Bryson v. Manhart

WOOD, J.

By this action the public administrator seeks to recover for the estate of George Channing Lawrence the proceeds of certain insurance policies collected and held by the defendants and to set aside the alleged fraudulent transfers of certain property made by decedent in his lifetime. Judgment was entered in favor of defendants, the trial court having found that there was no intention on the part of the decedent and defendants to hinder, delay or defraud creditors. This finding is attacked by plaintiff and a review of the evidence is necessary for a proper understanding of the problem before us.

The transactions involved covered the period from September 15, 1919, to July 4, 1928. At various intervals from the first-mentioned date to November 17, 1926, Lucy W. Whipple, aunt of decedent and a resident of Boston, on behalf of herself and as trustee for her sisters, one of whom was the mother of decedent, entrusted to decedent the sum of $271,489.02 to be invested and reinvested in their behalf. Decedent was a lawyer living in Pasadena during most of the time in which he handled the trust funds. He and defendants, husband and wife, moved to Pasadena or the vicinity of Pasadena in the year 1922. He did not maintain an office or engage in the practice of law, and so far as can be learned from the record, he did not engage in any gainful occupation. He did, however, hold in his name several pieces of real estate of comparatively small value and over a period of years bought and sold securities on the stock exchange. The total purchases in this line of activity amounted to approximately $391,000, and his sales amounted to approximately $383,000. Including commodity purchases his total losses were approximately $35,000. No accounting was ever made between Lucy W. Whipple and decedent. She pre7 sented a claim to the public administrator based upon the trust fund she had delivered to him. This claim was approved by the public administrator and the court in the

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sum of $196,489.02. Other debts were left by decedent amounting to approximately $25,000.

Before Mrs. Whipple entrusted funds to decedent, he carried but one insurance policy the value of which was only $4,000. ’ While decedent was handling his aunt’s funds he increased the amount of his insurance to approximately $200,000. Except in the case of one policy for a short period, which is of no consequence in this discussion, the wife of decedent, Violet Lawrence, was named beneficiary in the thirteen policies which he carried. Violet Lawrence died February 18, 1928. Thereupon the estate of George Channing Lawrence became beneficiary. On March 16, 1928, or shortly thereafter, at the request of decedent, defendant Katharine L. Manhart, his sister, was made beneficiary in each of the policies. George Channing Lawrence committed suicide on July 4, 1928. During the period in which decedent received funds from his aunt he had no difficulty in paying insurance premiums, but thereafter his financial troubles began. In December, 1926, he borrowed on two policies and borrowed $5,000 from each of two friends. During the following year he borrowed on several policies and allowed others to lapse. During his wife’s illness in February, 1928, he was unable to pay for nurses and expenses immediately following her death. Between March 1, 1928, and March 16, 1928, he renewed his activities on the stock market and lost $2,512.50. Between March 16, 1928, and April 5, 1928, decedent, in addition to making Katharine L. Manhart beneficiary in all of his insurance policies, delivered to her a bill of sale of all his personal property, deeded to her all of his real property except three cemetery lots, and delivered to her his will in -which she was named sole legatee and made executrix without bond. At this time some of the policies had a small cash surrender value. About April 10, 1928, decedent borrowed an automobile from a dealer friend saying he could not pay for it, and on May 8th sent the friend a note to pay for the car, enclosing a letter saying: “If I should not be on hand at its maturity . . . Katharine L. Manhart, 941 South Norton Street, Los Angeles will take care of it when due.” Later in May, 1928, he borrowed $1500 from the same friend. Between June 1 and June 20, 1928, he obtained $1850 by cashing checks drawn by his mother-in-law at his request, although she did not