
    LOCKHART, Appellant, v. EDGE et al., (EDGE, Respondent.)
    (167 N. W. 164.)
    (File No. 4267.
    Opinion filed April 2, 1918.)
    1. Bankruptcy — Fraudulent Conveyances — Validating Void Sale by Subsequent Delivery — Burden of Proof — Statute.
    While, under Civ. Code, Sec. 2369, a sale, void when made because of improper delivery and unaccompanied -by change of possession, may become valid as- against creditors who have not procured some lien upon the -property, the burden of proof is. upon vendee to show that ¡possession such as would validate the sale was thereafter taken and w-hile vendor was capable of lawfully turning over the property, and before he became bankrupt.
    2. Fraudulent Conveyances — Husband and Wife — Bankrupt, Incapability of, to Validate Void Sale — Statute—Assignee in Ba-nloruptcy, Devolution of Trust Upon.
    Under Civ. Code, Sec. 236-9, concerning fraudulent conveyances, providing that certain conveyances are void as against any person upon whom the estate “devolves in trust,” etc., an assignee in bankruptcy is such “person.” Held, further, that after a husband became bankrupt, he became incapable of validating a void sale previously made by him to bis wife.
    3, Fraudulent Conveyances — Husband’s Sale' to Wife, Notice of, Character of, Necessary — Bill of Sale, Recording, Effect— Recording Brand — Recording Wife’s Inventory — Statutes.
    Undeir Civ. Code, Sec. 23 69, making transfer of personalty without immediate delivery of possession, void as against creditors, the driving of horses and cows into a corral opening into regular pasture, and counting each head as they passed hack into the pasture, and the counting of calves and bogs and leaving them in yards where counted, was not sufficient change of possession; and a transfer by husband to wife of live stock without adequate visible change of possession, and which remains upon the homestead of the parties, is not validated by filing of bill of sale with register of deeds; there being no statute authorizing suoh filing, or rendering it or its recording, notice to any one; nor is said section to be held inoperative owing to fact that under our law, (Civ. Code, S&u-98) husband and wife may deal with onei another and make transfers one to the other, nor because they can not conveniently make visible and notorious change of possession of such transferred property. Vendee might have taken and recorded as assignment of husband’s brand, or have rebranded the stock, thus validating the sale under Pol. Code, Secs. 2932-2947, or have complied with Civ. Code, Sec. 101, providing for inventory by wife, of her personalty, and recording of same, which filing is made .prima facie evidence of title in wife.
    Smith, J., and McCoy, J., dissenting.
    Appeal from1 Circuit Count, Hughes. County. Horn. John E. Hughes, Jud'ge.
    A'ctfon .by J. L. Lockhart, trustee ini bankruptcy of Thlomas Edge, bankrupt, against Mary L. Edge amid John S. Edge, to set aside a 'sale of personalty. Erom a judgment for defendants, and from an order denying .a now trial, plaintiff appeals.
    Reversed.
    
      Howard G. Puller, for Appellant.
    
      Horner, Martens & Goldsmith, floir Respondents.
    (l) To plolint one o!f the opinion, Respondent 'cited: West-era Mining Supply Co', v. Quinn et al (Mont.) 20 Anno.. Cas. 173; 'and notes; McIntosh, v. Smiley, 17 S. W. 979.
    (3) To point three of tlhle opinion, Respondent cited, re change of pois's'ession; Lomgley v. Daley, 1 S. D. 262; Howard v. Dwight, 8 S. D. 402; 135 A. S. R. 618; Eirst Nat’l Bank v. Comfort, 4 Diak. 171. Re bill otfi sale .as notice: George v. Pierce, (Gab) 55 Pac. 775; 56 Pac. 53; Harrington v. Neville, 83 Mo. Ajpjp. 588; Qluackemblush v. Grtaf, 158 N. W. 408. Re, husband andi wife; Wbeeler v. 'Seld'em, (63 Verm. 429) 215 S. S. R 771; Mtunphy v. Mulgrew, ('Cal.) 36 Plate. 856.
    Respondent cited,, re, bill of sale: Civ. Ooide, See. 989a Re hiusband and wilffe; Civ. Ooide, 'Sees. 98, 2306; Williams v. Harris, 4 S. D. '22; Clark v. Else, 21 S. D. x 13; Barr v. S'wligart, (Utah) 44 P/ac. 711.
   WHITINtG, P. J.

