Case ID: ny-st-rep_40/html/0924-01.html
Source: Caselaw Access Project
Author: {"author": "Bartlett, J. Barrett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Jose A. Del Valle, App’lt, v. Josiah A. Hyland and Jose F. Navarro, Resp’ts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 16, 1891.)
    
    1. Fraudulent transfer—Consideration.
    Defendant H. found upon his desk an assignment by N. to him of five
    
      policies of insurance amounting to $50,000 subject to a claim of $15,000 for which they were pledged. He knew that N. was pecuniarily embarrassed. No money passed between them, but he claimed that the consideration therefor was claims he held against N. for past transactions. In. an action by a judgment creditor of N. to set aside the assignment as fraudulent it appeared that such claims consisted in large part of moneys alleged to have been loaned to N. and legal services rendered for him, but the evidence tended to show that the moneys were used in stock speculations for the benefit of both, and that no charges for the services were made and that H. was an Inmate of N.'s family. Held, that the proof would have sustained, although it did not require,a finding that the assignment was made in bad faith and with intent to hinder creditors, and that it was error to dismiss the complaint.
    2. Creditor’s action—Return op execution.
    An action to set aside an assignment of a chose in action may be commenced after the return unsatisfied of an execution. In such case the rule that a judgment creditor who wishes to reach personal property must commence his action while the execution is in the hands of the sheriff does not apply.
    (Van Brunt, P. J., dissents.)
    Appeal from a judgment entered upon a dismissal of the complaint at special term, at the close of the plaintiff’s case.
    
      G. O. Hulse, for app’lt; Julien T. Davies, for resp’ts.
   Bartlett, J.

In January or February, 1889, Mr. Josiah A. Hyland, one of the defendants, found on the table in his private office a written instrument purporting to have been executed by Mr. Jose F. Navarro, the other defendant, on the 31st day of December, 1888, whereby that gentleman transferred to him all his. right, title and interest in and to five policies of life insurance for $10,000 each, subject to a claim thereon of $15,000 by Charles Coudert, as executor, for which Mr. Coudert held the policies as collateral security. The plaintiff is a judgment creditor of the defendant Navarro, and has brought this action to have the assignment of these policies set aside on the ground that it was made with intent to hinder, delay and defraud Navarro’s creditors. At the close of the evidence offered to sustain the plaintiff’s case, the learned judge who presided at the trial directed a dismissal of the complaint; and from the judgment entered against him upon this decision the plaintiff has appealed.

If the evidence was such as would have justified a finding in favor of the plaintiff, it was error to dismiss the complaint at that stage of the case. The rule to this effect is well settled. Scofield v. Hernandez, 47 N. Y., 313; Place v. Hayward, 117 id., 487 ; 27 N. Y. State Rep., 710. It has been necessary, therefore, to go carefully through the testimony to see whether it presents no questions of fact which it would have been the duty of a court to submit to the jury upon a jury trial; or, in other words, whether the case for the defendants was so clear, upon the plaintiff’s own showing, as to entitle them to judgment.

I do not think it was. It seems to me that the proof would, have sustained a finding that the assignment was made in bad ,faitli and with an intent to hinder and delay creditors, although it did not necessarily lead to that conclusion.

Mi*. Navarro was in serious pecuniary embarrassments at the time of the transfer, and Mr. Hyland knew it. No money passed between them. then. According to Mr. Hyland, the consideration for the assignment consisted of a number of claims which he had against Mr. Navarro growing out of past transactions with that gentleman, and aggregating with interest upwards of $19,000, for which he accepted in payment these five policies of life insurance, the value of which he assumed to be from $20,000 to $25,000. An examination of the several items which go to make up this consideration, and the testimony relating to them, readily shows that the proof in almost every instance is susceptible of conflicting inferences, and is favorable or unfavorable to the defendants according to the view which is taken of it.

