Case Name: Frank J. Saxton, as Trustee in Bankruptcy of Joseph Bastian, a Bankrupt, Appellant, v. James O. Sebring and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1904-07
Citations: 96 A.D. 570
Docket Number: 
Parties: Frank J. Saxton, as Trustee in Bankruptcy of Joseph Bastian, a Bankrupt, Appellant, v. James O. Sebring and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 96
Pages: 570–574

Head Matter:
Frank J. Saxton, as Trustee in Bankruptcy of Joseph Bastian, a Bankrupt, Appellant, v. James O. Sebring and Others, Respondents.
Fraudulent conveyance by a husband to his wife — transactions between them are scrutinized with care — allegations in a complaint of a conspiracy and also of a conveyance in fraud of creditors^ proof of co-operation by some, and the receipt of the debtor’s property by other parties defendant in the action,, is- sufficient—. proof that a debtor was not engaged in business between certain, dates warrants a finding, where his insolvency is shown at the later date, that it existed also at the earlier date.
Transactions between husband and wife, as against creditors, must be scrutinized with care; and when a prima facie case of fraud is made out, it is incumbent upon the parties to explain their acts, and failing to do so,' they must take the consequences.
Evidence that a husband, when insolvent, transferred to his wife,- to whom he owed §675, personal property used in a hotel, managed by the husband, worth §3,500, for an expressed consideration of “§1.00 and other good and valuable consideration; ” that no inventory was made of the property at the time of the transfer, and that the husband continued in possession of the property after the transfer, is sufficient in the absence of any explanation of the transaction to sustain a finding that the transfer was fraudulent as to creditors.
Where the complaint in an action, brought by the husband’s trustee in bankruptcy against the husband and the wife and other parties who had obtained a portion of the property in question, to set aside the transfer, alleges a conspiracy upon the part of all the defendants, and also that the husband, being insolvent, with intent to defraud his creditors, conspired with the other defend ants to dispose of all his property, and that in pursuance thereof the property was disposed of, the plaintiff need not, in order to make out his case, show that there was a prior agreement between all of the defendants to do the acts alleged to be fraudulent, and that the acts were done in pursuance of the prior agreement.
If the plaintiff succeeds in showing that any two of the defendants acted in concert in the fraudulent scheme he has made out his case.
If an illegal act is committed which needs the concurrence of two persons it may be presumed that they intended to do the act, and when it must be done in concert to be effective, it may be said to be proven to have been so done in pursuance of an agreement, when the act itself is proven.
In such an action every person who has dishonestly obtained any portion of tbe ■ property may be made a party, although he may have acted independently of his codefendants and did not participate in the original fraud. ‘
Proof that the husband was not engaged in any business, and had no business relations or transactions from May 22,1902, the date of the transfer, to July 21, 1902, on which latter date he filed schedules showing his insolvency, and Was adjudged to be a bankrupt, is sufficient, as against all but bonajide purchasers, to warrant a finding that he was insolvent on May 22, 1902.
McLennan, P. J., dissented.
Appeal by the plaintiff, Frank J. Saxton, as trustee in bankruptcy of Joseph Bastian, a bankrupt, from a judgment- of the Supreme Court .in favor of the defendants, entered in the office of the clerk of the county of Steuben on the 16th day of May, 1903, upon the decision of the court, rendered after a trial before the court without a jury at the Steuben Trial Term, dismissing the plaintiff’s complaint upon the merits.
Francis E. Wood and Frank J. Saxton, for the appellant.
James O. Sebring, for the respondents.

Opinion:
Stover, J.:
This action is brought to have certain transfers of personal property declared void by reason of having been fraudulently made.
The defendant Joseph Bastian was adjudicated a bankrupt on July 21, 1902. For a year or two prior to the twenty-second of May of the same year he had been engaged in conducting a hotel at Corning, X. Y., and had no other business. On May 22, 1902, he executed a bill of sale of all the furniture, stock, fixtures and all other property in or about the hotel, to his wife, the defendant Lizzie Bastían, and at the same time transferred to her the lease of the hotel. The bill of sale recites as consideration " $1.00 and other-good. and valuable consideration." From the twenty-second of May to the date of the adjudication of bankruptcy Joseph Bastian was not engaged in any business.
The evidence of Joseph Bastian is that he, at the time. of the transfer, owed, his wife $675. Both Bastian and his wife testify that no money was paid at the time of the transfer, and the only statement as to an agreement as to consideration is made by Bastian,, who says that his wife wished to be protected, and he said that was. all right, he would transfer to her. Bastian testifies that he thought, the property was worth $3,500. He continued in possession of the hotel after the transfer and ran the business just as he had before.. No inventory was made at the time of the transfer, and a few days-after a portion of the liquors and other property was removed by Bastían and some of the other defendants.
