Case Name: James Baldwin, Appellant, v. Isaac June and Lucretia C. June, Respondents
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1893-03
Citations: 75 N.Y. Sup. Ct. 284
Docket Number: 
Parties: James Baldwin, Appellant, v. Isaac June and Lucretia C. June, Respondents.
Judges: Lewis and Macomber, JJ., concurred.
Reporter: Supreme Court Reports (Hun)
Volume: 75
Pages: 284–293

Head Matter:
James Baldwin, Appellant, v. Isaac June and Lucretia C. June, Respondents.
■Conveyance in fraud of creditors — retention of the subject-matter thereof as security to the grantee for the consideration paid by him.
When a conveyance made by a judgment debtor is set aside as in fraud of creditors, in an action in the nature of a creditors’ bill, it should be retained as security to the grantee (although said grantee is affected with knowledge of the fraudulent intent with which it was executed), for so much of the consideration therefor as is represented by land conveyed to the grantor in exchange therefor, which by reason of such conveyance to the judgment debtor is made subject to, and the proceeds of which are applicable in satisfaction of, plaintiff’s judgment (Dwight, P. J., dissenting).
Such security, however, is not to be extended to an antecedent indebtedness of the grantor to the grantee, included in the consideration for the conveyance.
When the grantee in such a case has had the use and profits of the premises covered by the conveyance, he is not entitled to interest on the amount of the consideration for which the conveyance is retained as security.
Appeal by the plaintiff, James Baldwin, from a judgment of the Supreme Court, entered in tlie office of tbe clerk of Steuben county on the 6th. day of June, 1892, upon a decision of the court, rendered at the Steuben Special Term.
The plaintiff as a judgment creditor of Isaac June, brought this •action to set aside as fraudulent, a deed from the defendant, Isaac June to the defendant, Lucretia C. June, his wife, dated December 19, 1887, conveying a house and lot in the village of Addison, Steuben county, known as the Tuscarora street house. On the same day the defendant Lucretia, in consideration therefor, conveyed to the defendant Isaac a house and lot known as the Hollis house. In making the trade they valued the Tuscarora street lot at $3,000 and the Hollis lot at $2,000. The balance was made up by canceling an indebtedness for borrowed money, etc., which Isaac was owing to Lucretia.
The trial court found as facts that the value of the Tuscarora street place was $3,500, and of the Hollis place but $1,500 ; that the ■consideration paid by the defendant Lucretia for the Tuscarora street place was inadquate and unfair, and that defendant Isaac consented to receive said consideration for the purpose of defraud ing his creditors out of the amount in which the value of the Tuscarora street house exceeded the consideration which was paid therefor,” and that Lucretia was aware of such intent. Judgment was awarded setting aside the conveyance of the Tuscarora street house, but retaining it as a security to the defendant Lucretia for the value of the Hollis lot and for the money owing her by her husband.
D. M. Darrin, for the appellant.
A. 8. Kendall, for the respondents.

Opinion:
Haight, J.:
This appeal comes here on exceptions taken to the conclusions of law. The evidence is not returned, and we' must, therefore, assume that it fully sustains the findings of fact. The appellant, by bringing up the record without the evidence, accepts the findings of fact as correct, but he contends that under the facts as found the conveyance to Lucretia should have been absolutely set aside and not retained as a security for any sum whatever.
It is true, as we have seen, that the court has found that the defendant Lucretia was aware of the fraudulent intent of her husband in making the conveyance. This makes her a party to the fraud, and she must submit to such a judgment as the plaintiff is entitled to. The plaintiff, as a judgment creditor of the defendant Isaac, had a right to have the value of the Tuscarora street house applied upon his judgment. In. awarding judgment, it was the duty of the court to see that this is fully done, and the plaintiff protected to the same extent that he would have been had the conveyance not been made.
The trial court has found as a fact, as we have seen, that the defendant Isaac made the conveyance of the Tuscarora street house, and received a consideration ther.efor, " for the purpose of defrauding his creditors out of the amount which the value of the Tuscarora street house exceeded the consideration which was paid therefor." Under this finding the plaintiff was defrauded only to the extent of the difference between the value of the two places. It must be assumed that the evidence supports this finding. To sustain it, it must have appeared that the plaintiff's iudgment had become a lien upon tbe Hollis house and lot, and that it bad been, or be was entitled to bave it sold and tbe value thereof applied upon bis judgment, otherwise be would bave been prejudiced by tbe fraudulent conveyance to tbe extent of the value of the Tuscarora street place, instead of tbe difference in tbe value of the two places. Under this finding be is fully protected by a judgment which preserves tbe deed of tbe defendant Lucretia as a security for tbe value of tbe Hollis lot, for on a sale of that lot be would obtain tbe value thereof to apply upon bis judgment, and by a sale of tbe Tuscarora street bouse tbe amount thereof, less tbe value of the Hollis lot, to also apply upon bis judgment, thus preserving all of the rights which be would bave bad had not either conveyance been made. (Hamilton National Bank v. Halsted, 134 N. Y. 520.)
I am aware that it has frequently been held that payments made by a fraudulent vendee upon tbe purchase of property, cannot be recovered back or be allowed to him in a judgment setting aside a conveyance which was fraudulent; that be, being a guilty participant in tbe fraud, was entitled to no relief from the court. But these decisions are founded upon tbe theory that the rights of tbe creditors would be impaired by tbe allowance of such payments.
