delivered the opinion of the court.
The question in this case is whether certain transfers of property made by John Schreyer to his wife, Anna Maria Schreyer, were fraudulent and void as against Peter J. Vanderbilt, a creditor of John Schreyer. The case is here on appeal from a decree of the Circuit Court for the Southern District of New York, brought by the assignee in bankruptcy of Schreyer against Schreyer individually, and as executor, etc., of his wife, now deceased. The Circuit Court, 25 Ped. Bep. 83, found that the transfers were fraudulent, and decreed that the bankrupt, as executor and trustee, convey the real estate and bonds and mortgages hereafter described to the assignee in bankruptcy. From such decree this appeal has been taken.. The facts are these: On January 21, 1871, Schreyer conveyed to his wife the following real estate situated in the city of New York: Nos. 348 and 350 West 39th Street and Nos. 351, 353 and 355 West 42d Street. The title was passed from Schreyer to his wife, by conveyance to Edward Sharkey, and from him to Mrs. Schreyer. On October 15, 1870, Schreyer and his wife conveyed No. 420 West 40th Street to George Gebhart and No. 422 West 40th Street to Matthew L. Bitchie, who each thereupon executed mortgages for $5000 to Mrs. Schreyer.
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These conveyances and mortgages were all recorded in 1871. Notice was thus given, by public record, of title in Mrs. Schreyer to both the real estate and the mortgages. Thereafter, and in 1874, buildings were erected on the two lots last mentioned/the mortgages for $5000 surrendered and two- new mortgages taken — one from Gebhart to. .Mrs.' Schreyer for $7750 on premises No. 420 West 40th Street, and one from Ritchie-to Mrs. Schreyer for $8850 on premises No. 422 West 40th Street. The claim of Vanderbilt arose in this way: On February 2,1874, a building contract was entered into between George Gebhart and Matthew L. Ritchie; as owners of premises' Nos. 420 and 422 West 40th Street, with Vanderbilt, whereby he covenanted to erect two buildings on said premises for the sum of $8175, to be’ paid in the following manner: “When the said houses are topped out the’ payment of five •thousand ($5000) dollars, by assignment of mortgage held by John Schreyer on the property of Anna Maria Schreyer, No. 350 West 42d Street, in the city of New York; three thousand one hundred and seventy-five ($3175) dollars when the houses are fully completed as above.” On May 5,1874, Vanderbilt had so far completed his contract- that he was entitled to an assignment of the bond and mortgage. He then demanded and received from- Schreyer not only an assignment, but a guaranty of the bond and mortgage. There was no new consideration for this guaranty. In 1876 a.prior mortgage oh the premises covered by the bond and mortgage assigned as abdve set forth was foreclosed, and swept away the entire property, so that this bond and mortgage became worthless; whereupon Schreyer was sued on his guaranty, and judgment recovered" thereon. On September 17,1878, John Schreyer was adjudged a bankrupt upon a creditor’s petition, filed August' 23, 1878. Several claims were proved against his estate in bankruptcy, but all have been satisfied except that of Vanderbilt; so that,while this action was brought by an assignee in bankruptcy, it was really for the sole benefit of Vanderbilt. On September-6, 1876, Mrs. Schreyer died, leaving a will by which her property was devised and bequeathed to her children; her husband was named as executor; and he, individually and as executor,
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was the defendant in this suit. And now tHe contention .of the plaintiff below is, that the conveyances of January 21, 18Tl,-and the two mortgages from Gebhart and Ritchie‘to Mrs. Schreyer in 1814 were fraudulent and void as against the. claim of Yanderbilt. The conveyances were made and recorded more than: three years prior to the-building contract, out of .which Yanderbilt’s claim arose; and, while the mortgages to Mrs. Schreyer were executed and recorded during the same year with the bu: .ding contract, yet the obligation assumed by Schreyer was a voluntary one, without considera,tion, and after a contract' expressly providing , for payment in another way, was conditional, and only became-a fixed indebtedness two years thereafter, when by the foreclosure proceedings the worthlessness of the guaranteed bond and mortgage was developed- Obviously, very clear and direct testimony is essential to support an adjudication that these various transfers were fraudulent and void as against this subsequent creditor. In determining the rules applicable to such transactions reference should be had not only to the decisions of this court, but •also to those of the courts of New York, where the parties .lived and the transactions took place.
Allen
v.
Massey, 17
Wall. 351;
Graham
v.
