Case ID: ny_10/html/0189-01.html
Source: Caselaw Access Project
Author: {"author": "Denio, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Robinson, survivor, &c., against Stewart.
    A positive denial of fraud in an answer in chancery will not prevail against admissions in the same answer of facts which show that the transaction was fraudulent.
    Where an aged father conveyed to his son all his property, real and personal, in part in consideration of an unliquidated indebtedness to the son for several years’ labor in the management of his farm, and in part to provide for his and his wife’s future support, the son promising orally to pay the father’s debts, supposed to amount to a specified sum, but making no provision for a contingent claim not yet due, and the consideration being altogether much less than the value of the farm, it was Held, that such conveyance was fraudulent and void as against creditors.
    
      A creditor at large at the time of a conveyance of lands fraudulent as against creditors, having no specific lien on the lands, is only entitled to share ratably with other creditors in their proceeds when sold under his decree.
    The grantee of lands for an inadequate consideration, having paid certain debts of the grantor in part consideration for the conveyance, is entitled to take the place of the creditors as to such debts,'and to share accordingly in the proceeds of the lands when sold in accordance with the player of a creditor’s bill.
    Where part of the consideration in such conveyance was an unascertained indebtedness due the grantee for several years’ services in conducting the farm conveyed, it was Held, that the grantee was entitled, upon the sale of the land as above, to stand as a creditor to the amount due him for services, with interest from the date of the conveyance, but not from the end of each year’s services.
    The grantee of lands by a fraudulent conveyance, upon the sale of such lands in a creditor’s suit, is not accountable to the creditors at large for the rents and profits prior to the time when a receiver is appointed.
    On the 22d of October, 1841, Rufus Scofield gave to the firm of Seymour, Ward & Co., of Albany, his note for $1327, payable one year from date, and endorsed by William Stewart, of Milo, Yates county, and one Pelton. Stewart at this time was the owner of two lots of land; one a farm of about forty acres, on which he resided, and the other a wood lot containing fourteen acres, in the town of Barrington in the same county. The value of this land, which was all the real estate Stewart owned, was about $2000.
    On the 15th of January, 1842, William Stewart conveyed to George D. Stewart, his son and the defendant in this suit, the two lots of land before mentioned; the deed for the fourteen acre lot purporting to be for the consideration of $300, and the other for that of $2000. . The father at the same time transferred to the defendant all the farming imple ments and other personal property' then upon the farm, amounting in value to about $326. The actual consideration for these transfers consisted in an oral promise from the son to pay the debts of the father, then supposed to amount to about $400; the defendant’s three notes for $100 each, payable in four, five and six years with interest, which were to be given to the three little sisters of the defendant, and with the understanding and agreement that in case the debts which the son had assumed to pay “ should exceed $400, the amount of such excess should be divided and allowed as payments on the said notesand lastly, an indenture of lease, bearing date the same day with the conveyances, from the defendant to William Stewart and wife for their lives or the life of the survivor of them, for the yearly rent of six cents if demanded. On the 21st of February following, William Stewart released to the defendant his claim on the wood lot for the consideration of one dollar; and on the 9th of August in the same year he died intestate.
    Upon the maturity of the note made by Scofield to Seymour, Ward & Co., and endorsed by Pelton and William Stewart, payment was demanded and refused, and notice duly given to Pelton, “ and also to the heirs at law of the said William Stewart, deceased.” In December following, Robert M. Seymour and the plaintiff Robinson, as surviving partners of the firm named as payees, recovered a judgment upon the note against Scofield and Pelton, upon which judgment execution was issued and returned unsatisfied, both defendants being insolvent.
    In August, 1843, after an application by Seymour and Robinson for administration on the estate of William Stewart, his son, the defendant, came forward and obtained letters from the surrogate of Yates county, and soon after filed an inventoíy of his father’s personal estate, valued therein at $135.23. On rendering his account as administrator, in April, 1846, after deducting expenses, &c., a balance appeared of $75.42, which was allowed to the widow by the surrogate’s decree, under the act of 1842, leaving no assets of the intestate to apply upon the debt of Seymour, Ward & Co., which had been duly presented and established. Seymour and Robinson, therefore, in August, 1846, filed their bill in this cause against George D. Stewart, charging that the two conveyances to the defendant from his father were fraudulent and void as against the complainants, and praying for a sale of the lands, and an account of the rents, issues and profits thereof from the date of the conveyances. Seymour died after the commencement of the suit, which was prosecuted in the name of the survivor.
    The answer of the defendant alleges a parol agreement between Ms father and himself about the time he came of age, which was some five years previous to the conveyances, that if he would stay and manage the farm and take care of the family, his father would convey to him the land at some future time; which agreement he claimed to have been consummated by the conveyances in question. It insists that he was a purchaser in good faith and for an adequate consideration ; and shows that at the time of the conveyances he was unaware of the existence of the note to the plaintiffs, but that all the remaining debts of his father, which he then assumed to pay, he had since that time in fact paid; and that the amount of such debts was $742.17.
    No proofs were taken, and the cause was heard upon the pleadings and a stipulation between the parties, at a general term in the seventh district, before Justices Maynard, T. A. Johnson and Selden, and a decree made setting aside the conveyances, in accordance with the prayer of the bill, and ordering the sale of the premises and the appointment of a receiver. The decree further declared that the complainants were entitled to be paid their debt against William Stewart, deceased, fro rata with his other creditors who should come in and prove their debts; and that the defendant was entitled to be subrogated to any debts of his father paid by him from his own means, or otherwise than from the personal property which he had received from his father, and from the rents and profits of the real estate. A reference was also ordered to ascertain the debts of William Stewart at his death, and what of them had been paid by the defendant from his own means; and also the rents and profits of the real estate since the death of William Stewart and of his wife (who died in June, 1847), and which had not been applied to the payment of the debts of the deceased.
    The referee appointed under this decree reported that the defendant had paid debts of William Stewart, amounting, with interest from the time of payment, to $1098.27; that personal property received from his father had been applied by him to the payment of such debts, amounting in value, with interest from the date of its transfer, to $87.17; that $121 with interest still remained unpaid, which was owing by William Stewart to another creditor at his death; that the amount due from William Stewart to the defendant for services, from the time the latter came of age to the date of the conveyances, mating annual rests and computing the interest thereon to the latter date, then deducting the value of personal property transferred by William Stewart, and casting interest on the balance to the date of the report, was $1067.53 ; and that the value of the rents and profits from the death of Mrs. Stewart to the date of the report was $190. This report was affirmed at special and general terms.
    The complainant appealed to this court from the original decree and from the orders of affirmance; and the defendant appealed from the final judgment in the action. The grounds of the appeals are indicated in the opinion.
    
