48 N.J. Eq. 193 | New York Court of Chancery | 1891
The complainant was appointed by the judge of the circuit court of the county of Warren receiver of the property of the defendant David M. Dean, under the twenty-sixth section of the act respecting executions. Rev. p. 394. The judgment upon which the execution issued which gave rise to the proceeding resulting in the appointment, was recovered by William M. Gibbs against David M. Dean, January 9th, 1890, for $500 of damages and $103.76 of costs, in an action for slander.
On the 5th of February, 1889, eleven months prior to the recovery of this judgment, Dean conveyed to his wife, through a third party, a house and lot worth about $1,000, and also assigned to her his one-sixth interest, amounting to $500, in a bond and mortgage given to secure $3,000, the interest to be paid to Dean's mother during his lifetime, and at her death the principal to be divided between him and his brothers and. sisters. Either on or
Gibbs and Dean were partners in a small country store for one year, commencing April 1st, 1888, and on April 1st, 1889, the partnership was closed, the debts of the concern paid, and the assets divided and distributed in specie between the parties. The business of keeping the store was continued by Gibbs. Shortly afterwards Dean began to slander Gibbs, and, in so doing, used language which tended directly to injure his character and standing as a merchant, and in October, 1889, Gibbs brought the suit in question.
The allegation of the bill is, that these transfers to the wife were made for the purpose of defrauding the then existing and possible future creditors of Dean, and also to enable him to gratify with impunity a desire which he then entertained of injuring Gibbs's future credit and standing as a merchant; and it prays that the conveyance of the house and lot and the assignment and transfer of the personalty may be decreed to be void, and that the wife may be decreed to re-transfer the personalty to the receiver, and to account for the proceeds of so much of it as she may have turned into money,-and to assign to the complainant any securities she may have arising therefrom.
The defendants take the point in limine, that this complainant has, and can have, no interest in the realty, and that as to that the bill must be dismissed. This part of the case is covered precisely by Higgins v. Gillesheimer, 11 C. E. Gr. 308, which- was a bill by a receiver, appointed, as here, upon supplemental proceedings to set aside a conveyance of real estate only. The authority of that case was partially drawn in question in the court of errors and appeals in Miller v. Mackenzie, 2 Stew. Eq. 291, -and it was there overruled in so far as it decided, or was supposed to decide, that a bill like that before the court could not be sustained for the purpose of reaching chattel interests. But Miller v. Mackenzie went no further. The chief-justice (at p. 293) expressly limits his reasoning and decision to personalty, when he says:
The case as made is as follows: Dean and Gibbs lived for ■many years in the village of Townsbui’y, Warren county, on the ■line of the Lehigh and Hudson Railroad Company. On April 1st, 1888, they entered into partnership to keep, for one year, a ■country store in a store-room which they rented of one Yliet, who appears to have controlled, and to have been able, so to :speak, to rent as an appurtenant with his store-room the post-mastership and station agency of the railroad. Dean held both ‘these positions, but was under obligation to resign both at the •end of his term. The capital invested in the business was $1,440, of which Dean contributed $1,080, or three-quarters, and Gibbs $360, and the term was one year. They purchased an old stack •of goods belonging to former tenants and appear to have paid too much for it, and that circumstance probably aided in promoting the difficulty which subsequently arose between them. 'On or about January 1st, 1889, Gibbs succeeded in procuring for himself alone the lease of the store-house for the ensuing year, and with it the right to Dean’s resignation and his own •appointment as postmaster and station agent. This made Dean very angry. He forbade Gibbs to buy any more goods on the •credit of the firm, and, on Gibbs’s assertion of his right to do ¡so, he wrote", January 4th, to the dealers from whom the firm
So far, there is little dispute between the parties. The differences arise when we inquire into the motives and object of Dean< in this conduct. He denies that he was influenced by anger at Gibbs for ousting him from the store and the offices he held with, it, and says, in explanation of his conduct, that early in December he looked over the bills owing by the firm and found- that it owed $580, and that he thought there were not goods enough in the store to pay the debt. He knew that Gibbs was a man of no-
Gibbs denies Dean’s statement as to the indebtedness in December, and the alarm felt by him at that time, and swears that the trouble began about January 1st, when Dean learned that he (Gibbs) had secured the lease of the store for the then ensuing •year.
Dean’s story as to the indebtedness in December is unsupported by any evidence, and is contradicted by the circumstances. 'The stock of goods and the trade were both extremely small, and I do not see how so large an indebtedness as $580 could have been incurred without the knowledge of Dean, who gave the business his constant attention, had an opportunity to open all •letter's received, and cared for all moneys, drew all checks and paid all bills. Then he admits that most, if not all, of these debts were paid off by February 1st. The checks of the firm were produced, and show no indications of any such indebtedness ■or payment as Dean swears to. It would seem to have been •easily within his power to have produced the bills and shown to whom this comparatively large sum of money was owing, but he failed to do so. Nor does he show whence came the money to liquidate it, nor why the first notice to the creditors was not sent earlier than January 4th.
