Opinion
The testimony of a witness, since deceased, given before a referee in bankruptcy upon the general examination of the bankrupt, is not admissible in an action subsequently brought against the latter. Under the general rule that the declaration of one engaged in a conspiracy to defraud, made during the continuance of the scheme and in attempted furtherance of it, is admissible against the declarant and his co-conspirators, the testimony of a mother and daughter as to their financial transactions, given before a referee in bankruptcy, was admissible against either or both of them in a subsequent action by the daughter's trustee in bankruptcy to recover the proceeds of certain bonds alleged to have been fraudulently transferred by her to her mother. In view of the latitude allowed when a question of fraud is involved, evidence concerning the transactions between the parties from 1921, when the bonds were acquired, until 1924, when the transfer took place, was admissible. In an action to recover property fraudulently transferred, a trustee in bankruptcy is not bound to allege and prove a deficiency of assets. A fraudulent transfer made within four months of the filing of a petition in bankruptcy is void. The trial court's finding that the transfer in the present case was made within four months prior to the adjudication in bankruptcy was supported by evidence that the trustee was appointed during that period, since the appointment necessarily imported a prior adjudication. An obviously inadvertent statement in a conclusion drawn by the trial court is of no material effect where the subordinate facts found accord with the allegations of the complaint and are sufficient to support the judgment.
Argued April 13th, 1928
Decided June 18th, 1928.
ACTION by a trustee in bankruptcy to recover a sum of money alleged to have been transferred by the bankrupt to the defendant Annie Dobbins for the purpose of concealing her assets and defrauding her creditors, brought to the Superior Court in New Haven County and tried to the court, Ells, J.; judgment for the plaintiff, and appeal by the defendants. No error.
Harry L. Edlin and Arthur Klein, with whom, on the brief, was Harry Freedman, for the appellants (defendants).
Charles W. Atwater and Kenneth Wynne, with whom, on the brief, was Thomas R. Robinson, for the appellee (plaintiff).
The trial court found that on or about September 15th, 1921, Christine Dobbins purchased, with her own money, certain bonds, and was the owner in possession thereof until December, 1924, when she sold them; that on January 6th, 1925, and within four months prior to her adjudication in bankruptcy in New York, she transferred the proceeds of the sale, amounting to $5,250, to her mother, the defendant Annie Dobbins; and that the transfer was without consideration and for the purpose of defrauding her creditors.
On the trial the plaintiff offered, and the court admitted, over objection by the defendants, depositions of stenographers for the referee in bankruptcy in New York, that certain testimony was given, before the referee, by Annie Dobbins and Christine Dobbins, as to their respective financial transactions, and error is assigned in the admission of such declarations of each, as against the other. The court found, justifiably, that these two parties fraudulently conspired together to conceal the bonds and the money received therefor; consequently the declarations of one were admissible against the other. Cooke v. Weed, 90 Conn. 544, 548, 97 A. 765; Knower v. Cadden Clothing Co., 57 Conn. 202, 17 A. 580; 2 Wigmore on Evidence (2d Ed.) § 1079. Appellants based their objection principally upon the ruling in Todd v. Bradley, 99 Conn. 307, 122 A. 68, that the nature of a general examination of a bankrupt before a referee is not such as to render the testimony of a witness, since deceased, given upon such examination, admissible in a subsequent action against the bankrupt. But the present occasion is not one where, as in that case, it is sought to utilize evidence given in a former proceeding by a witness who is now unavailable by reason of death or other cause. Atwood v. Atwood, 86 Conn. 579, 583, 86 A. 29; 3 Wigmore on Evidence, § 1402 et seq.; 22 Corpus Juris, p. 427. The statements here in question were declarations made by parties jointly charged with fraud and found to have been conspirators, during the continuance of the conspiracy and in attempted furtherance of it, and were admissible not only against the declarant but also against the other as a party thereto, irrespective of whether they were made in or outside of judicial proceedings. Cooke v. Weed, supra, p. 550.
Evidence as to the financial condition and transactions of the parties in 1921, when the bonds were purchased, and thereafter to the time of the transfer, was relevant as tending to prove the allegations in issue and its admission was not erroneous by reason of remoteness, or otherwise, especially in view of the latitude allowed where a question of fraud is involved. Kornblau v. McDermant, 90 Conn. 624, 634, 98 A. 587; Wilcox v. Downing, 88 Conn. 368, 373, 91 A. 262; 27 Corpus Juris, p. 50.
At least since the amendment of the Bankruptcy Act, in 1910, Chapter 412, § 8, 36 U.S. Stat. at Large, 840 (U.S. Comp. Stat., 1916, § 9631), providing that the trustee "shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied," a trustee is not required to allege and prove a deficiency of assets, in an action to recover property fraudulently transferred. Conquest v. Goldman, 121 Me. 335, 117 A. 236; Kraver v. Abrahams, 203 F. 782, 29 Amer. B.R. 365; 2 Collier on Bankruptcy (13th Ed.) pp. 1053, 1326. The reason of appeal based upon the absence of such an allegation from the complaint is without merit, and the admission of evidence of the trustee that he had received no assets, objected to as not being alleged, was, at most, harmless.
Most of the corrections sought to be made in the finding depend upon the exclusion from the record of the above-mentioned evidence, unsuccessfully contended to have been inadmissible. The evidence, as it stands, supports the finding in these respects.
Appellants claim that the finding that the transfer was made within four months of adjudication in bankruptcy lacks support from the evidence, since there was no specific proof of the date of the entry of the decree of adjudication. A certified copy of the appointment of the trustee, on April 21st, 1925, and approval of his bond, was introduced in evidence. Appointment of a trustee necessarily imports a prior adjudication. Since the transfer is found to have been made on January 6th, 1925, and less than four months before the appointment of the trustee, the exact prior date of actual adjudication is immaterial. Furthermore, the Bankruptcy Act declares void "all conveyances, transfers, assignments, or incumbrances of his property or any part thereof, made or given by a person adjudged a bankrupt . . . within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors, or any of them," (§ 107(e), 11 U.S.C.A.) and, the finding shows, Christine Dobbins filed her voluntary petition on March 28th, 1925.
Advantage is attempted to be taken, also, of the fact that while the complaint alleges a fraudulent transfer of money, and the finding is of a transfer of the cash proceeds of the sale of the bonds, the conclusion states that Christine Dobbins bought the bonds in question with her own money and fraudulently conveyed them to Annie Dobbins. However, since the subordinate facts found accord with the allegations of the complaint and are sufficient to support the judgment, this obviously inadvertent misstatement in the conclusion is of no material effect. Twiss v. Herbst, 95 Conn. 273, 278, 111 A. 201. The further statement in the conclusion, that the defendant Annie Dobbins took an active part in the fraud and conspiracy, objected to as not founded on any allegation in the complaint, is fairly to be construed as merely negativing good faith on her part in accepting the transfer.