58 A.D. 395 | N.Y. App. Div. | 1901
Lead Opinion
This action was brought by a judgment creditor of Edward.B. Cuthbert to set aside certain transfers and a general assignment made by. him, upon the ground that the same were made with the intent to hinder, delay and defraud his creditors. The complaint alleged, in substance, that the plaintiff had recovered a judgment against Edward B. Cuthbert for $15,019.71, upon which an execution had been issued and returned wholly unsatisfied; that for some time prior to August 31, 1897, Cuthbert did business in the city of’ New York as a stockbroker, on which day he made a general assignment to the defendant Ball for the benefit of creditors; that from. April, 1897, to the time when the assignment was made, Cuthbert; was insolvent, and for the purpose of hindering, delaying and. defrauding his creditors he transferred, without consideration,- certain property belonging to him to the defendant Ball, William- C. Cuthbert and Ophelia J. Cuthbert, which included the transfer of a. certain check for $10,000 drawn by him on the 20th of April, 1897, to the order of the defendant Ball, and another check bearing date on that day for $20,000, payable to thé order of one Youngthat these checks were cashed by the payees named in them, and the
Upon the issues thus framed the parties went to trial, at the conclusion of which the trial court found as a fact the recovery of the judgment, the issuance of the execution and the return of the same unsatisfied, as alleged in the complaint; and that
“II. On August 24, 1897, .the defendant Edward B. Outhbert transferred to the defendant William C, Outhbert, his brother, $18,000, and on August 30, 1897, the defendant Edward B. Outhbert transferred to the defendant William O. Outhbert $40,000. Shortly thereafter the $40,000 was transferred by the defendant William O. Outhbert to Ophelia J. Outhbert, the mother of the defendants Edward B. Outhbert and William O. Outhbert, who, until her death on August 14, 1899, was a defendant in this action.
“ III. The transfers aforesaid were each and all of them made with the intent to hinder, delay and defraud the creditors of Edward B. Outhbert, including this plaintiff. Such was the actual intent of the defendants Edward B. Outhbert and William C. Outhbert. Ophelia J. Outhbert had nothing personally to do with the matter,
The trial court also found that the general assignment for the benefit of creditors was made with intent to hinder, delay and defraud creditors, and that intermediate the commencement of this action and its determination, a decree of this court had been made adjudging that such assignment for that reason was void, and appointing one David J. Lees receiver of the assets of the property fraudulently transferred. It also found that after this action had been commenced and issue joined therein, the defendant Ophelia J. Outhbert had died, and that Francis L. Outhbert had been appointed the sole administrator of her estate; that he had been substituted in this action for her and the action had been continued against him.
And ,as a conclusion of law the court held that the transfers of " the $18,000 and of the $40,000 were void as against the plaintiff, and also as against the receiver Lees ; that the.general assignment was also void, and that that the defendant Ball had no interest in or title to the subject-matter involved in this action ; that for the purpose of satisfying the plaintiff’s judgment. William O. Outhbert should account to the plaintiff or the receiver for the moneys fraudulently transferred to him and make a discovery concerning the same; that the liability of Ophelia J. Outhbert to satisfy the plaintiff’s claim out of the $40,000 fraudulently transferred to her had, by reason of her death, devolved upon her administrator; that the plaintiff had an equitable lien upon the property in the hands of the administrator so far as it became necessary to satisfy the claim set out in the complaint, and for the purpose of satisfying such claim the administrator was directed to account either to the plaintiff or to the receiver appointed in the action brought to set aside the assignment.
