Herbert B. Finn, as Trustee in Bankruptcy of the Estate of Richard M. Aldridge, Etc. v. Joseph D. Gilbert

On April 22, 1960, Richard M. and Eloise M. Aldridge, husband and wife, filed a petition in bankruptcy and were adjudicated bankrupts. On February 16, 1960, within four months prior to the filing of the petition in bankruptcy, the bankrupts conveyed by warranty deed certain real property to Joseph D. Gilbert and Lambert Owen Gilbert, co-partners doing business as L. O. Gilbert Painting & Decorating Company, appellees herein. The deed to the property was recorded on the day of the conveyance. Herbert B. Finn was duly appointed trustee in bankruptcy of the Aldridge estate. He timely filed a petition asking the referee in bankruptcy for an order setting aside the conveyance to appellees as a preferential transfer.

In the proceedings before the referee the appellees contended that at the time of the conveyance the property involved was subject to a valid homestead exemption under Arizona law and that exempt property conveyed by a bankrupt can’t be reached by a trustee under the preferential transfer provisions of the Bankruptcy Act. Alternately, the appellees contended that some of the elements essential to a preferential transfer were not present.

After a hearing the referee made…