#### The Trust and Deposit Co. of Onondaga, Plaintiff, *v.*Townsend Verity et al., Defendants.

(Supreme Court, Onondaga Special Term,

November, 1900.)

Equity — Absolute transfers of property,, for only about a tenth of its real value, declared to have been made as collateral security only.

Evidence deemed sufficient to justify a court of equity in holding that assignments, absolute upon their face, and by which a man, of drinking habits and in need of money, appeared to have transferred all his interest in his uncle’s estate for about one-tenth of its value, were really executed only as collateral security for loans made him. by the assignees at the times when the assignments were executed.

Action brought by a trust company, as trustee for the wife and children of William P. Brown, to have it determined whether certain transfers made by him of all his interest in the estate of his .uncle, Wilber H. Brown, deceased,were absolute, or were intended' only as collateral to loans made him by pertain of the defendants.

Hiseock, Doheny, Williams & Oowie, for plaintiff.

James O. De La Hare (Theodore E. Hancock, of counsel), for defendants Verity and Frey.

Horris W. Ohase, for .defendant Brown.

Andrews, W. S., J.

Wilber H. Brown died in Syracuse on January 27, 1896, leaving an estate that was afterwards inventoried at $132,000. By Ms will, after certain small legacies, he bequeathed and devised the residue of his property to some sixteen nephews and nieces,- one of whom was the defendant William Perry Brown. The latter was fifty-three years old; a married man *5with two children, and, at the time, a resident of the city of Rew York. He appears to have been a man of intelligence, but in somewhat reduced circumstances.

On the 9th day of June, 1898, Hr. Brown executed an agreement in writing, with the defendant Rose Frey, by which he contracted to sell and convey to her, in consideration of the payment of $200, all his right, title and interest to the value of $1,200, in the estate of Wilber M. Brown. Thereafter, and on June sixteenth, the transaction was completed by the execution of the necessary papers.

On the 30th day of June, 1898, Hr. Brown executed a further written contract with the defendant Townsend Verity, by which he agreed tó sell to the latter all his right, title and interest in the estate of Wilber H. Brown, deceased, for the sum of $500, and on July eleventh the final papers were signed.

On the 12th day of Hay, 1899, Hr. Brown executed a further assignment, for value received, of all his right, title and interest in the estate to the plaintiff, who, in its complaint, assumes to hold such property as trustee for his wife and children.

Thereafter, and on September 28, 1899, the present action was begun. In it the issue to be determined is whether the defendants bought the interests in the estate assigned to them respectively, or whether they made a loan to Hr. Brown and the assignments were merely collateral security to such loan.

The defendants Frey and Verity did not personally appear in the transaction.- The negotiations were all had between Hr. Brown on the one side, and a Hiss Forgotston and her personal attorney on the other. And the testimony of these persons as to what occurred is irreconcilable. Hr. Brown says that in each instance he applied for a loan, that his application was granted, and that the sums paid were received as a loan. The other two witnesses say the transaction was an absolute sale, and was clearly understood so to be.

In determining between these respective claims the circumstances and facts known to the. parties are of great importance. They cast light upon the question as to which version is reasonable and probable, and as to them there is little dispute.

Prior to June ninth, when the Frey contract was executed, a letter had been received from the executor of the W. H. Brown estate stating that Hr. Brown would receive therefrom between $5,000 and $6,000. This was known both to Hr. Brown and to Hiss Forgotston and her attorney. Prior to June sixteenth, the *6date of the final papers, the attorney had made a thorough investigation. By this investigation the identity of Mr. Brown had been established, and his statements regarding the estate had been verified. By June eleventh, the date when the Verity transaction was completed, even fuller information was at hand, including a letter from the executor stating 'that the estate had inventoried at $132,000. Of this amount Mr. Brown’s share would be over $8,000.

If the.defendants 'Verity and Frey are right, therefore, they bought and Brown sold his interest in the estate for less than a tenth of its value. The mere fact that such a claim is made casts discredit on the defendants’ witnesses. It is improbable. It may still be true, but it suggests, at least, the need of a critical examination of the testimony.

This is the more necessary when it is considered that all the negotiations were had between Brown and the defendants’ agent, and her and their attorney — that all the papers were drawn by the latter and signed in his office — that they were all verified and acknowledged before him.

A circumstance that attracts attention, although it may have no direct bearing on the credibility of the different witnesses, is the curious lack of business methods in certain parts of the transactions that, in other respects, are certainly not so lacking. While these matters were pending — before the final papers were signed — before the investigations were completed — from day to day small advances were made by Miss Forgotston to Mr. Brown, without any security whatever.

There are, however, some circumstances that bear more directly on this case. Brown says he obtained a loan. The defendants’ witnesses say not only that he did not, but that they were careful to explain that Forgotston *& Go.*never, under any circumstances, made loans up.on legacies. Yet the firm seems to have advertised that it made “ advances on chattels in use, legacies, insurance,” etc. It is true, as Miss Forgotston says, that advances are not always loans. The language may have meant that chattels in use and legacies would be purchased, but it will, at least, bear the other construction.