Upon this decision judgment was thereafter entered, which, among other things, decreed that “ the defendant William O. Cuthbert, personally, and the defendant Francis L. Cuthbert, as administrator of the estate of Ophelia J. Cuthbert, deceased, are directed and required to pay forthwith to David J. Lees, as receiver aforementioned, fifteen thousand nineteen and 71/100 dollars ($15,019.71), with interest from December 20, 1897, to date of payment, together with the receiver’s expenses and commissions in collecting the same,
From the record before us it appears that Ophelia J. Outhbert, the mother of the defendants, Edward B. and William 0. Outhbert, inherited from her father, Francis W. Lasak, who died in 1889, upwards of $300,000, nearly all of which was paid to the defendant Edward B. Outhbert for her; that in October, 1894, Edward B. Outhbert and three other persons formed a copartnership under the firm nam§ of E. B. Outhbert & Co., for the purpose of doing business in the city of New York as stockbrokers; that in or prior to April, 1897, all of the persons having an interest in the copartnership withdrew, except Edward B. Outhbert, who thereafter continued as the sole surviving member; that when this copartnership was formed Edward B. contributed to the capital of the firm (and this was substantially all the capital .contributed by any one) $100,000, which sum, according to the testimony, and it is not disputed, he obtained, at least to the extent of $95,000, from his mother, Ophelia J. Outhbert; that he did in fact obtain at the time of the formation of the firm at least $95,000 from his mother, does not seem to have been disputed upon the trial, but that it was a loan to him was disputed, and the testimony given by him indicated that it was not in fact a loan, at least in such a sense that he could have been compelled to pay it or that his mother could at any time during the existence of the firm have insisted upon payment. He testified, referring to the transaction, as follows : “ I told her that I wanted to go in business and that I was getting along in life and I had not been able to do anything; I had been tied to this estate so long, attending to her matters for her, and that I had a proposition to start "a business in Wall street. She threw her hands up in the air and she said : ‘ That is just the way my money is going to go if I let you have anything. I won’t have anything to do with Wall street. I have always heard just what that Wall street is, and I have always been warned against it by my father, especially, and I know if he was living he would not allow you to have a cent for you to go down in Wall street.’ Well, I told her, I said, ‘ mother, you
From this testimony, which was not disputed or contradicted in any way, it appears that Edward B. was not to become liable to his mother for the amount advanced by her, unless he succeeded in making that amount out of the firm, and if he did not make it, then the amount advanced was, upon her death, to be deducted from the share or interest in her estate to which he would be entitled. Under such circumstances, we do not think that he could, for the purpose of reimbursing his mother for the advance thus made, withdraw from his assets, to the detriment of his creditors, money to pay such advance or any part of it. The terms and conditions, upon which the advance was made were that the same was to be repaid to her out of the profits of the business ; and if profits were not made, then upon her death it was to be made a charge against him. Had she died prior to his failure, no one would seriously contend that in the settlement of her estate the amount of this advance, under the agreement, could not be deducted from his share or interest. Any other view of the transaction would be that Edward B.. took no risk of the business so far as the capital invested by him was- concerned, but that the risk was wholly upon his creditors. If the venture were a failure, he could immediately withdraw from the. assets of his firm a sum sufficient to reimburse his mother for -the capital which he had invested, and in such reimbursement it is only fair to assume he supposed that he would ultimately participate. That this view of the transaction is a fair criticism of it, based upon the testimony of Edward B. Outhbert, is further sustained by the fact that no record whatever was made in the books of the firm of Edward B. Outhbert
In connection with these fictitious .entries it. is interesting at least to. examine in detail some of the entries in the books of the firm, of E. B. Cuthbert & Co., in the account headed “ Mrs.. O. J. Cuthbert Estate.” By these entries it appears that on July 1, 1896, the firm was actually indebted to Mrs. Cuthbert, for money advanced,- with interest (not, however, including the $95,000 ■advanced to E. B. when the firm was formed), in the sum of $78,157.27. The next interest item that appears in this-account is
There is no doubt but that Ophelia J. Outhbert received the proceeds of the check drawn on the 31st of August, 1897. She was entitled, however, only to so much of it as was sufficient to satisfy and discharge in full the money which she had advanced to the firm, together with interest to the date of payment. ' Just wliat that amount was does not clearly appear in this record, and must be determined by the referee on the accounting. All over and above this amount was a payment without consideration ; and it must be held to that extent to have been made to hinder, delay and defraud creditors. The explanation given by Edward B. Outhbert as to how this check came to be given is as follows: “ At the time I gave W. O. Outhbert the check of $40,000, our conversation was substantially as follows: He came into my office and he said I was in a very weak condition; that I had mother’s money there and that acting under instructions from her he called to make a demand on me for her money. He said, to make a formal demand on you for her money.’ I told him, well, if that’s the case, I would have to pay him. I then gave him a check. * * * -I cannot say on what account that $40,000 was paid. It was paid on the general account. * * * That was money I owed her.”
