Case ID: ad_50/html/0092-01.html
Source: Caselaw Access Project
Author: {"author": "Laughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William W. Cook, as Receiver of David Lake, Respondent, v. Wilbur F. S. Lake, Appellant, Impleaded with Phebe V. Hollister.
    
      Party—a grantee of one who takes a deed in fraud of the creditors of his grantor is a necessary party to a creditors' suit — the Appellate Division may direct that he he made a party thereto.
    
    Where one of two grantees mentioned in a deed of real estate, fraudulent as. against the creditors of the grantor, conveys, without consideration, his interest in the property to a person having full knowledge of the facts, the latter grantee is a necessary party to an action brought by a judgment creditor of the original fraudulent grantor to set aside the deed executed by such grantor,
    The Appellate Division may, in such an action, of its own motion, upon an appeal from a judgment in favor of the plaintiff, direct the final grantee to be made a party, although that question was not raised by answer or demurrer.
    Appeal by the defendant, Wilbur F. S. Lake, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 5th day of June, 1899, upon the decision of the court rendered after a trial at the Erie Special Term.
    
      Loran L. Lewis, Jr., for the appellant.
    
      Wallace Thayer, for the respondent.
   Laughlin, J.:

This action was brought to set aside as fraudulent and void a conveyance of land by David Lake to his son and daughter, the defendants herein. The conveyance was made on the 10th day of August, 1898, and the consideration expressed was love and affection.

David Lake, at the time of deeding the property to his children, was engaged to marry Augusta C. Younger, who subsequently brought an action against him for breach of promise and recovered judgment for $5,000 damages by confession the day following the service of the summons. Execution was immediately issued on this judgment and it was returned unsatisfied on the 7th day of December, 1898. On the application of the plaintiff in that action, the plaintiff herein was appointed receiver of the property of the judgment debtor pursuant to a previous understanding between him and the attorneys for the judgment creditor, and, by like understanding, this action was subsequently brought for the purpose of clearing the way to enable said judgment creditor to obtain satisfaction of her judgment by a sale of the premises. The appellant defended upon the ground that he took the conveyance in good faith, and that there was a good consideration, and that the judgment in the action for a breach of promise was obtained by collusion for the sole purpose of enabling David Lake to regain title to the premises. TJpon the trial the attention of the court was drawn to the fact that within a few weeks after the appellant obtained title from his father he conveyed all of his right, title and interest in and to the premises to his wife, Frances H. Lake, which conveyance was recorded in the proper county clerk’s office some months before the commencement of this action or the recovery of the judgment in the breach of promise suit. The deed from the appellant to his wife was received in evidence, under the plaintiff’s objection and exception, and the court, in its decision, found the facts with reference to the execution and recording of this deed, and also found that the appellant’s wife had full knowledge of the facts and parted with no consideration. The court also found, as a conclusion of law, that the deed from David Lake to the defendants should be set aside as fraudulent and void as against the judgment of Augusta C. Younger, and that she should be permitted to issue execution and sell said premises thereunder as. if said conveyance had not been made.

The appellant did not not raise the objection by his answer that there was a defect of parties defendant; therefore, he had no legal right to insist upon his wife being made a party. (Osterhoudt v. Board of Suprs., 98 17. Y. 239.) But the litigation will be fruitless without the presence of Frances H. Lake, who holds the record title to the premises, and we are of opinion that she is a necessary-party to a complete determination of the controversy.

The judgment can have no binding effect upon the appellant’s wife, and, while it cannot as a matter of law prejudice her legal rights, the effect of the judgment is that her land is to be sold on execution on the theory that she .has no title, whereas but for this decision, concerning which she has not been heard, she had a clear record title. The judgment creditor doubtless could have pursued her legal remedy and have sold the land under execution, and the purchaser, if he obtained possession, might have defended his title against the appellant’s wife, upon the ground that the transfer to her was fraudulent, and might have impeached the conveyance to her upon the same ground in an action at law to recover possession. (Smith v. Reid, 134 N. Y. 568, 577.) It does not follow, however, that a court of equity should permit this suit to be prosecuted to judgment against an intermediate fraudulent grantee, who has parted with his title and who claims no interest in the premises and has none upon the record. While such an intermediate fraudulent grantee may be a proper party, he is not a necessary party to an action brought by a judgment creditor to have the conveyance to the party holding the legal title, when the action is commenced, declared fraudulent and void and to procure a sale of the premises for the purpose of satisfying thé judgment. The judgment in .such an action does not restore the title to the grantor who has, according to 'the record, parted with all his interest. It does not set aside the conveyance as fraudulent between the parties thereto ; it merely declares that the final grantee holds title subject to the lien of the judgment. (Bierschenk v. King, 38 App. Div. 360, 364; Fox v. Moyer, 54 N. Y. 130, 131; Dawley v. Brown, 11 N. Y. St. Repr. 260; 5 Ency. Pl. & Pr. 543, 544.)

But upon principle and authority it is settled that the final fraudulent grantee is a necessary party. (Wait Fraud. Conv. §§ 129-131; 5 Ency. Pl. & Pr. 543, 544; Pom. Code Rem. §§ 347, 348; Shaver v. Brainard, 29 Barb. 27, 29, 30; Sage v. Mosher, 28 id. 287; Gray v. Schenck, 4 N. Y. 460; Hammond v. Hudson River Iron & Machine Co., 20 Barb. 383; Sherman v. Parish, 53 N. Y. 490 ; Nat. B'dway Bank v. Yuengling, 58 Hun, 474.)

Although the question is not raised by demurrer or answer, yet where a complete determination of the controversy' cannot be had without the presence of other parties it is the duty of the court under section 452 of the Code of Civil Procedure, of its own motion, to postpone the tidal and direct the plaintiff to bring such parties in, and where this is not done the appellate court may order it done. (Pondir v. N. Y., L. E. & W. P. P. Co., 72 Hun, 391, .392; Shaver v. Brainard, supra; Osterhoudt v. Board of Suprs., supra ; First Nat. Bank v. Shuler, 153 N. Y. 163; Mahr v. N. U. F. Ins. Society, 127 id. 452.)

These considerations render it unnecessary for us to review the case upon the merits, and require that the judgment appealed from be reversed, and that the plaintiff be directed to bring in Frances H. Lake as party defendant, without costs of this appeal to either party.

All concurred.

Judgment reversed, without costs of this appeal to either party, and the plaintiff directed to bring in Frances H. Lake as a party defendant.