This story is substantially corroborated by a witness, Kelsey., who was a by-stander, and who identifies it by the circumstance of the protested checks and the question as to whether one partner could sue another. Gibbs’s and Kelsey’s story of what occurred in January is denied by Dean, but I feel constrained to give it credence. It is in accord with what subsequently occurred. Dean went immediately to Belvidei’e, consulted counsel, and the result was the deed and assignment to his wife and the second batch of letters to the ca*editor-dealea’s with .the'firm. The transfer of property was made February 5th, and it was completed, so far as concerns the chattels, on April 1st.
Dean’s explanation of his conduct, and his excuse for the transfer of his property, is that he was afraid Gibbs would buy a large quantity of goods, more than the firm needed, in order to keep up the stock until April 1st, on the firm’s credit, and have them on hand at the close of the partnership, and compel Dean to sell them to him at a sacrifice. But I can find no evidence of any such design being entertained by Gibbs. He was undoubtedly entitled to buy, on partnership account and credit, from time to time, goods enough to keep up the stock and make the business fairly profitable to its close, and there is no evidence that he designed or attempted to do more.
Nor does the transfer of Dean’s property to his wife, made- in February, seem to me to be at all warranted or justified by the apprehension, if it had been well founded, that Gibbs would run the firm in debt to an improper extent. As to all creditordealei’s, to whom lettei’s wex’e written and notice given, the transfer was unnecessary, since the notice was sufficient of itself to effect the desii’ed end, and as to all ei’editor-dealers to whom no notice was giyen, the transfer was, of course, and upon the plainest pi’inciples, absolutely void.
Dean admits, on the stand, that befox’e the close of the partnership year he became satisfied that there were substantially no outstanding debts, and that all cause for the alarm he had felt the previous December had passed away, and yet he, at the last moment, gave his share in the partnership goods to his wife, and, on April 1st, invested $200 in cash in the px:omissox:y notes of one Ketcham, payable to his wife. He continued to do business by selling goods out of his house precisely as if he was the owner
There was, at the hearing, no pretence of any valuable consideration paid on the part of the wife, although Dean had sworn on his examination, under supplemental proceedings upon the execution, that she had paid him $800 as a consideration for the land. Dean frankly stated, on the witness-stand, that the transfer to his wife was for a temporary purpose, and that he expected that she would retransfer the property to him after the partnership was closed, but had as yet not done so, and that the only inducement to let it remain longer was that his health was feeble and his chances of life not good, and, having no children, he felt that he wished his wife to have his property when he died, and so was willing to let it stand in its present condition.
Upon this state of facts* the complainant puts his case on two grounds-, both of -which he contends are found in the case, and either of which he argues is sufficient to entitle him to relief.
First. Granting that the transfer was made for the purpose staffed by the defendants, and for that purpose only,-.and that it was quite innocent and free from frand, in law and fact, still it is plain, as to the personalty at least, that the wife holds it in trust for the husband, and that it is plainly within the letter and spirit of the act respecting executions under which complainant claims title.
The twenty-fourth section of the act (Rev. p. 393) provides that the petition of the execution creditor shall state “his belief that .the judgment debtor has property or money, or things in action due to him, or held in trust for him, where the trust has been created by or the fund held in trust has proceeded from himself” <fcc., and by the twenty-sixth section the receiver becomes vested with all such property rights. Now, it seems to me, under the circumstances above set out, that the wife holds
But the complainant goes further, and insists, in the second .place, that the transfer in question was (1) fraudulent and void, from the defendants’ standpoint, as to present and possible future "Creditors by contract; and, further (2), that the evidence warrants ■the belief that it was made with the object and purpose of enabling the defendant Dean to do with impunity just what he has •done.
As I have already stated, this transfer was, on Dean’s own . show, fraudulent and void as against any of his future contract creditors of the class he then says he had in his mind, namely, creditors of the firm by contract entered into in good faith with Gibbs on behalf of the firm. There was no pretence that the partnership contract forbade or did not include the right to purchase goods for resale by the firm on the credit of the firm. The right of Gibbs to make such purchases was conceded. The . notices to. the creditors did not allege, and were not put on the ground, of want of power in Gibbs. Such being the case, Dean liad no right, in law or in equity, to protect himself against the ■effects of contracts entered into in the ordinary course of business by Gibbs while the partnership existed, 'by putting his property beyond the reach of creditors who became such in that way. But the debt here in question is not one of that class, and I am ■not prepared, without further consideration, to hold that the ..transfer, though void for the reason just mentioned as against future creditors of the class mentioned, was for that reason void as against the judgment obtained afterward by Gibbs. I leave that question undecided.
But the aspect of the case just dealt w.ith does show quite plainly that the transfer was not made by way of a family settlement, or for other proper and lawful purpose, and aids to establish the ground first taken, namely, a general trust for the assignor.
