Ben Greenblatt v. Ernest R. Utley, Trustee in Bankruptcy for Moses A. Fleming, a Bankrupt

We decide on this appeal that a transfer by a debtor, within four months of bankruptcy, to a creditor, with knowledge of the debtor’s insolvency, made in discharge of a California inchoate mechanic’s lien may not be avoided by the trustee as a preference within the meaning of sec. 60, sub. b of the Bankruptcy Act, 11 U.S.C.A. § 96 .

The relevant facts are not in dispute and a summary thereof follows: On May 28, 1952 Moses A. Fleming, the bankrupt, conveyed to appellant Ben Greenblatt, certain real property situate in Los Angeles County, California in consideration of $3000 in cash and a note by Greenblatt in the amount of $36,000, payable on or before June 1, 1953. As security for the note Greenblatt executed and placed in escrow two deeds of trust to the property. The deeds contained provisions wherein Fleming, as beneficiary, agreed to the reconveyance by the escrow to Greenblatt of individual lots upon payment of $500 for each lot. The arrangement was made in contemplation of Greenblatt’s intention to develop the land as a subdivision project.

The trust deeds further recited that the bankrupt agreed to give credit against the indebtedness evidenced by the note for…

(dissenting).

The whole Court is in agreement that an inchoate mechanic’s lien upon property of the bankrupt may be paid either by the bankrupt himself or from his *248 property without creating a preference or a fraudulent conveyance to the transferee. There are several theories upon which a transaction of that type can be upheld.

But here the able trial judge, Hon. Leon Yankwich, held the issue was whether a designated assignment constituted a preference. All of the elements necessary to constitute a preference were pleaded by the trustee, found to exist by the trial court, and judgment was based thereon. Efficient findings to support the determination were entered. The District Court negatived the affirmative defenses relating to the lien and an agreement that the credit was given therefor. The effect of these findings was only to indicate that these defenses were not relevant to the case at bar, and the preference was affirmatively found to exist. In opposition to the situation which developed in the case, the majority opinion now adjudges affirmatively that the facts in the record show that a valid inchoate lien was in existence and further that there was an agreement…

240 F.2d 243 Ben GREENBLATT, Appellant, v. Ernest R. UTLEY, trustee in bankruptcy for Moses A. Fleming, a bankrupt, Appellee. No. 14875. United States Court of Appeals Ninth Circuit. October 9, 1956. Wolver & Wolver, Eugene L. Wolver, Los Angeles, Cal., for appellant. Burke Mathes, Los Angeles, Cal., for appellee. Before STEPHENS, ORR and FEE, Circuit Judges. ORR, Circuit Judge. 1 We decide on this appeal that a transfer by a debtor, within four months of bankruptcy, to a creditor, with knowledge of the debtor's insolvency, made in discharge of a California inchoate mechanic's lien may not be avoided by the trustee as a preference within the meaning of sec. 60, sub. b of the Bankruptcy Act, 11 U.S.C.A. § 96 . 2 The relevant facts are not in dispute and a summary thereof follows: On May 28, 1952 Moses A. Fleming, the bankrupt, conveyed to appellant Ben Greenblatt, certain real property situate in Los Angeles County, California in consideration of $3000 in cash and a note by Greenblatt in the amount of $36,000, payable on or before June 1, 1953. As security for the note Greenblatt executed and placed in escrow two deeds of trust to the property. The deeds contained…