                               No. 12241

       I N THE SUPREME COURT O THE STATE O MONTANA
                              F           F

                                 1972



FRANCIS J . RAUCCI, a s T r u s t e e
i n Bankruptcy o f Hazel Marguerite
Dahlquist ,

                       P l a i n t i f f and Respondent,



V I R G I N I A R. DAVIS and H Z X MARGUERITE
                              AE
DAHLQUIST,

                       Defendants and A p p e l l a n t s .



Appeal from:    D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r j c t
                Honorable Paul G. Hatf i e l d , Judge p r e s i d f n g         .
Counsel of Record :

    F o r Appellants :

          John C.     H a l l argued, Great F a l l s , Montana.

    For Respondent:

          Church, H a r r i s , Johnson & Williams, Great F a l l s ,
           Montana.
          Donald A. JJaBsr and Richard G a l l a g h e r argued,
           Great F a l l s , Montana.



                                             Submitted:        November 27, 1972

                                               Decided : Q&!4    2 3 1973
Mr. Justice James T. Harrison delivered the Opinion of the Court.
         This is an appeal by defendants, Mrs. Virginia R. Davis
and Mrs. Hazel M. Dahlquist, from a judgment in the district
court of Cascade County, for the Trustee in Bankruptcy, Francis
J. Raucci.    On the basis of the evidence produced at trial with-
out a jury, the trial judge found that an assignment of a note
and mortgage from Mrs. Dahlquist to Mrs. Davis was a fraudulent
conveyance.   This appeal is taken from that judgment.
         The record of the cause shows the facts of the trans-
action are as follows:   Mrs. Davis and Mrs. Dahlquist are sisters.
 heir parents, Mr. and Mrs. Gustav Haag, were the owners of a
farm in Liberty County, Montana.   In 1961 the farm was sold to
Marvin Haag, brother of the defendants.   He executed a promissory
note in favor of his parents in the amount of $26,800 and a
mortgage on the farm was taken as security for the note.   It is
this note and mortgage that are the subject matter of this law suit.
Upon the death of Mr. Haag in 1963, Mrs. Haag became the sole
owner of the note and mortgage by right of survivorship. Approx-
imately one year later in 1964 Mrs. Haag executed an assignment
of the note and mortgage, giving an undivided one-half interest
to Mrs. Dahlquist and an undivided one-half interest to Mrs.
Davis.   The purpose of this assignment is an issue in this law-
suit. Mrs. Dahlquist and Mrs. Davis contend Mrs. Haag wanted
to make a complete assignment to Mrs. Davis but was prevented
from doing so by Mrs. Dahlquist's husband.   At the time the
assignment was made Mrs. Haag was in poor health and living with
Mrs. Dahlquist.   For her to continue to live with Mrs. Dahlquist,
Mr. Dahlquist insisted that half of the mortgage be assigned to
Mrs. Dahlquist.   This was done but it is further contended that
an oral condition was attached to the assignment.   The substance
of the condition was that when Mrs. Haag went to live with
Mrs. Davis, Mrs. Dahlquist would assign her one-half interest
to Mrs. Davis.   As security for this assignment Mrs. Dahlquist
was to take out a life insurance policy on herself in favor
of Mrs. Davis, which was done.    On August 22, 1966, Mrs. Dahl-
quist executed an assignment of her interest in the note and
mortgage to Mrs. Davis.   The assignment was recorded on October
5, 1966, and it is this assignment that is claimed to be fraudu-
lent as to Mrs. Dahlquist's creditor by the Trustee in Bankruptcy.
        The issue in this case at trial and on appeal was that
the assignment was a fraudulent conveyance in terms of the bank-
ruptcy laws and the laws of Montana.     This case is brought by
the Trustee in Bankruptcy on behalf of D. A. Davidson Co. a cred-
                                     I


