McDowell v. Goldsmith

| New York Court of Chancery | Sep 15, 1851

The Chancellor :

This is a creditor’s bill, filed by the-complainants, who also, allege themselves to be creditors of Elizabeth Osborne, to set aside certain deeds, executed by her to the defendant, upon the ground, that they were made to delay, hinder and defraud them, and are, therefore, void at common law, or under the statute of Elizabeth.

The deed of the 14th of July, 1841, the first in point of date, is not now called in question, and need not be noticed. The second deed, which is a mortgage of real and personal property, is dated on the 5th of November, 1842, and was executed to secure the defendant the sum of twenty-one thousand five hundred dollars, which, according to the recital, was due from the mortgagor to him. This deed was executed in pursuance of the provisions of the act of 1833, ch. 181, and in conformity therewith, a petition was filed on the equity side of Baltimore County Court, on the 6th of December, 1842, and on the same day a decree was passed by that court, providing for the sale of the real estate and chattels real, for the payment of the mortgage debt, with interest, when it should become due, according to the terms of the’ mortgage, as by the said act is authorized.

This decree, as is shown by a record thereof, filed in this cause, now remains in the Baltimore County Court, and it is no part of the object of the present bill, to interfere with it in any way. Prior to the period limited for the payment of the money by the terms of the decree, that is to say, on the 16th day of February, 1844, the mortgagor, Elizabeth Osborne, conveyed to the defendant, the mortgagee, her equity of redemption in the mortgaged premises, for the consideration as expressed in the conveyance of $7,750, and this conveyance, also, is impeached by these complainants. I do not understand it to be insisted that this court has the power to vacate or annul the decree of Baltimore County Court, that court by the terms of the act of assembly referred to, having concurrent jurisdiction with this court to pass decrees, upon mortgages of this description, upon the ex parte application of mortgagee, or his assigns, and as the decree passed by Baltimore County Court, upon the mortgage, is not to be called in question in this court, I do not clearly see how the mortgage, the foundation of that decree, can be impeached here.

But even if this objection could be overcome, and it would be competent for this court to set aside the decree of Baltimore County Court, this bill does not ask for the exertion of any such power, its object and prayer being to vacate the deeds, and not the decree passed upon one of them, and if, therefore, this court should now pronounce the mortgage of November, 1842, fraudulent and void, it would be adjudging that void, which a court possessing équal powers with itself, had given relief, and to which relief this bill makes no objection. Suppose this court should declare this mortgage fraudulent against the creditors of the mortgagor, and the mortgagee should afterwards proceed to carry his decree upon it, in Baltimore County Court, into execution, would it be competent to this court to interfere and prevent his doing so ? Would it not be quite as competent to Baltimore County Court to pronounce the decree of this court, vacating the mortgage, a nullity, as for this court to adjudge the decree of Baltimore County Court, upon the mortgage, void ? It seems to me, it would be dangerous to place the two courts in this position of antagonism, when there can be no absolute necessity for it, and I am, therefore, unwilling to do so. If the plaintiffs seek to avoid the mortgage, and the decree passed upon it in Baltimore County Court, upon the ground of fraud, let them file a bill in that court for that purpose, and if they can establish the fraud, there can be no doubt they will be relieved.

I, therefore, forbear expressing any opinion upon the mortgage of November, 1842, and proceed very briefly to consider the case as it relates to the deed of the 16th of February, 1844.

