Arnold v. Hadgis

California Court of Appeal Jan 30, 1951 No. Civ. 18161Published

Before: Wilson

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Holding. The court held that a debtor may lawfully prefer one creditor over another, and that a transfer of property for adequate consideration is not fraudulent simply because it is made while other litigation is pending or between family members.

Issues

Whether a conveyance of property by a debtor to one creditor to satisfy a debt constitutes a fraudulent transfer as to other creditors.
Whether the trial court's findings regarding the absence of fraudulent intent are supported by the evidence.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Defendant concedes it is well settled that a debtor may prefer any one of his creditors over others provided he does not do so to defraud his creditors.”

“Whether a transfer is in fraud of creditors is a question of fact and not of law”

“The evidence and the inferences to be drawn therefrom must be regarded in the light most favorable to the support of the judgment”

WILSON, J.

Alleging ownership of a parcel of real property, plaintiffs brought this action against defendants Hadgis and James Arnold to remove the cloud of an alleged invalid attachment • levied on the property in an action in which Hadgis was plaintiff and James Arnold was defendant. Judgment was entered quieting plaintiffs’ title, declaring the claims of defendant to be without right, and decreeing the purported levy of attachment to be null and void. Defendant Hadgis has appealed from the judgment.

On July 15,1947, plaintiff Oliver Arnold loaned his brother James $15,000 and took the latter’s note for that amount. Title to the property in question was taken in the names of Broz and wife on August 22, 1947, subject to a trust deed in favor of one Barnes for $18,000. Broz and wife never claimed to be owners of the property or to have any interest therein other than as trustees for James Arnold.

Hadgis and James Arnold had been in a business venture together wherein James became indebted to Hadgis on July 2, 1947, in the sum of $24,500. At some time prior to May 9, 1949, Hadgis brought an action on his claim and caused an attachment to be levied on the property.

Hadgis and his brother purchased the Barnes trust deed. By reason of its delinquency they ordered a trustee’s sale, which was set for June 22, 1949. The amount necessary to satisfy the trust deed was $20,118.59. On the date of sale at James Arnold’s request Hadgis consented to postpone the sale for one day in order to enable Arnold to obtain funds.

On June 21, the day prior to the original date set for the trustee’s sale, James offered to turn the property over to Oliver in settlement of his $15,000 debt. Oliver obtained a loan from another brother of $14,000 to be applied on the payment of the trust deed. Previously Oliver had offered plaintiff Steel a 25 per cent interest in the property if the latter would advance $5,000, which offer Steel accepted.

On the morning of June 23, the date to which the sale had been postponed, Oliver, James and Broz met at the trustee bank. While they were in conference with the agent of the bank Hadgis entered and was told that Oliver and Steel were paying off the trust deed. He informed them he had an attachment on the property and threatened litigation if

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Arnold v. Hadgis

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WILSON, J.

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