itor of Mrs. Dahlquist.   Under section 67 of the Federal Bankruptcy
Act the Trustee has the option of bringing the suit either in the
United States District Court or, as was done in this case, the
state court:
        "For the purpose of any recovery or avoidance
        under this section, where plenary proceedings
        are necessary, any State court which would
        have had jurisdiction if bankruptcy had not
        intervened and any court of bankruptcy shall
        have concurrent jurisdiction." Bankruptcy
        Act, section 67 (e); 11 U.S.C. S 107 (e) .
The effect of this concurrent jurisdiction is to allow the
Montana courts to apply the bankruptcy legislation in making
their determination.   In fact it may be required to do so, the
Court of Appeals held in a decision concerning an application
of section 67 to a transfer, as quoted in Britt v. Damson, 334
F.2d 896, 902 (9th Cir. 1964) :
        "The question of whether a particular occurrence
        is a 'transfer' within the meaning of the Act
        is a matter of federal characterization. (Cita-
        tion omitted) Therefore in deciding whether the
        occurrence in question was a 'transfer' we are
        not concerned with what label Washington law
           has placed upon occurrences of this kind. We
           do however, look to Washington law to deter-
           mine what was actually done as a preliminary
           to applying the tests of 'transfer' set out
           in section l(30) of the Act. It
In effect, therefore, the district court will determine under
Montana law what was done and apply the Bankruptcy Azt to deter-
mine what the effect of the actions was.
           In reviewing this cause we are limited to a determination
that there was sufficient credible evidence to support the
court's finding and that it correctly applied those facts to
the law.    This is in conformity with the rule established in
Morrison v. City of Butte, 150 Mont. 106, 111-112, 431 P.2d
79, where this Court said:
         "Thus, there is a conflict in the testimony from
         which different conclusions could be drawn. The
         credibility of witnesses and the weight to be
         given their testimony are for the trial court,
          (citation omitted). This court will not overturn
         the holding or findings of a trial court unless
         there is a decided preponderance of the evidence
         against them, and, when the evidence furnishes
         reasonable grounds for different conclusions,
         findings will not be disturbed.(citation omitted)"
What we are saying is that this Court will not substitute its
judgment for that of the trial court when there are reasonable
grounds for its ruling.
         The portion of the Bankruptcy Act applicable to this
case is section 67 (d) ( 2 ) , 11 U.S.C.   S 107 (dl (2) and reads:

         "Every transfer made and every obligation incurred
         by a debtor within one year prior to the filing
         of a petition initiating a proceeding under this
         Act by or against him is fraudulent (a) as to
         creditors existing at the time of such transfer
         or obligation, if made or incurred without fair
         consideration by a debtor who is or will be thereby
         rendered insolvent, without regard to his actual
         intent * * *."
Following through in the same manner as the statute the first
question presented is what was the date of the transfer.          Mrs.
Dahlquist and Mrs. Davis advance the argument that the date of
the transfer was August 22, 1966, the date the assignment was
signed.    The trustee argues for a later date, October 5, 1966,
when the assignment was recorded in Liberty County.   The re-
sponse to this argument by the defendants is that a recording
is not required under Montana Law to make an assignment effect-
ive.    This argument is correct under Montana Law, but as stated
earlier the Federal Bankruptcy Legislation must also be consid-
ered.   Under section 67(d)(5), a transfer is not effective until
no subsequent transferee or purchaser could acquire a superior
interest than that of the original transferee.   The statute
states:
          "For the purposes of this subdivision (d), a
          transfer shall be deemed to have been made at
          the time when it became so far perfected that
          no bona fide purchaser from the debtor could
          thereafter have acquired any rights in the
          property so transferred superior to the rights
          of the transferee therein * * *." 11 U.S.C,
          § 107 (dl (5).                                       ->
                                                              3 ;a   -   //+   3