This is a conveyance of the mortgagor’s equity of redemption, and there are circumstances apparent upon the face of the transaction, and altogether independent of the evidence aliunde, offered to establish the fraud, which involve it in suspicion. The principal of the mortgage debt, by the terms of the instrument, was not to become due until November, 1847, and the decree passed by Baltimore County Court, on the 6th of December, 1842, gave the mortgagor, until the 1st of December, 1847, to pay the debt, with the interest thereon, and no sale under the decree could have been made until that tim;> should arrive. There was, therefore, on the 16th of February, 1844, when the deed in question was executed, no motive pressing upon the mortgagor, to part with her right to redeem this property. The debt had, then, more than three years to run, and it is not at all likely, that under such circumstances, the mortgagor would have been disposed to anticipate its payment, and thus deprive herself of the advantage of the probable appreciation of the property in the interval. There is, moreover, something suspicious in the account given by the defendant, of this transaction, and in his statement of the motives by which he was influenced, as he says, in making the purchase. He speaks of further advances made by him to Mrs. Osborne, subsequent to the date of the mortgage, which, with his claim for interest on the mortgage debt, amounted, as he says, on the day the deed of February, 1844, was executed,' to $3,250, and that on that day, he paid her in money, the sum of $4,500, making the aggregate sum of $7,750, which, he says, formed the consideration of the deed, and was the full value of the equity of redemption, and more than he would have given therefor, under other circumstances. The court does not see, in these circumstances, any reason or motive, to induce the defendant to give more for the property, than he would, as he declares, otherwise have been disposed to give. He had a decree for his mortgage debt, securing the payment of principal and interest, at the stipulated period, and if he had made the mortgagor further advances, as he states, that furnished no reason why he should advance in cash the large additional sum of $4,500, to acquire the title. Lenders of money, say the Court of Appeals, in the case of Dougherty vs. McColgan, 6 Gill & Johns., 281, “being less under the pressure of circumstances, calculated to control the free exercise of judgment, than borrowers, they may often be tempted to avail themselves of that advantage, in order to attain inequitable bargains.” The leaning of courts of equity, is therefore against them, and presumptions are not made in their favor. In this case, all the advantages of position were with the defendant. He had a mortgage and decree for a large sum of money, and there is no circumstance connected with the transaction, which would induce a man of ordinary prudence, to give more for the property, than his unbiased opinion would prompt him to give. The case, moreover, is singularly defective in evidence, in regard to the payment of the consideration, by the defendant, and his refusing to answer, respecting his means to command such large sums, is certainly a circumstance from which unfavorable inferences may be drawn.

It has been argued by his counsel, that if the reasons given by the defendant, for not giving this information, were not satisfactory,, exceptions should have been filed, and a fuller answer thus extorted from him, and there can be no doubt that his refusing to answer, is not to be taken as an admission of the allegations of the bill, which have not been answered. But this rule of chancery practice does not exempt the defendant from some degree of suspicion, because of his declining to answer interrogatories, which might easily have been answered, and without, so far as the court can see, subjecting the defendant to the slightest annoyance or inconvenience. It will be seen, upon referring to the case of Joice and Wife vs. Taylor, 6 Gill & Johns., 54, that the court lay no little stress upon the caution displayed by the defendant in that case, in answering, or evading to answer, an allegation of the bill, and that it evidently had some influence upon the decision of the cause.

The court cannot, however, shut its eyes to the extraordinary account given by the defendant, of his dealings with Mrs. Osborne. It must strike the mind as strange, indeed almost incredible, that transactions involving such large amounts of money, should take place with such utter disregard of the ordinary precautions which persons having any regard for their interests, usually observe. The defendant says, “he kept no book of accounts,” “in making his loans to the said Elizabeth Osborne, he sometimes took her notes,” “at other times, he would make a loose memorandum thereof, and again, he would suffer the loan to rest in the recollection of the parties.” These statements are made with reference to the debt of $21,500, for which the mortgage of November, 1842, was given, but it does not appear that the defendant was more careful in his subsequent transactions with Mrs. Osborne, or that he kept any accounts of the advances, which he alleges he made her, after November, 1842, and which constituted a part of the consideration of the conveyance of February, 1844. There is, unquestionably, about this whole case, a character of reckless carelessness, which is absolutely amazing, and which, in the eyes of prudent men, cannot fail to stamp it with suspicion.