This action, wtas brought by plainltiiff as trustee in bankruptcy of one Tbomlas Edige, bankrupt, to- set.aside a sale of personal property made by 'such' bankrupt to his- wife, the defendant ¡herein. Edge filed a petition in bankruptcy on April 13, 19x6, was' ¡adjudged bankrupt on April 14, 1916, and plaintiff was appointed and qualified as trustee on May 8, 1916. This action was begun on June 13, 1917. Tttxie complaint attacked the said sale both upon the ground of actual fraud and also¡ under section 2369 of the Civil Code. At the trial, and before the receipt of evidence, plaintiff withdrew the charge of actual fraud, leaving as the only issue to be tried ¡as to whether or not there w.as such a delivery and change oPpossession of the property sold as would render such sale valid under section 2369, Civil Code. Sulch section reads:

“Every ,transfer o!f persona! ¡property' other than a thing in action, or a ship or cargo at sea, or in a foreign port, and every lien thereon, other than a mortgage, when allowed by few, and a •o'cintraot ¡c|f bottomry oir respondentia, -is conclusively 'presumed, if mlade by a person having at the time the possession, or control •of the property, and not aocompamied 'by an immediate delivery, and -fallowed by an actual and continued change Of'possession of things transferred, to be fraudulent ¡and therefore void, against ■those who 'are his creditors white he remains in possession,- ¡and ■the successors in interest of such creditors, and against any parson ¡on whom his estate devolves in trust for the benefit of others than himself, and against purchasers -and incumbrancers in good faith subsequent ¡to the transfer.”

Regardless -of the ¡above f-adt, the trial uotort received a great masis of testimony" having no bearing upon any question except that of actual fraud. Eurthermore, the trial count made extensive findings upon such abandoned issue. Tlhie material evidence isi very limited and absolutely undisputed, and leaves fcir our consideration and idleterroiniatiion but the one question oif whether or not it was sufficient to sustain the finding of t!be court tihiat ithe sale “was accompanied by an immediate delivery of said personal property by said Tibornas Edge to Mary L. Edge, and was thereafter followed by an actual and; continued change of possession at all times from the 26th day of May, 1915.” The sale was on Mlay 26, 1915. The property sold was Hive stock kept 'upon the home farm of Hílese /people. At Itihie time of such sale and purchase the husband executed and delivered to' bis wife a bill olf sale, -whiidh bill of sale wlas placed on file in the office Of the register df deeds of Hughes county, the county wherein the property was situated!. To consummate Such /sale the parties thereto, so far ias attempting to' malee delivery and change of possession, proiceadis as follows: The horses .and cows were driven into ;a corral, which ciorral opened into Hue pasture in which the stock had! .theretofore been kept; as the ¡stock passed) through the gate of the corral back into' the pasture, 'each head was counted, this constituting the fuming over lolf plossession from the husband ltd ihiis wife. Tire calves, and) hogs, which1 were in yards, were counted and left in the yards. The stock afterwards remained in tibie pastures and! yards upon the Same farm as theretofore, and was looked after and fed anldl watered by ithe husband and the son olf defendant in 'substantially (the same manner as it h!ad 'been ■at alii tiroes prior tia the 'allegad transfer. The husband was engaged in farming opehatilons requiring the use lolf teams, and he was given permission. by defendlalnt to, and lie did, use the horses in the farming operations, and at her request clointinued to feed and care for all tibe 'Stock in thle usual and or/diniary way. This farm wlas ithe family homestead, and from the proceeds of such farm and the stock thereon the family was supported. No attempt was made by the defendant to .file an inventory under section 101, Civil Code, nor was any olf tihia saild! stock rebranded1 or ini ainy other manner iso marked! 'as to indicate ¡a change of o wnership. The trial court concluded! that the safe was valid, and entered judgment in favlor of defendant, and from such judgment 'and an order denying a new trial, this appeal was. taken.