The first item is one of $7,000 alleged to have been loaned to Mr. Navarro. “ He borrowed $7,000 cash from me,” says Mr. Hyland, “ in 1880, down, covering a period of two or three years.” This statement standing by itself would be clear proof of a loan; but it is followed by further testimony which shows that the witness turned over all the spare money he had at that time to Mr. Navarro, to be invested in mining stocks; that he received some stock, but returned it to Mr. Navarro with the understanding that Mr. Navarro would give it back to him or pay him the money which it represented; and that in the result he found himself without either stock or money. He declared that he did not regard this transaction as a speculation into which he had entered with Mr. Navarro ; but to my mind it seems quite as much like a joint speculative adventure in mining stocks as it does like a loan. It is to be observed that Mr. Navarro gave Mr. Hyland no note or other evidence of any indebtedness on his part growing out of this matter.

In magnitude, the next item going to make up the consideration for the assignment is a claim of $5,000 for legal services. These appear to have related chiefly to the purchase of New Jersey lands for Mr. Navarro, and to a litigation concerning the Commercial Warehouse Company. The testimony as to the character of these services is very general and a very liberal estimate seems to have been put upon their value. Mr. Hyland never rendered Mr. Navarro any bill on account of his labors as a lawyer, and nothing appears to have been said about how much they were worth, either in the conversation which immediately preceded the assignment of the insurance policies, or, indeed, at any other time. Another remarkable circumstance is Mr. Hyland’s omission to make any entries in his books relating to any professional services to Mr. Navarro. It seems, however, that he was an inmate of Mr. Navarro’s family for months at a time, during many years; gave instruction to the sons and was himself treated by lír. Navarro like a son. “I never felt as if I would like to render Mr. Navarro any bill,” he says. “If I wanted anything I could have gone to him for it.” In view of all these facts, would it be a harsh or unwarrantable inference to conclude that these legal services were really gratuitous, and that the idea of charging for them was an afterthought ? If such an inference can fairly be drawn it would bring this item within the operation of the rule that “ a gratuity cannot be subsequently converted into a debt so as to become the consideration of a conveyance made by the grantor to the injury of his creditors.” Clay v. McCally, 4 Woods C. C., 605. The case cited presents considerable similarity to the case at bar in the remarkable failure of the grantee ever to have kept any account of the alleged transactions with the grantor or to have made any charges against him, until the grantor became embarrassed, and it was desirable to shield his property from execution.

The other items of the alleged consideration are the payment by Mr. Hyland of a deficiency judgment for nearly $2,600, which Mr. Navarro was clearly under a moral obligation to pay, and a claim of $2,000 for office rent for Mr. Navarro’s sons, which the father, according to Mr. Hyland's testimony, agreed to pay, beginning with the time when the young men were admitted to the bar. Conceding the indebtedness of Mr. Navarro, so far as these two items are concerned, they would not constitute an adequate consideration for the transfer of the insurance policies, if there was no real claim in Mr. Hyland’s behalf for money loaned in the mining stock transaction, and on account of legal services rendered. I have shown that the proof would justify, although it does not require, a rejection of his claim in these respects; and hence it follows that upon the evidence the trial court could have found that the disposition between the actual consideration for the assignment and the value of the property assigned was so great as to indicate an intent to hinder and delay his creditors on the part of the assignor, which intent was shared by the assignee or of which he had notice. In such a case notice of the fraudulent design could well be imputed to the assignee from his own. knowledge that the debt due to him was so much less than the value of the property transferred in ostensible payment thereof.

For these reasons, I think- it is our duty to grant a new trial. The objection to the maintenance of the action, based upon the language of the court of common pleas in Buswell v. Lincks, 8 Daly, 518, to the effect that where a judgment creditor wishes to reach personal property the action must be commenced while the execution is in the hands of the sheriff, has no application to the facts of the present case. “ Where the subjects sought to be reached are choses in action, an execution returned is necessary by the express provision of the statute.” Shaw v. Dwight, 27 N. Y, 244; Code Civ. Pro., §§ 1871, 1872.

Barrett, J.

I concur. The judgment should be reversed and a new trial granted, with costs to the appellant to abide the event.

Van Brunt, P. J., dissents.