The parol evidence, also, is strong in opposition to the deed. In view of all the circumstances which have been mentioned, there would, perhaps, be quite proof enough to overthrow the conveyance of the equity of redemption, without the evidence of Mr. Spurrier, but I am of opinion, that the declarations made by Mrs. Osborne to him at the time she executed that conveyance, are admissible. If the case of Merrill vs. Meacham, 5 Day, 341" court="Conn." date_filed="1812-11-15" href="https://app.midpage.ai/document/merrill-v-meachum-7866432?utm_source=webapp" opinion_id="7866432">5 Day, 341, is authority, it concludes the point. In that case, the declarations of a grantor, made at the time of the execution of the deed, the grantee not being present, were admitted in evidence, as part of the res gesta, and as constituting an essential part of the facts necessary to understand the transaction. The force of that case is attempted to be broken, by remarks upon the flagrant character of the fraud which the grantor was about to perpetrate upon his creditors, but in answer to this, it may be said that the grantee was no party to this fraud, not even having any knowledge at the time of the execution of the deed, and that when it did come to his knowledge, he paid a valuable consideration for so much of the property as he agreed to accept. It seems to me, however, that the admissibility of this description of evidence cannot depend upon the degree of fraud. Whether it be more or less enormous, or whether there is, or is not, fraud in the transaction, is to be ascertained when the proof is introduced, and to say, that the proof shall not be offered, until the fraud is established, is to say, it shall not be offered until the necessity for its introduction is removed. In truth, in this case of Merrill vs. Meacham, the gross character of the fraud was made out by the declarations of the grantor. In the case now under consideration, there is a reason for letting in the declarations of the grantor, which did not exist, in the case in Day. In this case, the grantee first called on the scrivener, who prepared the deed, and told him, the grantor would call on him, and give him instructions about it. She did call accordingly, gave the instructions, and the deed was prepared, and executed, and her declarations then made, are now offered to show that the object was to defeat her creditors. It seems to me, that by referring the draftsman of the deed to the grantor for instructions, the grantee must be considered, to some extent at least, as constituting the grantor, Eis agent, and tEen, of course, the declarations of the agent made in the course of, and accompanying the transaction would be admissible. Franklin Bank vs. Steam Company, 11 Gill & Johns., 28.

But at all events, the circumstance that the grantee gave no instructions himself, being willing to take any deed which the grantor might have prepared, certainly is calculated to show, that the deed was intended rather for the benefit of the latter than the former. We find by the evidence of the same witness, that when the mortgage of November, 1842, was prepared, both parties were present, and the instructions for its preparation were given in the presence and hearing of both, and it is certainly not unreasonable to suppose that if the grantee had felt himself to be interested in the deed of 1844, he would have given some instructions in regard to it.

Taking, then, these declarations as evidence, and considering them in connection with all the other evidence in the cause, I am of opinion, that the deed of the 16th of February, 1844, cannot be supported, as against the creditors of the grantor, which makes it necessary to inquire whether these complainants, or any of them, have established their right, as creditors to call them in question. Sarah Ann Twist was one of the parties in the original bill which was filed on the 25th of August, 1845, and her claim, therefore, for $1,100, founded on the note of Elizabeth Osborne, dated the 6th of November, 1843, at twelve months, is certainly within time, and I think she has a standing in court, as a creditor, in respect of that note.

By an amended bill, filed as of the 1st of April, 1851, certain other parties come in as complainants, and I am of opinion, that according to the law and practice of this court, there is no objection to their coming in at that stage of the cause. Hall vs. Creswell et al., 12 Gill & Johns., 36. But, although they may come in as co-complainants, with the originally suing creditors, limitations will run against their claims until they do so come in, and file them. This point, also, was expressly decided by the case last cited. Certain of the parties to the amended bill, have proved their claims, to wit: Walter Crook, Hyde & Carter, Hamilton Easter & Co., Harrison & Co., and Ann Vickery, but the claim of the last party appears to have been paid. Notwithstanding, however, the claims of these parties have been proved, the plea of limitation, relied upon in the answer, must bar the remedy upon them, unless the fraudulent character of the transaction, saves them from the operation of the statute, and this is a question not free from difficulty. In Beach vs. Cotlin, 4 Day, 284, the Supreme Court of Connecticut said, that a grantee under a fraudulent conveyance, could acquire no title by possession, against the creditors of the grantor, for whom the grantee held the land in the nature of a trustee for them.