Appellant contends' that there was- not an immediate delivery followed by a change of possession,, that under section 2369, stupra, the sale wias absolutely vot'd, anld! 'that the mere fact that this -wias 'a transfer 'between husband and) wife cannot except this transaction from) the provisions oif such statute — the contends that this section, being a statute of frauds, has peculiar application to transactions between husband and wife 'which 'are so frequently fraudulent in fact. Respondent contends! that there was as complete and. notorious a delivery land; cihalmge of possession as the oiroumstancesi oif. the parties permitted, that the finding above quoted was fully supported by the evidence, and that therefore this transfer was valid at al(v times from the time it was entered into. Respondent takes the further position that, it being conceded1 in appellant’® complaint and found by the court (finding 5) that respondent was in the possession' of this property at the time this action was commenced, such concession! is conclusive against appellant, respondent contending that under .said section 2369 ia transfer, though vioiid when made because 'not accompanied by a sufficient 'delivery and change of possession at the time that the transaction was entered into, yet becomes valid whenever possession is actually delivered. In other wioirdis, resip ondfent seems to be of the opinion that said section should be aonstrtted as though! the latter part thereof read as follows':

“To be, ais against those who are hiis creditors, fraudulent amid thierefore void during the period in which be 'continues to remain in) possession.”

Tire second! oif respondent’s eoinlbenrioms is clearly without merit. Conceding that the iawi is -that, a's against creditors 'who have not attached or otherwise procured' some lien upon the property, a siale which when made was void -because not accompanied with proper delivery and change of possession may become valid as againisit such creditors by a sufficient delivery and change of possession (-and this for the reasons announced in Western Mining Supply Co. v. Quinn, 40 Mont. 156, 105 Pac. 732, cited by respondent), yet such -rule avails respondent nothing. In the case before us., iff the finding we have quoted: is not supported by the evidence -and! the sale was void when made, the burden would rest upon respondent to show that at some time thereafter she took such possession as would validbte the sale, and, further, that she ¡took such possession While her husband; was still capable of lawfully turning over such property. If the evidence fails to Support the questioned finding, we are left without finding or evidence of such change of ,possession as! would Validate this sale prior to the husband's becoming an adjudged! bankrupt. Appellant is! a “person on whom’ his (the husband’s) estate 'devolves in trust for the benefit of others than himself.” Section 2369. After the husband became a bankrupt he became as incapable off validating this sale as though he were dead, anld it follows that, if the sale was void so that this, property “devolved” on appellant when the husband was declared 'a bankrupt, the sale remained void. We are mot conicerned wilth the eviildemce of what occurred after itih'e day of this alleged sale. To avail respondent anything there must 'need .be a finding to the effect that at some subsequent date, tat prior to the initiation of the bankruptcy proceedings, there was such a change off possession as to validate the sale. What this court said to Musekamp. v. Riley, 34 S. D. 23, 147 N. W. 68, is peculiarly applicable to this point. I11 that case there was no finding that there was am attachment lien giving creditors a right to rely on section 2369, and1 particular attention was called to the fact that there whs no proiolf of “a -levy prior to the time Potter surrendered possession off the property, 'and prior to tire time when appellant Riley became advised off respondent's rights in and1 to .said property.” Under such facts the mule contended for by respondent was applied. We find no fault with respondent’s law. She has failed to’ prove the necessary 'facts! to which to. apply suidh law. It therefore becomes unnecessary to consider the many aluthorifies cited by respondent in support of her second contention'.

Was this attempted sale accompanied) by an -immediate delivery of said personal property, followed by an actual and continued change off possession at all times from the 26th day of May, i<j)'5? To support- the -court’s finding the evidence must show delivery amid change off possession immediately following the sale. The judgment must stand or fall on what occurred immediately upon tíre sale in cloomectiom with .delivery and change of .possession. Was there -a sufficient delivery and -change of possession? No one would id'aim that there was such a delivery and sufch. a change of possession! as would be sufficient under any other conditions than those naturally existing between husband and wife. See Scott v. Hantz, 35 S. D. 634, 153 N. W. 894; Wright v. Lee, 10 S. D. 263; Howard v. Dwight, 8 S. D. 398, 66 N. W. 935; Longley v. Daly, 1 S. D. 257, 46 N. W. 247; Quackenbush v. Graf, 37 S. D. 385, 158 N. W. 409. The real question then lis, Shall a different rule be .applied under section 2369 where the parties are husband an/d wife than in the ordinary case?

