Opinion
L. A. No. 5306.
December 1, 1919.
APPEAL from a judgment of the Superior Court of Los Angeles County. Frederick W. Houser, Judge. Reversed.
The facts are stated in the opinion of the court.
Simpson Simpson, Elmer I. Moody and Ticknor Carter for Appellant.
A.K. Hancock, and S.M. Johnstone for Respondents.
This is an appeal by plaintiff from a judgment entered after a demurrer to the third amended complaint had been sustained.
The pleading held defective by the superior court contained allegations that Loren Ury, Jr., a minor, appearing by his guardian ad litem L.G. Ury, was a judgment creditor of John L. Van Every, the amount of the judgment being one thousand dollars; that after Loren Ury, Jr., sued defendant by his guardian ad litem, Van Every was adjudged a bankrupt December 31, 1914; that William H. Moore, Jr., was appointed trustee of the estate in bankruptcy; and that subsequently said Moore, as trustee, was by order of court substituted for Ury as plaintiff.
It was further alleged that on February 10, 1913, J.L. Van Every made and executed a certain instrument purporting to convey to his sister, Jessie L. Van Every, certain described property; that other property, description of which was unknown to plaintiff, had been similarly conveyed; that Van Every had also given into the hands of his sister money and other personal property prior to the adjudication of the fact that he was a bankrupt; and that all of such transfers were without consideration and "with the understanding and agreement between the said John L. Van Every and the said Jessie L. Van Every, that she was to hold the same as and for the property of the said John L. Van Every." It was further averred that the estate of John L. Van Every, bankrupt, owned all the property; that Jessie L. Van Every held it as the property of her brother and for his use and benefit; that she received it in trust for said John L. Van Every; that she had no right, title or interest in the said property received by her prior to the bankruptcy of her brother.
It is conceded by respondents that if the pleading had contained only such averments it might have properly passed demurrer, but the complaint also contains allegations which, with those epitomized above, made it, as respondents assert, demurrable as both ambiguous and uncertain. In substance, these averments (based upon information and belief) are that John L. Van Every willfully and fraudulently transferred and assigned the property, prior to bankruptcy, "under a secret trust agreement with the said Jessie L. Van Every, and with the intent for a purpose of avoiding and escaping the payment of just debts of the said defendant, John L. Van Every, and for other purposes unknown to this plaintiff, and that the said John L. Van Every and the said Jessie L. Van Every refused to deliver to the trustee of said bankrupt the said property so held by said trustee, and both of said defendants are fraudulently withholding said property from the trustee of said bankrupt, thereby preventing the payment of just debts of the creditors of the said John L. Van Every in the estate." According to the complaint claim to the amount of $1,025 have been proved and filed in the bankruptcy proceeding; the trustee has no money or property in his possession; and it is necessary that he obtain possession of the property held by Jessie Van Every that it may be sold and the proceeds used in paying claims and expenses of administration in the estate of the bankrupt.
The prayer is for a decree declaring Jessie L. Van Every trustee as to the property involved in the suit; requiring her to reconvey, assign, and transfer all of said property to the estate of the bankrupt; and restraining her from asserting any adverse claim thereto as against the estate.
Respondents take the position here, as evidently the superior court did, that it is impossible to determine, from the pleading, whether the object of the action is to impress a trust on the property in the hands of defendant Jessie L. Van Every, or to set aside the transfer on the ground of fraud.
We are of the opinion that this criticism is without merit. If the property was transferred to Jessie L. Van Every without consideration as the property of her brother under a secret understanding that she was to hold it as his, the effect was to work a deception upon his creditors unless she should be required to return it to his estate. This would be true whether actually a deception was intended or not. The pleading of actual fraud, therefore, does not alter the essential characteristics of the action. Whether the trust be considered voluntary or involuntary, the officer having control of the bankrupt's estate would be entitled to conveyances or assignments.
"Where one for whom property is held in trust becomes a bankrupt, his entire interest in the trust estate passes to the trustee in bankruptcy, and such ownership draws with it the right of possession, in so far as such interest is capable of possession." (7 Corpus Juris, 118.)
"Any property, in which there is a secret trust for the bankrupt's benefit, no matter how much covered up, passes to the trustee." (Brandenburg on Bankruptcy, 4th ed., sec. 853.)
In view of the principles above announced we feel constrained to hold that the complaint is sufficient as against the demurrer.
Judgment reversed, with instructions to the superior court to overrule the demurrer to the complaint.
Lennon, J., and Wilbur, J., concurred.