The trial court dismissed the complaint. It is argued upon this, appeal, as it doubtless was before the trial court, that as the complaint. alleged a conspiracy upon the part of all the defendants it. must be proven that there was a prior agreement between all of the defendants to do the acts alleged to be. fraudulent, and that the acts done were in pursuance of the prior agreement, in order to sustain the cause of action set forth: by the complaint. The trial court, seems to have adopted this view. This theory ignores some very-pertinent allegations- of the complaint. It is true the complaint alleges a conspiracy, but it also alleges that the defendant Bastian, being insolvent, with the intent and purpose to hinder, delay and defraud his creditors, conspired with the other defendants to secure, convert and dispose of all the property of said Bastian, and further alleges that in pursuance thereof the property was disposed of.
Under, this complaint the plaintiff might not be able to prove that; all of the defendants agreed to the scheme, nor was it necessary to do so in order to sustain his cause of action. If he succeeded in showing that any two of the defendants acted in concert in a fraudulent scheme he has made out a case. In a civil action an allegation of conspiracy may be no more than an allegation of an illegal agreement to act, nor is -it necessary that the agreement need be proven .by direct testimony, but as . every one is presumed to. intend the consequence of his acts, so if an illegal act is committed which needs the concurrence of two persons it may be presumed that they intended to do the act, and when it must be done in concert to be effective, it may may be said to be proven to have been so done in pursuance of an agreement, when the act itself is proven.
The object of this action is to set aside the transfer, and it being once established that this transfer was conceived and executed in fraud, and that the defendants other than Bastían acquired some of these goods and claim title thereto, they are proper defendants, and a cause of action is made out against all. It may or may not be necessary to show that the defendants other than Bastían were privy to the initial fraud, but if the bill of sale was fraudulent and the other defendants acquired a portion of the property, acting collusively with Bastían, intending to defraud his creditors, they are sufficiently connected to make them proper parties. In a creditor's action every person who has dishonestly obtained the possession of property fraudulently transferred may be made a party, although each alleged purchaser may have acted independently of his codefendants. And by this it is not meant to suggest that there is not evidence to connect the defendants other than Bastían with the original transfer, but it is only intended to point that it was not proper to dismiss the complaint, even if these defendants had been free from the original participation.
It needs no extended argument to show the transfer from Bastían to his wife to have been fraudulent.- It was upon inadequate consideration, not followed by change of possession, and bears the usual marks of fraudulent transfers from husband to wife; its certain, absolute result was to deprive the creditors of Bastían of any means of collecting their debt. The wife upon the witness stand neither 'gave nor undertook to give an explanation of the transaction, and so it stands almost confessed.
Fraud can seldom be proved by direct- evidence, but must be established by circumstances.. Transactions between husband and wife, as against creditors, must be scrutinized with care; and when a prima facie case of fraud is made, it is incumbent upon the parties to explain- their acts, and failing to do so, they must take the consequences.
Some statement is made that there was a failure to show insolvency. It can hardly be said that a state of facts which clearly establish that a man who engaged in no business, and who does not •appear even to have had any business relations or. transactions, between the twenty-second day of May and the twenty-first day of July,, and who on the later date filed a schedule of liabilities showing his insolvency and bankruptcy, do not fairly show that he was insolvent on the prior date, namely, May twenty-second. But it is said that the schedules are not proof as against the other defendants in. the action; While this is undoubtedly generally true,, yet the adjudication in bankruptcy is binding upon the parties, and an adjudication that lie was insolvent upon such a date is, so far as he is concerned, a proof of insolvency upon the prior date, and except as to parties who were bona fide purchasers, sufficient to warrant a finding to that effect.
We think a prima facie cause of action in favor of the trustee under- the Bankruptcy Law was established, and that the trial court erred in dismissing the complaint as matter of law.
It is not necessary to discuss the effect of the testimony in other respects, as the plaintiff should have the opportunity to have the evidence passed upon in a correct view of the acts of Bastían and his wife, and to have the acts of the other defendants judged accordingly. The judgment should be reversed.
All concurred, except McLennan, P. J., who dissented upon the ground that the cause of action set forth in the complaint is for conspiracy, and the evidence wholly fails to establish such cause of action, and that even if under the allegations of the complaint it could be regarded as a creditor's action, so called, the plaintiff failed to prove the facts necessary to entitle him to recover and that, therefore, the complaint was properly dismissed by the learned trial court,
Judgment reversed and new trial ordered, with costs to the appellant to abide event upon questions of law and of fact.