'Respondent urges that the filing of the bill of sale should be cionisiidereid in her favor. In ¡this she is in error. There is no statute authorizing the filing -of 'bills of salle and rendering such filing, or even' a recording thereof, notice to any one. If our statutes authorized suoh a filing and made it 'constructive notice, such notice might he held tioi excuse a visible and open change of possession where otherwise it woluld be required. When the circumstances surrounding a s'ale ¡are such as to render incom venient, ilf not Impossible, such visible change of possession as wtoiuld ordinarily be necessary under section 2369, is not the vendee bound to take advantage of such means as the statute provides for giving notice off >dkim off ownership? Should section 2369 be held to be inoperative owing to the 'fact that, under oUir law, husband! and wife may deal with one another, or, even through a husband1 and his wife are given the right to' make transfers the one to the other, sholuild not such right be so exercised as to comply with the spirit of section 2369 — should not the parties furnish such evidleoce ¡off delivery and change off possession as the law makes possible? Section 2369 is a statute of frauds, enacted to prevent the ¡opportunity olf fraud. There is. no class of cases that callsi more urgently for such a statute than ■that oif safes between 'those oiolsel'y related. To< hold that, merely because a husband and wife cannot conveniently make visible and notorious the ichainge off possession' off property transferred from one toi ¡another, they are put in a class by themselves', and need not even comply with reasonable statutory provisions providing methods off giving notice of change off ownership, is to malee section 2369 inoperative in a class of cases wherein it is most needed. To avoid' laying down poor Haw, let us remember that a perfectly hcina fide salte from a husband to a wife is no moire sacred than any other bona fide sale, and that 'all come under the (provisions off section 2369. Respondent . cites and1 quotes Grady v. Baker, 3 Dak. 296, 19 N. W. 417. We are unable to see where she gets any comfort from these wicmd's:

“The sale shall be open ‘anidl public; that itlbe world may be 'apprised oif the change of ownership.”

The decision in Clark v. Elsie, 21 S. D. 113, 110 N. W. 88, Cited by respondent, contains nothing having the slightest bearing upon, the question, now before us. Respondent has cited [Morgan v. Ball, 81 Cal. 93, 22 Pac. 331, 5 L. R. A. 579, 15 Am. St. Rep. 34. Sympathy for the vendee in. that case resulted, in poor law. The court in Murphy v. Mulgrew, 102 Cal. 547, 36 Pac. 857, 41 Am. St. Rep. 200, has rejected its: holding in the former case, anidl has since adhered strictly to the rule that no distinction' ooulidi be mlade between salles between husband and wife and other safes'. And sudhi court also', held! ini this last case thtat the filling of a schedule of property owned by the wife, if fifed subsequent to the time of sale, wloiuMi not validate Such sale. It said:

“From, the evidence of the plaintiff, it will be perceived .that no actual' change of possession of this' property took place at ithe time of the delivery of the bil'll of sale; but, óm the contrary, in all its surroundings, it remained entirely in sit'atu quo. Mrs. Murphy attempts to escape the legal effect of the foregoing evidence 'by the claim that she bad1 appointed her husband her agent to take the poisis'e'ssioini and control! of the horses for her, and; as such agent, his possession whs her possession'; but there i's nothing to be urged ini .flavor of such a 'contention. Bbith the letter and the ithe recognition, of such ,a principle. The object of the statute is to require notice to the world olf the transfer of personal property, spirit of the law contained in section 3440 would be defeated, by in order that men may be able to deal' with each other upon equal terms, anidl from a common level. The efficacy of the statute would be entirely destroyed if .the vendor were allowed to remain in possession of the property as' the agent of vendee, in the absence oif any notice to the wiorlidi of1 such a .change -oif conditions. Sluich a practice wioluild be in 'direct conflict with the terms of the statute 'itself. We do not find) a syllable of evidence in the record that 'would indicate to' tire outside world that a change of ownership had taken place as to itlbies'e horse's; and we can hardly imagine a base where the provisions elf tih.e statute could have been more entirety disregarded. Morgan v. Ball, 81 Cal. 93, 22 Pac. 331, is munch stronger for the vendee; in. its facts; amid! the language relied upon by respondent, taken from the case of Williams v. Lerch, 56 Cal. 334, has been well and justly criticized in the case of Etchepare v. Aguirre, 91 Cal. 293, 27 Pac. 668 [929, 25 Am. St. Rep. 180]. Tihe fact that a vendor 'and vénidiee -are husband and wife, or parent and -child, is no reason, why the provisions olf the statute -should -receive a different or more liberal construction. •Those conditions; give the statute no additional elasticity. The •rute of aan-s-tru-Gtiio-n is the same in all- -cases,' 'and the relationship ■existing between the parties- is a matter wholly immaterial.”

See, also, O’Kane v. Whelan, 124 Cal. 200, 56 Pac. 880, 71 Am. St. Rep. 42, and George v. Pierce, 123 Cal. 176, 55 Pac. 775; 56 Pac. 53. It is quíte probable that the count had in mind -the decisions in Morgan v. Ball, sliipra, and in Roberts v. Burr, 54 Pac. 849, when, in George v. Pierce, supra, it said:

“In some exceptional oas-es presenting (bar'd law the court, in its construction 'and interpretation of the fa-cts; may have leaned-a little too far toward' tine 'administration of s-ubsantial justice. But beyond this .it has never gone, and the law of this- question stands to-day -exactly .as it did' 38 years -ago.”

Any adthdrities such as Porter v. Bucher, 98 Cal. 454, 33 Pac. 335, where the property wias- of a nature not subject to ordinary delivery, are of no value in determining this -case, as the nature Of tihe property would affect tire kind of delivery necessary if 'the vendee were some one else than the wife of the vendor, just as it would affect it if the vendee was1 the wife o-f1 the vendor.

In.-every -case wherein a sale has been -upheld; excepting the case oif Morgan v. Ball, supra, there will be found 'some fact or facts clearly 'distinguishing slurih case from- this one. Thus in Webster v. Sherman, 33 Mont. 448, 84 Pac. 878, -cited by -respondent, one of -the laonitro-ll'ing facts- was- -the taking by the vendee o-f ami assignment o-f her husband’s live stock brand- -and the recording of th'.e same In- the vendee’s name Not -only might the -respondent have idlon-e as was done in that oase, or pu-t another brand on -all' the stock except th-e hogs, 'and thlus validated the safe of -tlie horses add! -cattle (sections 2932-2947, P. C.), but she might have complied with th-e provisions o-f -se-dtioto 101, 'Civil Code. Sudh statute provide®:

* * a fxiJil and1 compílete inventory of the separate personal property df the wiilfe may be miad'e out and signed1 by her, acknowledged or proved in the manner provided by law far the acknowledgment or .proof of .a grant of -real (property by an unmarried woman, and recorded in 'the Icffiae of the register of deeds of the county or 'subdivision in' which 'the parties reside. The filing of tlie inventory in the register's office is notice and prima facie evidence of the title of the wife.”

Let it not 'be understood! that we hold that there could not’ have been'a valid sale of property, from Edge to his wife under the facts df this case if section xoi, 'Civil Code, did' not exist ■and we had no law unidor whlfidh stock could be branded' and the 'brand registered. We do not pass on that question. We do hoik! that, where the circumstances surrounding a sale prevent there being a change of possession.' open aadi visible to the world, the vendee must give such constructive notice, provided for by statute, as will tend 'bo apprise the world' of the change in- ownership of the property ipurchlasedl.

The judgment and order appealed from are reversad.

SMITH and McCOY, JJ.