      S. A. Foot for the plaintiff.
    
      S. Beardsley for the defendant.
   Denio, J.,

delivered the opinion of the court.

1. The defendant’s counsel insists that the plaintiff is not shown to be a creditor of William Stewart. The argument in that respect is based upon the idea that enough is not stated in t1..' bill to show that sufficient notice of the dishonor of the - jte, on which the deceased was an endorser, was given. The note fell due after the death of William Stewart, and the statement is that notice was given to the heirs at law of the deceased. There had been no administration granted at that time, and the next of kin and the heirs at law were the same persons. But it is a sufficient answer to this objection that the plaintiff’s debt was admitted in unqualified terms in the answer.

2. It is said that the decree is wrong in setting aside the deed of January 15th, 1842. The answer is on oath, and denies in terms any fraudulent intent, and states the circumstances under which these conveyances were executed. There is a replication filed, but there are no proofs,- except a stipulation as to some facts which are not very material. It is a familiar rule that a positive denial of fraud in an answer will not prevail against admissions, in the same pleading, of facts which show that the transaction was fraudulent. (Jackson v. Hart, 11 Wend.., 343, 349, per Savage, Ch. J.) The conveyances to the defendant, taking his own statement of the circumstances under which they were given, and of the consideration, cannot be sustained as against the creditors of the grantor. William Stewart was indebted, at the time they were executed, without taking into the account the plaintiff’s debt, which had not then become absolute against him, and without reckoning interest on his debts, about $1400; and his whole personal property was only about $270. Without reference, therefore, to the endorsement, his affairs were in an embarrassed state, and if that debt should come upon him he was hopelessly insolvent. In this state of things, he conveyed his property, real and personal, worth about $2300, to his son, the defendant, a young man wholly without property; and the defendant at the same time gave to his father and mother a lease for their lives and the life of the survivor, reserving a nominal rent. The answer states that the lease was designed to be in the nature of a mortgage, to secure the support and maintenance of the father and mother; but even a responsive answer cannot overthrow the evidence furnished by writings under the signature of the defendant, executed at the time of the transaction. (1 Greenl. Ev., § 258; United States v. Wood, 14 Peters, 430, 442; Clark v. Van Riemsdyk, 9 Cranch, 160.) It is true he agreed with his father-to pay his debts in and about Penn Yan, but this'was not evidenced by any written contract, and it is not shown to have come to the knowledge of his creditors. He also gave his father his notes for $300, but it was part of the arrangement that they should be given to his sisters, and to this extent the conveyance of the fourteen acres was intended to be a gift to the family of William Stewart, which the defendant assisted in consummating. The agreement stated to have been made about the time the defendant came of age will not sustain the conveyances. 1. It did not embrace the personal property, and yet that was given to the son when the land was conveyed. 2. The time when the land was to be conveyed was not mentioned; but as the consideration was the care of his parents during their lives, and it would not, therefore, be fully earned.until their death, it was testamentary in its intention, and did not contemplate a conveyance which should leave the creditors of his father unpaid. The defendant, it is true, was a creditor for his labor at the time the conveyances were made, and to the extent of his debt might have been lawfully preferred; but it was fraudulent as to other creditors for him to receive conveyances of all the debtor’s property to the amount which has been mentioned, while the debt did not exceed one-third of the value of the property. (Butler v. Stoddard, 7 Paige, 163; S. C. in error, 20 Wend., 507.)

