respondent is addressed to the question as to whether at the time of the' transfer Borgfeldt was actually solvent or insolvent. Appellant constructs from the testimony a table of assets and liabilities, which he contends show Borgfeldt to be insolvent. Bespondent takes the same table, and contends that it proves the contrary. The difference between them arises from the item of one thousand dollars, previously referred to as having been put into a new business on the day

For the reasons stated the finding of the trial court is not supported by the evidence. The judgment is therefore reversed and the court directed to enter a judgment for the defendant for his costs.

Lennon, P. J., and Kerrigan, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on December 24, 1914.