Robert C. Spitzer, Harrisburg, for appellant.
R. Hart Beaver, Lebanon, did not file a brief on behalf of Miller, appellee.
Clemson N. Page, Jr., Reading, for American Bank, appellee.
Montemuro, Hoffman and Van der Voort, JJ. Hoffman J., concurs in result.
[ 293 Pa. Super. Page 105]
The instant action is the result of a battle between two creditors for the assets of a debtor who had pledged his securities to one financial institution as collateral for refinancing of prior debts and later used his personal assets to obtain a second loan for his corporation. There is no doubt that each bank had a legitimate claim, to repayment. When the debtor's financial situation collapsed, only one of the creditors was paid in full.
The only issue concerns the claim of the unpaid creditor that two acts of the debtor in regard to the securities amount to fraudulent conveyances, and that it therefore has
[ 293 Pa. Super. Page 106]
the right to set aside the transactions and retrieve the assets for repayment of its own debt.
The facts are as follows: several months before the financial difficulties of the debtor became obvious, he requested and was permitted the right to transfer the securities from his own name to that of his and his wife's name. American Bank, which had held the securities since 1966 and continued to hold them, had no objection to the transfer into entireties property on the explanation that it was for estate planning purposes. Under the U.C.C., 13 Pa.C.S.A. 9203(a)(1), physical possession of collateral perfects the security interest of the creditor. Five months after the transfer into entireties, debtor and his wife executed an hypothecation by which they both agreed that the securities should be applied to the obligations held by American Bank.
Appellant in this action is Commonwealth National Bank (CNB), who argues that the two stock transfers were fraudulent and that American Bank's participation in these transfers was also fraudulent, with intent to insulate the debtor's securities from the debt owed CNB. CNB, therefore, argues that it may set aside the transfers as fraudulent conveyances, and that creditor American Bank must disgorge the proceeds it obtained when it sold the securities and applied the money received to its own debt. The proceeds would then, of course, be available to cover the debts owed to CNB.*fn1
As to the first transfer of the securities by the debtor from his own name only into his own and his wife's name, we find the transfer was fraudulent under 39 P.S. 354. Intent is specifically made irrelevant by the statute, and a conveyance of securities into entireties property, thus rendering the husband/debtor insolvent, is per se fraudulent. Appellee, American ...