Upon the defendant’s statement in his answer it was parcel of the consideration of the conveyances that he should continue to support his father and mother during their lives. This presents the case of a debtor providing for his own future maintenance and support out of his property, which by law belongs to his creditors to the extent of their debts. It need scarcely be said that such an arrangement could -never.be upheld against his creditors. (Goodrich v. Downs, 6 Hill, 438; Barney v. Griffin, 2 Comst., 365.)

3. The remaining questions arise upon the appeal of the complainant, and' relate to the details of the decree. The case does not present any question respecting the conveyances standing as a security for the defendant’s claims against the grantor.- It is not upon that doctrine that the defendant and the other creditors are allowed to participate in the fund to arise out of the sale of the land by the receiver.'' The complainant had not acquired any lien at law, not having obtained any judgment against William Stewart, and was not therefore entitled to a priority over the other creditors. Equity only requires that the fund should be distributed among the creditors pro rata. It is entirely equitable that the defendant should be substituted in the place of the creditors whose debts he has paid. Although the conveyances were void as to creditors they were valid between the parties; and according to the statement in the answer, these debts were to be paid by the defendant as a consideration in part for the conveyances. The complainants have not been injured by the payments made by the defendant, for all they could claim under the circumstances would be their proportionate share of the avails of the property. So ás to the- defendant’s own debt for labor. The conveyances being pronounced, void from the beginning, at the instance and upon the prayer of the complainant, he cannot set up that they extinguished the defendant’s demand. It is like the case of an usurious obligation of a higher nature substituted for a prior legal one. In such cases, if the debtor procures the' one tainted with usury to be set aside, the one for. which it was substituted becomes available; though, while the usurious security remains on foot, the other is deemed to be' extinguished. (Hughes v. Wheeler, 8 Cow., 77; Rice v. Welling, 5 Wend., 595; Vilas v. Jones, 1 Comst., 274, Bronson and Jewett, Js.; La Farge v. Herter, 5 Seld., 241.)

The complainant suggests that though , the court below ordered an account of the rents and profits of the real estate to be taken by the referee, and such account was taken, showing the defendant to have received $190 on that account after the expiration of the life lease, yet the decree makes no application of this sum towards the debts or any of them. The facts seem to ■ be as stated. But the question then arises, whether the complainant was entitled to an account of the rents and profits. I think he was not. As, before remarked, he had no lien, and the conveyances were valid between the parties. .The remedy of the complainant was to procure the land to be sold, and the proceeds to be applied towards the debts. But'until such sale, or at least until the conveyance to the receiver, I know of no principle upon which the defendant could be compelled to account for the rents and profits to creditors at large of the defendant’s grantor. If the grantor had lived, and the land had been sold on execution against him, the creditor would have had no right to the rents and profits until the conveyance by the sheriff. I think, therefore, the decree is right in this respect. If the. defendant has continued in possession under the receiver, the creditors may perhaps have the benefit of these rents' when the receiver’s accounts come to be adjusted in the court below.

The value of the personal property was correctly applied towards the defendant’s debt, as of January 15, 1842, the time when it came to his hands. The referee has allowed the defendant interest upon the amount of each year’s labor, from the end of the year in which it was earned to the time of the conveyance, and then, after deducting the value of the purchased property, has reckoned interest on the balance until the date of the report. The demand being, wholly unliquidated, interest should not have been allowed prior to the conveyances. (Raid v. Rensselaer Glass Factory, 3 Cow., 393; Doyle v. St. James’ Church, 7 Wend., 178.) The deceased attempted to pay this debt by the conveyances, by means of the property conveyed, on the 15th of January, 1842. From that time I think the defendant was entitled-to interest. The decree must be modified in this' respect. In all the other particulars it should be affirmed.

Edwards, J., was in favor of modifying the decree below, so as to *give the defendant a lien on the lands for the amount advanced by him.

Gardiner, Oh. J., and Selden, J., not having heard the argument, took no part in the decision.

Judges Johnson, Rugóles, Allen and Parker concurred in the above opinion.

Judgment accordingly.