The judgment, therefore, should have directed that the referee ascertain just what amount was due to Ophelia J. Cuthbert on August 31, 1897, and require her estate to account for the $40,000 received by her, less whatever sum might be found to be due to her from the firm of E. B. Cuthbert & Co. or E. B. Cuthbert, together with interest thereon, not including the $95,000 originally advanced
This brings us to a consideration of the claim made against William C. Cuthbert. It appears that in April, 1897, the defendant Edward B. Cuthbert drew a check payable to the order of a Mr. Ball, a clerk in the office of E. B. Cuthbert & Co., for $10,000, and this item was charged on the books of the firm to legal expenses; On the same day a check was also drawn payable to the order of a Mr. Young, who then had a small interest in the firm, for $20,000, and the same was charged against his account. These checks were cashed within a few days after the same were drawn by the respective payees, and the cash obtained was delivered to Edward B. Cuthbert, who deposited the same in a safe deposit vault, where it remained until the 24th of August, 1897, on which day the whole amount was turned over to William C. Cuthbert by Edward B. Cuthbert. The explanation given by Edward B. Cuthbert as to this payment was as follows : “ The reason I gave my brother William the $30,000 in greenbacks instead of a check on that balance in the bank was, that the balance at that time would not have stood it. The way that was, my brother, W. C., came in and said he had to have some money to put up as he had been called upon for margins on stocks he was carrying for us. He said,£ I have got to have some money. I have got to put this up before three o’clock. * * *’ Then I said £I have $30,000 down in the trust company and I will have to go and get it out;'’ so I went down there, telling my brother, ‘ yon wait until I come back; ’ and I went down there and got the $30,000 and brought it back and handed it to him. * * * I simply handed him the money and said, ‘ Bill, send back to us all you can out of it.’ * * * And finally I learnt that he sent back the $12,000.”
From a concession made upon the trial, it appears that a payment of $30,000 was in fact made by Edward B. Cuthbert to William C. Cuthbert, as stated in the testimony just quoted, of which William C. Cuthbert retained $18,000, and this is the sum which the trial court found he should account for. From the same concession it appears that there was an account upon the books of the firm of E. B.. Cuthbert & Co., headed í£ W. C. Cuthbert Stock Account; ”
It further appeared that in another account in the books of E. B. Outhbert & Co. A. 0. Cuthbert was indebted to the firm in the sum of $3,621.25; and if this sum were added to the overpayment it would then .'appear that he had received between $7,000. and $8,000 more than he was entitled to, and for which sum he should account to the receiver Lees.
This brings us to a consideration of the judgment rendered. The action, as already said, was for an accounting. It was tried and decided upon that theory. The judgment rendered was in effect a money judgment. It directed William O. Outhbert personally and the' administrator of Ophelia J. Cuthbert to forthwith pay to Lees as receiver $15,019.71, together with interest thereon to the date of payment, including the commissions to- the recei-yer and the costs and disbursements of the action.
We are of the opinion that this was error. We think an accounting should have been ordered and the referee directed to ascertain the amount due to Ophelia J. Cuthbert and to William C. Outhbert, and that the administrator of the estate of Ophelia J. .Outhbert be
It follows that the judgment must be modified in accordance with the views herein expressed, with costs to the appellants to abide the event.
Patterson, O’Brien and Ingraham, JJ., concurred; Van Brunt, P. J., dissented.
Dissenting Opinion
I dissent. There is no proof whatever that the money which was loaned by the mother to Edward B. Cuthbert was intended as an advance to him, to be paid only by a charge against his share of his mother’s estate. She loaned the money to him at his request, and when she told him that the .money would be lost in Wall street if she let him have it, his answer was that her estate would not lose anything, as it might be charged against his share. There was no agreement upon her part not to ask him for the money, and she could have claimed it at any time that she saw fit.
Judgment modified as directed in opinion, with costs to the appellants to abide event.