The last branch of the complainant’s second point was fully discussed, and with much ability, on both sides, and I have felt it to be my duty to consider and decide it. My conclusion on a
I have already alluded to the evidence in support of this.position. The principal points are the anger of Dean on learning, as-he did about January 1st, 1889, that Gibbs had secured the lease-of the store and its incidents for the ensuing year, and his threat then made to prevent him from keeping the store and to spend his time and money to ruin him; his letters of January 4th to-the creditor-dealers with the firm, forbidding further sales except on orders signed by both partners, and announcing the approaching dissolution on April 1st; the notice to the bank cashier not to pay checks . unless signed, by both partners; his immediate-issuing to several creditors checks signed by himself alone, and their protest in accordance with his orders; the quarrel with Gibbs over these protests, and the renewed threat by Dean to-ruin Gibbs’s credit and to prevent his keeping the store, and his-avowal that such was his object in having the checks protested ;. the threat of Gibbs to sue him if he undertook to persecute him, and Dean’s threat to fix his property so that Gibbs’s suit would' be fruitless; the conveyance of the house and lot and assignment-of the bond ■ and mortgage to his wife, on February 5th, and' shortly after this quarrel; the second batch of letters, February 9th, to his creditor-dealers forbidding any further sale to the-firm; and then, six weeks or more later, after all danger from partnership debts was passed, and he had had time to cool, and' the assets were about to be divided, his further threat to ruin Gibbs, and then his present to his wife of his share of the store-goods, together with the money he received from the sales, and his loaning the money op promissory notes taken in his wife’s-name, and saying to the borrower that he put it in his wife’s name-because “ he was afraid of Gibbs.”
Now, there was no contention or pretence that at that time (about April 1st, 1889) he was afraid that he might be held' liable for any debts which Gibbs had contracted or might con
It is well settled, as I think, that if after a person has incurred a liability for a tort, and before suit brought upon it he makes a voluntary conveyance or settlement of his property, and judgment afterwards goes against him for the tort, the conveyance is void as against that judgment. It was so laid down by Chancellor Runyon in Scott v. Hartman, 11 C. E. Gr. 90, and reiterated by Vice-Chancellor Van Fleet in Post v. Stiger, 2 Stew. Eq. 558, 559; and while in neither of" those cases was the point necessary for the decision, yet the cases cited in support of the doctrine do fully support it, and it is somewhat remarkable that among them Jackson v. Myers, 18 Johns. 425, and Clapp v. Leatherbee, 18 Pick. 138, were cases where the tort was, as here, a slander. In addition to the two last-named cases are Fox v. Hill, 1 Conn. 295; Leukener v. Freeman, 1 Eq. Cas. Abr. 149, Freem. Ch. 236 (a case of damages for crim. con.), and Barling v. Bishopp, 29 Beav. 417, 6 Jur. (N. S.) 813. The rule is so stated in Wait Fraud. Conv. §§ 110, 123, where many cases are cited in its support from other states. The principle which underlies it is that there is no distinction in this respect between a cause of action founded upon tort and one founded upon contract. Each are equally entitled to be protected against voluntary transfers of property.
If this is so, then it seems plainly enough to follow that if a transfer be made for the purpose of immunity against torts thereafter to be committed, it is open to the same objection as if made to avoid paying future contractual obligations. In fact, it seems to me that the party who suffers from a tort stands on higher ground in. this respect, .than one who suffers from a broken contract, and that the argument from thp latter, to the former is .a fortiori, since he who contracts with another does so voluntarily
■ Defendants’ counsel placed reliance upon the recent case of Ex parte Mercer, L. R. (17 Q. B. Div.) 290 (1886), as overruling, ■■or at least very much modifying, the earlier English cases on this subject. There a man who was under contract to marry one woman intermarried with another, and, after suit brought by the first flaneé for breach of promise of marriage, came unexpectedly into possession of a small legacy, which he at once settled, in the • ordinary way, upon his wife and children, if any there should -be, with remainder to himself. Judgment went against him in •the suit, and it was held that the settlement was valid as against ¡the judgment. It was an admitted fact in the case that there was no actual fraud on the husband’s part, and that the thought 'of a judgment against him in the suit was not in his mind when •he máde the settlement, and it was on that avowed ground that
The remaining point taken by the defendants is, that there is-no proof that the wife participated in this unlawful design of her husband, but such -non-participation can only save the conveyance or settlement when it is made for a valuable considera-r tion. "Where, as here, there is no consideration, then the innocence-of the assignee or grantee is immaterial, and will not avail to save-the transaction. May Fraud. Conv. 45; Wait Fraud. Conv. §§. 200, 208; 1 Story Eq. Jur. § 35.
The complainant is entitled to an assignment of the interest in' the bond and mortgage, and a transfer of the Ketcham notes,:, and, if necessary, to an account of moneys received by the wife-from the husband.