Court Opinion

ID: 5209294
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:09:08.460047+00
Date Added: 2024-06-11T08:27:20.553171
License: Public Domain

Scott, J.:
This is an appeal by plaintiff as trustee in bankruptcy of Edward E. Gwynne from a judgment dismissing his complaint upon the merits. The action is brought to set aside a conveyance of real estate made by the bankrupt to his mother, upon the ground that it was made with intent to hinder, delay and defraud creditors. The property conveyed was a vested remainder in the undivided one-half of a house and lot of ground in the city of New York, subject to the life estate of a man then fifty-seven years of age. The conveyance was made on February 8, 1901, when the grantor ivas wholly insolvent, and was the defendant in a certain action in which he soon afterwards permitted judgment to be entered against him for about $50,000. The expressed consideration in the deed was “ $10 * * * and other valuable consideration,” but there were revenue stamps attached indicating an actual consideration of $6,000. The court below has found that the defendant’s mother, his grantee, actually paid $6,000 as consideration for the conveyance, and that the value of the interest conveyed did not at the time of the conveyance exceed $6,000. The alleged consideration, at least to the extent of $5,000, consists of moneys paid to the bankrupt by his mother previous to the conveyance. It is not denied by the appellant that a bona fide antecedent debt may constitute a sufficient consideration for a conveyance, even if the grantor be insolvent. But when the grantor and grantee occupy to each other the relation of parent and child, and the conveyance strips the debtor of all his property, the courts *114look with careful scrutiny at the bona fides of the transaction. (Lawrence Brothers, Inc. v. Heylman, 111 App. Div. 848.) The evidence showed that the bankrupt had for a long time been dependent upon his mother for support, and that she had been in the habit of giving him about $400 a month, upon which he had lived. The great bulk of the consideration was sought to be made up of sums thus paid, although no account of them had ever been kept, and no attempt was made to show just how much had been paid him in this way, or how much was due from him to his mother at the time of the conveyance if the monthly allowances were to be treated as loans and not as gifts. There was nothing whatever to show that these payments when made were considered by the parties or treated as loans. Not only was no account kept of them, and no receipts dr other obligations given for them, but the mother herself in her testimony avoids with apparent care speaking of them as loans or alleging that they were such, but always speaks of them as money “given ” to her son. The conclusion seems to be inevitable that they were gifts, and that it never occurred to any one to regard them as loans until it became necessary to find a consideration for which the bankrupt might place his property without the reach of his creditors, and preserve it for the benefit of his own family. That it was the intention of the bankrupt to hinder and delay his creditors is too plain for argument. He had been sued for a large sum of money, and while he defended the action so far as possible with a view to postponing the entry of judgment, when he could no longer delay the trial, he withdrew his answer and permitted judgment to be taken against him. In the meantime he had made this conveyance to his mother of his last remaining piece of property, and she had been represented in the transaction by the same attorney who was conducting the defense of the suit against the bankrupt, and, therefore, knew of the impendency of a large judgment against the latter. The court has found that the value of the property conveyed did not exceed $6,000. There is no evidence to sustain this finding, the only testimony on the subject being that of a real estate dealer who placed the value at upwards of $15,000. This, of course, was opinion evidence, and merely advisory, but the fact remains that it is the only competent evidence of value in the case, for the recitals in the deed, or the stamps affixed thereto, or the declaration of the parties *115to it, are not competent evidence of value as against this plaintiff. (Tift v. Barton, 4 Den. 171.) The case presents all, or nearly all, of the circumstances that are recognized by the authorities as indicia of fraud. First, the transfer was made while a suit for a large amount was pending against the grantor, to which it appears he had no available defense. (Ford v. Johnston, 7 Hun, 563; Maasch v. Grauer, 58 App. Div. 560.) Second, the transaction stripped the debtor of all his property available to meet the demands of his creditors. (Cole v. Tyler, 65 N. Y. 73; Fuller v. Brown, 76 Hun, 557.) Third, the debtor was hopelessly insolvent when the transfer was made, and this fact, if not actually known to his mother (as it probably was), was certainly known to her attorney who represented her in the transaction. This circumstance of itself cast upon the grantee, as well as the grantor, the burden of proving the honafides of the transaction. (Fuller v. Brown, supra ; Wadleigh v. Wadleigh, 111 App. Div. 367.) The proof clearly showed and the court found that Edward E. Gwynne was insolvent'at the time of the conveyance. The defendants did not assume or at least satisfactorily sustain the burden of showing honafides, but on the contrary it seems to have been assumed that the burden of proving maleofides and inadequacy of consideration still rested upon the plaintiff. Fourth, the fact that the conveyance was from a son to his mother carried a suggestion of fraud in conjunction with the other facts in the case. (First National Bank v. Miller, 163 N. Y. 164; Lawrence Brothers, Inc. v. Heyman, supra.) Fifth, the fact that the consideration is attempted to be found in past advances, which are not clearly shown to have been loans and not gifts, and the amount of which is left vague and uncertain. Sixth, notwithstanding all these indicia of fraud, and the consequent obligation resting upon defendants to establish the honafides of the transaction they made no attempt to prove that the interest conveyed was not worth more than the alleged consideration, or indeed to prove any value whatever, leaving the only evidence in the case as to value that of plaintiff’s expert, who put it at upwards of $15,000. There are other circumstances, of perhaps minor importance, but all of which tend to show that the conveyance was made and accepted for the sole purpose of hindering 'and delaying the grantor’s creditors and especially that one who was pressing his claim, and in order that the *116property might be kept in the family for the ultimate benefit of the grantor’s children, to whom, in fact, it was devised by his mother by a will executed, shortly after the transfer.
The judgment must he reversed and a -new trial granted, with costs to the appellant to abide the event.
Laughlin and Olarke, JJ., concurred; Patterson, P. J., and Ingraham, J., dissented.