77 N.J. Eq. 119 | New York Court of Chancery | 1910
The single question presented is whether Mr. Stokes in fact owed Mr. T'atem, on July 28th, 1908, approximately $1,200, and received the conveyance in question in good faith and without any fraudulent or improper purpose. If the indebtedness existed to the amount named and the conveyance was in good faith, it is immaterial, so far as the subsequent judgment creditor of Mr. Stokes is concerned, whether the conveyance was absolute or as security, for the surplus money, which now stands in the place of the property conveyed, is only about $500.
The law controlling controversies of this nature is well defined. So far as the powers of this court extend it is the right of an individual who is' in failing circumstances or insolvent to prefer one of his creditors; and it is also the right of any creditor of such an individual, acting honestly and in good faith,
“The reasons that have been assigned for the distinction between one who purchases for a present consideration and one who purchased in satisfaction of a pre-existing debt are sound and unassailable. The former is in every sense a volunteer. He has nothing at stake, — no sglfinterests to serve. He may, with perfect safety, keep out of the transaction. Having no motive of interest prompting- him to enter it, if yet he does enter it, knowing the fraudulent purpose of the grantor, the law. very properly, says that he enters it for the purpose of aiding- that fraudulent purpose. Not so with him who takes the property in satisfaction of a pre-existing- indebtedness. líe has an interest to serve. He can keep out of the transaction only at the risk of losing his claim. The law throws upon him no duty of protecting- other creditors. 1-Ie has the same right to accept a voluntary preference that he has to obtain a preference by superior diligence. He may know the fraudulent purpose of the grantor, but the law sees that he has a purpose of his own to serve, and if he goes no further than is necessary to serve that purpose, the law will not charge him with fraud by reason of such knowledge.”
It cannot be said to be unworthy of belief that one well-circumstanced friend should advance to another, whom' he believed to be solvent, the amount here stated in the manner claimed. The ledger accounts, showing the dates and amounts of the several loans, was undoubtedly- incompetent evidence in the absence of original entries, but the sworn statement of the two men that the aggregate amount was loaned as stated by them is sufficient. I am unable to believe that they swore falsely.
The value of the interest of Mr. Stokes which was conveyed-appears to have been about the amount of the indebtedness.
Both Mr. Stokes and Mr. Tatem have testified that Mr. Tatem knew nothing of the indebtedness of Mr. Stokes to the Atlantic Befining Company at the date of the conveyance, and also that Mr. Tatem had asked for security for the money due on prior occasions, and that it had been promised and its execution deferred.
The fact that Mr. Stokes was permitted to occupy a part of the premises conveyed without, paying rent does not, to my mind, indicate fraud, if it be true, as stated by both parties, that rent was to be paid. Had the conveyance, in fact, been made as a mere cloak to protect the grantor from his creditors, it is not improbable that more care would have been observed to give it the appearance of regularity. One of the badges of fraud defined in 20 Cyc. 450 is:
“Circumstances indicating- excessive effort to give the transaction the appearance of fairness or regularity, which are not usually found in such transactions, are to be regarded as badges of fraud.”
"With the debt past due, and with the value of the property conveyed about the amount of the debt, and with an absence of knowledge on the part of the grantee of other indebtedness of the grantor, no fraudulent purpose can be properly assumed. In Muirheid v. Smith, supra (at p. 309), it is said:
“Astute as courts should be in the detection of fraud, they are not justified in finding it on grounds which show no more than its possible existence. When the acts of the parties admit of a reasonable interpretation in favor of honesty and fair dealing, they should receive ll.”
I will advise a decree directing the surplus money to be paid to petitioner.