(dissenting). W'e do not concur in the conclusión reached by our 'majority brethren. The - rule .announced in the majority opinion finds no' support in any statute. It concedes that there may be a valid sale of property from the husband to the wife without any compliance with the provisions of section' ioi, Civil Code, or with’ section's 2932-2937, Piol'itilca'l Code, and yet says:

“Where the circumstances surrounding a sale prevent there being a change of possession open and visible to the world Hie vendee must give such constructive notice provided for by statute as will tend to apprise the world of the di'ange in ownership of the property purchased.”

Just what (is meant by “oomisfrMetive notice 'provided by statute” 'is not apparent. The statute does- require immediate delivery and: continued change of possession, which' are in themselves 'substantive facts. But nowhere does the statute require or ¡provide for “constructive notice which, will tend1 to' apprise tlie world of .the di'ange in possession of the property purchased.”

We are aware that courts are not i.11 harmony as to what constitutes delivery and possession of property as between husbands 'and wiivesi residing ani’di beeping property upon a common (homestead. Tbe property rights oif the wife are equal in the eyes of the law to those of the husbandf® creditors, and her property rights should: not be sacrificed through an overstrict construction of the statute. The facts stated in the majority opinion clearly ishipw a delivery perfectly valid in law. It follows that the conclusion reached by the majority opinion rests solely upon the lack of a continued’ change of possession, and upon that ground alone the wife is to be deprived of property concededly received by her in payment in good faith of an actual! indebtedness 'due to her from her husband. In Murphy v. Mulgrew, 102 Cal. 547, 36 Pac. 857, 41 Am. St. Rep. 200, quoted from in the majority opinion, the .record' conclusively shows that there had been absolutely no delivery of the property. The only evidence as to delivery was the testimony of the wife who said:

“Uipou receiving -the bill of sale I put it áway and said in substance to him ‘Yioiu take charge of this property and manage it for me’ ”

—'whereupon the court says:

“From the evidence Of the plaintiff it will be perceived' 'that no actual' .change of possession of this property took place at the time of the delivery of the bill of sale, but, on the contrary, in all its surroundings: it remained 'entirely in sratu quo.”

The court further says:

“We can hardly imagine a case where the provisions of the statute could have been more entirely disregarded.”

It was in referring to the matter of delivery that that court used the language quoted in the majority opinion., to wit:

“The fact that a vendor and vendee are husband and' wife or parent 'and child is no reason why the provisions of the statute should receive different or more liberal1 construction.”

The facts in that case differentiate it so strongly from this case that it cannot be 'deemed 'controlling. Again the California court, in George v. Pierce, 123 Cal. 172, 55 Pac. 775, 56 Pac. 53, said:

“The law tcif this question stands today exactly as it did 38 years .ago”

- — referring to .the case of Stevens v. Irwin, 15 Cal. 503, 76 Am. Dec. 500, in which the court held:

“The delivery must foe maidte of the property * * * Bo&seission must he canitiniudus, not taken -to be surrendered back again,' not formal1 hut substantial:.”

The crucial fact'in this case is not that there w‘as no delivery — that must he conceded — but that there was not continued change of possession. There is not a scintilla of evidence that itbie possession following a valid delivery -was taken “to he surrenldlered( back again; n'ot formal, but substantial.” The correct rule fa stated in 12 R. C. L. § 83, that:

“Chahge'of possession! is jiulst as necessary in transactions between husband and wife * * * as'between strangers-, * * * but, owing to- the situation' of the parties, a state of -facts may be sufficient’ 'change between such persons which would not be sufficient undeh ordinary circumstances/'

The “continued change' of possession” in the present case was as compifete as -was possible, so long as the husband! and wife continued! tol live- together on the common homestead. In Porter v. Bucher, 98 Cal. 454, 33 Pac. 335, the California Supreme Court said:

“It never was the diesigm of this statute to give such- extension of meaning to this phrase, ‘confihu'ed change of 'possession/ as to require, upon a penalty of the forfeiture of the goods, that this vendor should never have- any control over or use of them. This iconstnuction, if madle without exception-, would lead! to very unjust and absurd results.”

The results anlticlipated by this remark appe'ar to have been attained in the present case.

The judgment of the trial court should he affirmed  