
    Jesse R. Shreck, Trustee, v. David Hanlon et ux.
    Filed November 19, 1902.
    No. 12,255.
    Commissioner’s opinion,
    Department No. 3.
    1. Bankrupt: Tbustee: Statute oe Limitations. Where a person has been declared a bankrupt under the act of congress approved July 1, 1898, the trustee appointed in- that proceeding’ may maintain an action to set aside a conveyance made by the bankrupt at any time within two years after the estate has been closed, provided the action was not barred by the laws of this state at the time the petition in bankruptcy was filed.
    2. Action to Set Aside a Conveyance. It is not always a defense, in an action to set aside a conveyance as fraudulent, that the grantor had iirojierty remaining after the conveyance was made sufficient to satisfy his creditors. If the conveyance was in fact fraudulent and made for the purpose of defrauding creditors, they may have it set aside on a showing to that effect, and the further showing that at the time of commencing1 the action he had no property subject to execution out of which their claim could be made.
    Error from the district court for Clay county. Bill in equity by trustee in bankruptcy, in the nature of a creditor’s bill. Tried below before Stubbs, J. The plaintiff was non-suited below, and brings error.
    
      Reversed.
    
    
      Thomas H. Matters, J. L. Epperson & Sons and L. E. Eager, for plaintiff in error.
    
      John G. Stevens, contm.
    
   Duffie, C.

On the 20th day of May, 1895, David Hanlon conveyed to John W. Howard three quarter sections of land in Clay county, Nebraska, and on the same day Howard executed a conveyance of the same lands to Eliza E. Hanlon, the wife of David Hanlon. These two deeds were recorded May 21, 1895. On May 19, 1899, David Hanlon upon his own petition was declared a bankrupt by the district court of the United States, and on June 12, 1899, Jesse R. Shreck, the plaintiff in error, was appointed trustee of his estate. Claims were filed and allowed in the bankruptcy proceedings aggregating something like $750, all of which, as we understand, were incurred previous to the conveyances above mentioned, and the only asset reported by the bankrupt was some Colorado land of the estimated value of $60. Upon an examination of the bankrupt, some question arose as to the bona-fide character of the conveyances above mentioned, and the referee in bankruptcy made an order directing the trustee to institute legal proceedings in the state court for the purpose of subjecting the real estate to the payment of the claims of the creditors, requiring, however, the creditors to give a sufficient bond to pay the costs of such proceedings in case of a failure of the action. Proceeding under this authority, the trustee commenced this action to set aside the conveyance made by David Hanlon to John W. Howard, and from Howard to Mrs. Hanlqn, alleging in his petition the bankruptcy proceedings above referred to, and further reciting that the conveyances were without consideration and made with the fraudulent purpose and intent of placing the legal title to said real estate in the name of Mrs. Hanlon, and beyond the reach of the creditors of David Hanlon. A trial was had in the district court,, and a decree entered dismissing the plaintiff’s petition. A motion for a new.trial being-overruled, the case has been brought to this court on error.

After the plaintiff had closed his testimony the court sustained a motion to dismiss the plaintiff’s bill, and entered a decree for the defendants. It will thus be seen that the court acted wholly upon the evidence offered by the plaintiff in the action, and the principal question in the case is whether the evidence is sufficient to warrant the action of the trial court. On the oral argument, and in the brief of counsel for the defendants in error, it is insisted that the court was governed in its action by the fact that this case was not commenced for more than four years after the filing of the deeds which it is sought by this action to set aside and cancel, and by the further fact that the evidence of the plaintiff showed that David Hanlon was possessed of something like $2,000 in personal property from which the creditors might have made their claims after the conveyance had been made. It will be conceded that the filing of-the deeds was notice to. the creditors of the fraudulent character of the conveyances, if they were fraudulent in fact, and that the statute of limitations commenced to run from that date. The deeds were filed on the 21st of May, 1895, while this action was not commenced until more than four years from that date. It will be noticed, however, that David Hanlon was declared a bankrupt on the 19th of May, 1899, less than four years from the recording of the deeds attacked in this case; and from that date the right of the creditors to maintain an action in their own name was gone, their only remedy being to pursue the method pointed out by the bankrupt law. From the time that Hanlon was declared a bankrupt, the statute of limitations was tolled as against the creditors pursuing their claims in that court. As the trustee alone could maintain an action to reach property fraudulently conveyed by the bankrupt, we are clearly of the opinion that the statute of limitations was not a defense available to the defendants, as by section 11 of. the bankrupt act the trustee has two years in which to commence the action. The evidence, while not conclusive,’ certainly supports the theory that the conveyances sought to be set aside were fraudulent, and if this was so, it is immaterial how much property Hanlon retained in his own possession. Where a conveyance is made to a wife or child, by one not in failing circumstances, the presumption is that it is made by way of advancement, and that no fraud was intended; and in such cases, if the grantor retains in his own name property sufficient to pay his debts, if the gift or .advancement is not disproportioned to his means, the conveyance will be upheld. But where the conveyance is made for the purpose of defrauding creditors, as before stated, the fact that he still retains property sufficient to satisfy his creditors is no defense to an attack made upon the fraudulent deed. A conveyance made to defraud creditors can not in any manner affect their rights, and the property may be pursued and taken until it reaches the hands of some bona-fide purchaser.

It is further urged by the defendants in error that the deeds attacked in this case recite a consideration of $3,000, and that as the plaintiff produced these deeds, he can not dispute the evidence which he has himself introduced, and is bound by the consideration named. This, it is urged, shows the good faith of the transaction, and that Mrs. Hanlon was a good-faith purchaser for value. We can not accede to this proposition. As between the parties to an instrument, the consideration, while not conclusive, can not be wholly disputed. In other words, as between the grantor and grantee in a deed reciting a consideration, it can not be shown that no consideration in fact passed. But as against a third person, no recital or statements of consideration, however specific, makes a case for the grantee. He can not establish the tona fieles of his purchase as against a third party by evidence of his own making and by recitals which he himself has made in the deed. 2 Bigelow, Fraud, 533.

While we do not wish to be understood as holding that the evidence is conclusive of the fraudulent character of the conveyances which it is sought to set aside, we think that the court proceeded upon a wrong theory, and therefore recommend that the judgment be reversed and the case remanded for another trial.

Ames and Albert, 00., concur.

By the Court: For the reasons stated in the foregoing opinion, the judgment is reversed and the case remanded for another trial.

Reversed and remanded. 
      
       U. S. Compiled Statutes, 1901, p. 3426.
     