In tbe case of the Hamilton National Bank v. Halsted (supra), Parker, J., in delivering the opinion of the court, says: " If A. convey to B. bis farm, worth $5,000, with intent to defraud bis creditors, B. paying him one thousand dollars at tbe time of tbe delivery of tbe deed, the court, in tbe decree setting aside tbe conveyance, will refuse to grant him relief, not as a proper punishment for tbe offense, but because the creditors bave an equity equal to tbe value of tbe property granted, which should be fully protected against him who fraudulently sought to despoil it. But for the conveyance the entire property would have been applicable to the payment of tbe creditors. By tbe fraud it was put beyond the reach of an execution. Because of it a court of equity declares tbe deed void. And to tbe request of B. that be be allowed tbe one thousand dollars paid to bis fraudulent grantor, a court of equity refuses to listen, because tbe equity of tbe -creditors embraces the whole of tbe property, including necessarily the interest represented by tbe one thousand dollars paid to A., and it cannot be cut down or interfered with by any payment constituting a part of tbe fraud ulent transaction. But for the* misconduct of B. the creditors presumably could have reached the entire interest; therefore, the result of it must be borne by him and not by the innocent party."
The refusal to reimburse for moneys paid in such a case is not for the purpose of punishing a party because of his wrongdoing, but is for the purpose of preserving the rights of the creditors to the extent that they would have been, had the conveyance not been made.
In the case of Loos v. Wilkinson (113 N. Y. 485), the action was to set aside a conveyance of real estate made by a judgment debtor in fraud of the rights of creditors. In that case the grantee was a guilty participant in the fraud and it was so adjudged, yet it was held he should be protected for payments made by him to an amount exceeding $20,000, for interest, taies, repairs, fees of agents, etc. In that case the grantee had been ordered to account for rents received by him.
Earl, J., in delivering the opinion of the court, says: " And what does such an accounting mean % Does it mean that he shall pay for more rent than he has received or could have received, for more profits than he has made or could have made ? Shall he account to the creditors for more rents than they could have received if they had had possession of the real estate ? If the grant be of a waste piece of land which the grantee has improved so as to make rent possible, shall he account for gross rents without any allowance for his improvements % If the fraudulent conveyance be of a vessel, unseaworthy, and the vendee makes her, by repairs, seaworthy, and then charters her, shall he be required to account for the gross charter money % Or, in the cases above cited, where the fraudulent vendee of slaves was compelled to account for their hire, would an allowance for their maintenance while they were working for hire have been denied ? To answer these queries in the afiirmative would, even in a court of equity, be a wide departure from the rule of compensation. It would be spoliation, not justice or equity. A court of equity does not sit for punishment of criminals. If a fraudulent grantee has violated the criminal law, he may be prosecuted and punished in the criminal courts. While such a grantee will not be allowed for permanent' improvements made upon the granted property to suit his fancy or simply to promote his supposed interests, when the creditors of the grantor come into a court of equity seeking to compel him to account for rents and profits, the accounting must be upon equitable principles, and when he has been compelled to surrender the property conveyed to him, and to account for all the profits he has made, or could have made, or ought to have made therefrom, the ends of justice have been completely and exactly attained."
It is said that the defendant Lucretia does not come into court with clean hands, that she knew of the fraudulent intent of her husband. She does not come into court, she is .brought in as a defendant, and the plaintiff is asking a judgment against her. The question is, what judgment is. he entitled to ? As we have shown, he is entitled to be made good for all that he lost by the fraudulent conveyance, fully that and nothing more. It is not his privilege, or that of this court, to punish her, or enforce forfeitures against her, only in so far as to preserve the rights of the plaintiff as they existed prior to the conveyance in question. The lien of the plaintiff's judgments immediately attached to the lands conveyed by her to her husband. It was not a payment to him in money that he could pocket or secrete, so as to keep it from his creditors, but was-a payment in real property which the plaintiff could sell and apply the proceeds upon his judgments.
The provision in the judgment in reference to the money owing her by her husband stands upon a different footing; it was an antecedent debt. Whilst I do not question the right of a diligent creditor to secure the amount of his claim by judgment, deed or mortgage, he must, however, not be guilty of wrongdoing in procuring the same. If he procures the conveyance of the property for his antecedent indebtedness he must allow fair value therefor, and not unnecessarily prejudice the rights of other creditors. He cannot join with the grantor in a scheme to defraud them and still be protected to the amount of his indebtedness. (Stevens v. Brennan, 79 N. Y. 254.)
In this particular I think the judgment is wrong. The defendant Lucretia should be permitted to hold the deed upon the Tuscarora street house as a security for the sum of $1,500, the value of her Hollis house and lot, and not for the amount of the antecedent, indebtedness owing from her husband to her.
The defendant Lueretia has the possession of the Tuscarora street house until the same is sold, and, therefore, has the benefit of the rents, issues and profits thereof. She should not, therefore, have interest on the $1,500.
The judgment should be modified accordingly, and as modified affirmed, without costs of this appeal to either party.
Lewis and Macomber, JJ., concurred.