Williams v. Twin City Co.

This is an appeal from a judgment for defendants on three counts of a four count complaint by which the trustee in bankruptcy sought to set aside a note and trust agreement of the debtor as a fraud on creditors under 11 U.S.C.A. § 107 , *680 sub. d, to recover certain payments as preferences, and to recover damages. ■The district court found for the trustee on certain payments as a preference (count three), but refused to set aside other payments on the ground the defendants were secured creditors within the meaning of 11 U.S.C.A. § 1 (28). The court also refused to set aside the transaction attacked, finding “that neither the Promissory Note nor the Trust Agreement * * * were nor are fraudulent as against the creditors 1 of * * Elliff * * * under Section 67(d) ( 11 U.S.C.A. § 107 (d)) of the Bankruptcy Act or under any other applicable statute of the State of California.”

Elliff, the debtor, was engaged in the retail lumber business in San Jose. In May, 1953, Elliff’s stock in trade was warehoused and the defendants, who had sold the stock in trade to Elliff, were given warehouse receipts as security for debts then owed them. This “May Agreement” 3 by which defendants…