On May 19, 1898, the- attorney wrote to the executor of the W. M. Brown estate that Mr. Brown had applied for the purpose “ of raising money on his share of the estate of his uncle.” On *7July second a second letter was written by the attorney stating that Hr. Brown “ has applied to a client of mine for more money.” These expressions seem more applicable to a loan than to a sale.

Early in the course of these transactions the question of Hr. Brown’s identity became important. Hiss Forgotston says that Hr. Brown told her that some one employed by the firm of Tillotson *&*Co., who had offices on the same floor, knew him and would identify him. A Hr. Graves, apparently a disinterested witness, says that he was in the employ of Tillotson & Go.; that he knew Hr. Brown, and once went with him into offices, at least, near those of Forgotston *&*Go. He there found Hiss Forgotston and a man seated at a table with papers before him, whom he cannot identify. Then ensued a conversation plainly pointing to the conclusion that the transaction was a loan and not a sale.

In the Verity transaction, at least, the expenses, including the services of Hr. Verity’s attorney and the cost of recording the deed, were paid by Hr. Brown. This fact would seem to indicate a loan rather than a sale.

The great and unusual precautions taken in these transactions, the multiplication of documents, the affidavits with their statements that a sale had been made, and had been made knowingly and willingly — all this is suspicious in itself. Such is not the way in which an ordinary sale is made. A claim of some kind inconsistent with the present position of Hs. Frey and H. Verity must have been expected, and was to be guarded against. Overcaution is often, of itself, a mark of fraud.

The evidence on behalf of the defendants is not altogether satisfactory. That of Hiss Forgotston is so detailed, her recollection of conversations is so minute, that the very details themselves excite criticism. And neither she nor her attorney are able to give or do give, any satisfactory reason for the inadequacy between the amount received and the property claimed to have been sold. Neither of the defendants personally were present at the trial and their relations to the transaction do not clearly appear. The various advances before the papers were signed, at least, seem to have been made by Hiss Forgotston personally, and at her own risk should the transaction not prove satisfactory to the defendants. Under all the circumstances the suspicion that the persons in reality interested were the witnesses who appeared at the trial cannot be avoided. The evidence of Hiss Forgotston, as to the inception of the Verity *8transaction, deserves notice. Mr. Brown’s share of this estate was worth, as all the parties then believed, over $5,000. Of this, at most, he had parted with $1,200. Yet he came in to sell the balance to Miss Forgotston, or to some one for whom she was acting, and in answer to her question as to how much he wanted for it, he replied “ I want at least $500 more, if I can get it,” or, as she says in another place *“*$500, or more if I could get it.” Such a reply would be natural, if a loan was contemplated. If a sale, it would not. At least, some hint of an attempt to bargain might be expected.

Nor is Miss Forgotston’s explanation of Mr. Brown’s motive altogether -credible. He needed, she says, $500 to pay off a mortgage on his mother’s house. Yet, day by day, until the transaction was finally closed, he was coming into the office and receiving small sums, a few dollars at a time.

The defendants urge that the documentary evidence is conclusive in their favor. In the various papers, Mr. Brown repeatedly states, that the transactions were sales, and that he intended to and did absolutely part with his entire interest in the property for the consideration which he received. Of course, if he chose, knowingly and consciously, to make such a sale, he had the right to do so, and the court may not intervene. And, if knowingly and consciously and realizing their import he signed these various papers, the evidence is strong that such was his intention. But he testifies that they were signed by him without any knowledge of their contents, and without any idea that such an interpretation could be given to them, as is placed upon them by the defendants in this action. So far as the deeds are concerned in one transaction, at least, he says that he suggested that the whole agreement should be contained therein, but that he was told by the attorney that this would not be satisfactory to the defendants, for the reason that the papers would be placed upon" record, and that it was not wished that their business should be open to general inspection.

It appears further, from the evidence of Mr. Gfraves, that during this very time the habits of Mr. Brown were bad, and that on frequent occasions when he visited the defendants’ agent and attorney he had been drinking. This evidence is all contradicted by Miss Forgotston and her attorney, but I am disposed to credit the explanation given by Mr. Brown. In the absence of evidence clearly and fully explaining the transactions, in view of the fact, as before *9stated, that the business was done with the agent and the attorney of the defendants, the nature of the transactions themselves may fairly be considered in deciding upon the credibility of the several witnesses. These transactions were so inequitable, so unnatural, and so unjust, that the court will hesitate long before finding that Mr. Brown consciously and voluntarily assigned some seventy-five hundred dollars’ worth of property for the seven hundred dollars received by him.

I shall, therefore, hold that the various papers were executed simply as security for the $200 and the $500 advanced to him by the defendants Frey and Verity, respectively, and that the treasurer of Onondage county be directed to pay to the defendant Frey, the sum of $200, with interest from June 16, 1898, and to the defendant Verity, the sum of $500, with interest from July 11, 1898, and that upon such payment being made, he pay the balance in his hands to the plaintiff. I shall further hold that the plaintiff recover costs of the defendants Frey and Verity.

Findings may be prepared, and if not agreed upon, will be settled by me upon five days’ notice.

Ordered accordingly.