Therefore while a recording is not necessary under section 55-
114, R.C.M. 1947, to make the assignment effective among the
parties, it must be recorded to cut off subsequent interests as
borne out by our recording statute, section 73-202, R.C.M. 1947,
which says:
          "Every conveyance of real property, other than
          a lease for a term not exceeding one year, is
          void against any subsequent purchaser or en-
          cumbrancer, including an assignee of a mortgage,
          lease, or other conditional estate, of the same
          property, or any part thereof, in good faith
          and for a valuable consideration, whose convey-
          ance is first duly recorded."
The assignment was introduced into evidence and the recording
stamp by the clerk and recorder of Liberty County shows that
it was recorded on October 5, 1966.   That being the case the
trial court was correct in finding that for the purposes of
this suit the effective date of the assignment was October 5,
           Determining that the date of the assignment was October
5, 1966, the next question is whether Mrs. Dahlquist was in-
solvent on that date.       The test under the Bankruptcy Act and
the Montana statutes appears to be the same; that is whether
the liabilities of the person exceed his assets. Bankruptcy
Act,   §   67 (d) (1)(d), Section 29-102 (1); R.C.M. 1947.       On the
issue of insolvency the judge found:
           "16. On August 22, 1966, HAZEL MARGUERITE
           DAHLQUIST possessed assets with a fair market
           value of approximately $14,895.00, and had lia-
           bilities in the amount of approximately $69,277.00,
           which included contingent liabilities in the sum
           of $59,000.00. About the same liabilities and
           assets existed on October 5, 1966, with an addi-
           tional liability to D. A. Davidson and Company
           in excess of $20,000.00."
In reviewing the record there is ample evidence to support this
finding.     Mrs. Dahlquist was called by the plaintiff as an ad-
verse witness and she testified to the figures contained in the
court's findings and the petition she made for bankruptcy was
introduced which showed those same figures.        There was no con-
tradictory evidence introduced by Mrs. Dahlquist to show that
she was not insolvent so the finding will be allowed to stand.
           The next question then is whether the assignment was
supported by fair consideration.       Section 67 (d)(1) (e) of the
Bankruptcy Act defines fair consideration as:
           " * * * consideration given for the property
           or obligation of a debtor is 'fair' (1) when,
           in good faith, in exchange and as a fair equiv-
           alent therefor, property is transferred or an
           antecedent debt is satisfied, or (2) when such
           property or obligation is received in good faith
           to secure a present advance or antecedent debt
           in an amount not disproportionately small as
           compared with the value of the property or obli-
           gation obtained." 11 U. S.C. , S 107 (d) (1) (e)  .
The Montana provision in section 29-103, R.C.M. 1947, is the
same except for introductory language.       Other than the testimony
concerning the condition attached to the assignment there is
nothing in the record concerning consideration.     When Mrs. Haag
went to live with Mrs. Davis, Mrs. Davis took a mortgage on
Mrs. Dahlquist's car to secure the payments for Mrs. Haag's
care.     The testimony was that Mrs. Dahlquist had the sole re-
sponsibility for the care of Mrs. Haag.
           The only other thing that would support the assignment
was the condition that Mrs. Dahlquist would reassign when Mrs.
Haag went to live with Mrs. Davis.     In this respect the district
court found that there was not sufficient evidence to support
such a conclusion.    The only real evidence to support the con-
tention other than the testimony of the defendants was the in-
troduction of the insurance policy in the amount of $10,000,
with Mrs. Davis as the beneficiary.     The district court made
its finding on this same evidence and as stated earlier, we
will not substitute our judgment for the court's judgment when
there is a reasonable ground for such conclusion.     In support
of the trial court's decision is the prior testimony of Mrs.
Dahlquist, in another proceeding which was introduced by the
plaintiff, to the effect that after she received the money she
could do anything she wanted with it, and there were no conditions
attached.
          There is nothing else in the record which would concern
a "fair consideration'' for the transaction.   Therefore it can
be determined that Mrs. Dahlquist was insolvent at the time the
assignment was made and there was no consideration for the trans-
action.    This being so the judgment of the trial court will be
affirmed.
          The plaintiff   presents several other legal theories
upon which the judgment could be affirmed but we do not believe
it is necessary to discuss all of them in light of our foregoing
opinion.
We concur:   L