This general remark, however, was made in an action of ejectment, and it will be found, upon an examination of the case, that the title of the plaintiff, who was a judgment creditor, was not asserted until within less than four years before the commencement of the suit; and, that, therefore, the defendant’s possession until his title accrued was not adverse to him, nor was it inconsistent with the right of the grantor, for he had none. The possession of the defendant in that case, was a mere naked possession, being adverse neither to the title of the grantor, nor to the plaintiff before he levied his execution upon the land, and the action was brought within the period allowed by the statute after such levy. In the case now before this court, the plaintiffs must in the first place show themselves to be the creditors of Elizabeth Osborne, and then that the deed they seek to put out of their way, is a fraud upon them as such creditors. The question, so far as it involves the existence of their claims, is of a legal nature, or at any rate, would be cognizable at law, and in such cases, courts of equity govern themselves by the same limitations as the statute prescribes to suits in the common law courts, acting not upon the ground of analogy but in obedience to the statute. 1 Story’s Equity, section 529; 2 ib., section 1520; Dugan et al. vs. Gittings et al., 3 Gill, 161. Cases have been cited to show that length of time ought not to be permitted to repel relief when fraud is imputed and proved. Such was the language of the Supreme Court, in Prevost vs. Gratz, 6 Wheat., 481, but the same case proves that the party, relying upon the fraud to excuse his delay, can only do so successfully when the fraud has been concealed from him. And cases are numerous to show that this is the true doctrine. In a note to Pickering vs. Lord Stamford, 2 Vez. Jr., 272, several cases are referred to, establishing the proposition, that in cases of fraud and mistake, the statute of limitations begins to run from the time of the discovery of the fraud or mistake. Such was said by Chancellor Kent to be the settled rule in Chancery, in the case of Kane vs. Bloodgood, 7 Johns. Ch. Rep., 122. The language there used is, “that after the discovery of the fact imputed as fraud, the statute runs as in other cases.” It cannot be necessary to multiply authorities upon this point, because it is believed, no case can be found, in which relief has been extended to a party in equity in opposition to the statute of limitations, upon the ground of fraud, when the fact imputed as fraud, was discovered by the party at a period beyond the time allowed by the statute for the assertion of his rights.

This being the rule, I do not see upon what principle the complainants, Walter Crook, Hyde & Easter, Hamilton Easter & Company, and Harrison & Company, can escape the objection of the statute. They came in for the first time, on the 1st of April, 1851, when the amended bill was filed, and then, more than double the period allowed by the statute of limitations had elapsed since the maturity of their claims. Their claims are of a legal nature, cognizable in a court of law, and consequently this court is bound by the provisions of the statute, equally, and to the same extent as if they were attempting to recover them in a court of law. If they seek to get rid of the statute upon the ground of fraud, the answer is, that the deed of the 16th of February, 1844, the imputed act of fraud, was recorded on the day of its date, which is constructive notice to all the world.

But in addition to these views of the subject, it seems to me, the case is concluded by the decree of the Court of Appeals of this state, in the case of the Farmers’ Bank of Maryland vs. Benjamin Mullikin et al., passed at December term, 1840. In that case, certain deeds were declared to be fraudulent against the creditors of the grantor, and yet the plea of limitations was allowed to avail those of the parties claiming under those deeds, who relied upon it. The only difference between that case and this, is, that there the deeds were made to the son and daughter of the grantor who may not have participated in the fraud. But that circumstance, it appears to me, cannot vary the principle. The deeds are adjudged to be fraudulent, as against the creditors of the grantor, and I can conceive of no reason, why a fraud, in which both grantor and grantee co-operate, shall not be within the statute of limitations, whilst a fraud, perpetrated by the grantor alone, shall be. The effect upon the creditors is precisely the same, and the fraud cannot be more severely condemned in the one case than the other.

John Glenn, Charles H. Pitts and S. T. Wallis for Complainants. Wm. H. Collins, Thos. S. Alexander and Wm. P. Preston for Defendant.

I will, therefore, sign a decree vacating the deed of the 16th of February, 1844, and directing the equity of redemption to be sold, for the payment of the claim of Sarah Ann Twist for $1,100, founded upon the note of Elizabeth Osborne, dated 6th of November, 1843, and the claims of such other of the creditors of the said Elizabeth Osborne, as may come in and establish their claims. The decree will reserve for further directions the question in relation to the claim of Sarah Ann Twist, upon the note for $2,800, dated 21st of October, 1844, payable twelve months after date. The evidence shows that Elizabeth Osborne removed to New York in November, 1844, before the note matured, and there are no facts in the cause from which it can be fairly inferred, that she could ever have been sued in Maryland upon that note. Indeed, if it be true that she died in April, 1845, and there has been no administration on her estate, limitations could never have commenced to run against this claim. The bill, as to the other complainants, will be dismissed.