Railroad Company,
In a redént case in the Court of Appeals of New York,
Todd
v.
Nelson,
Turning now to the cases in this court: It was said in.
Smith
v.
Vodges,
Assuming, in the first instance, that both transfers were-purely voluntary, the deeds to Mrs. Schreyer were made and recorded three years before the building contract was signed, or the work done, out of which Vanderbilt’s claim arose. There was thus that constructive notice referred to in Wallace v. Penfield, supra, as sufficient. Further, on May 21st, 1872, Vanderbilt entered into a written contract with Mrs. Schreyer to do the mason work in the construction of a building on the lots conveyed, the contract price being $10,50.0. He thus had actual as well as constructive notice, more than two years before he entered into this last contract, that Mrs. Schreyer was the owner of these lots. With such knowledge he entered into the last contract, and thereafter accepted Schreyer’s *412 guaranty. IIow can' be then say, with such, knowledge, that he was defrauded by those conveyances?' Is it possible to suppose that the Schreyers, when they made those' conveyances, looked forward three years, and anticipated that Geb-hart and Ritchie-would seek to improve their real-estate, and obtain pecuniary assistance from th'em, and, with that prevision, planned to .defraud any one who might rely upon Mr. Schreyer’s guaranty ? Further than. that, Schreyer did not at the time purpose to, and did not in fact, change his regular business, or enter upon any new business.' From 1854 his business was that of a stair-builder, which ■ business he prosecuted steadily until "he sold, out, in 1876, six years after the conveyances. • Notwithstanding these conveyances, he retained all the property used in his stair-building business, was in debt only from five hundred to one thousand dollars, ' and had money in bank, accounts due him, and personal property used in his businés's, aggregating from ten to twenty • thousand dollars. It is true that some $12,000 of mechanic’s liens had been filed against buildings which he owned, and' which had been recently constructed; but these liens wére by sub-contractors, with possibly one or two minor exceptions. Money for their payment was deposited with certain trust companies; and, as the amounts due were adjudicated, they were paid' out of moneys thus deposited. Gould anything .be'clearer than that these conveyances, were free from all imputation of fraud, as. against anybody, and especially as against such a remotely subsequent creditor ?
While the transaction' as to the bonds and mortgages is nearer in point of time to the creation of the indebtedness to Yanderbilt,-it is so-remote in' fact as also to be free from imputation of fraud. The circumstances surrounding the creation of’ this debt must be stated a little more in detail: Geb-hart and- Ritchie owned the lots; they were each subject to two mortgages; one was-a mortgage of $3750, given to Ellen E. Ward, from whom the Schreyers had originally purchased the. lots ;• and one to Mrs. Schreyer, originally $5000, but reduced by payments to about $2200. Desiring to build, in the belief that the rents from new buildings on the front of
*413
tbe lots could be used to pay off their indebtedness, they arranged with the Schreyers for an advance of the amount that should be needed in addition to the sums they could borrow on mortgages from the "Ward estate. The "Ward estate agreed to loan $10,000 on each lot. and contemplated building. In pursuance of this' arrangement, Mrs. Schreyer released her mortgages, new ones were executed to the Ward estate for $10,000 on each lot, and the difference in money, $8000 and over, was paid to Gebhart and Eitchie, respectively, and by them handed- to the Schreyers; and, when the .buildings were completed, new mortgages were executed to Mrs. Schreyer for the $2200 of her original mortgage, and the excess of the cost above the amount furnished by the "Ward estate. Schreyer, who was a practical builder, superintended the construction of the buildings.- Yanderbilt made á contract with Gebhart and Eitchie for the mason 'work, as heretofore stated. ITe entered into - this contract with knowledge that the $5000 bond and mortgage which' Schreyer proposed to transfer in part payment was second and subordinate to a prior mortgage of $16,000. • He must have assumed, when he made the contract, that the property mortgaged was good for both .mortgages ; and, according to the testimony, it was then considered worth from thirty to .thirty-five thousand dollars. When he had so far completed his contract .as to be entitled to the assignment of his bond and mortgage, he demanded its guaranty from Schreyer; and he, in order that there might be no' delay in the work, gave the required guaranty. Two years thereafter, owing to depreciation in value of real estate, the property covered by this $5000 bond and mortgage' was so^d under foreclosure of the $16,'000 mortgage, and realized only enough to pay' that. Hence, Schreyer became, liable on his guaranty. Is there anything in these facts to show fraud in' intent or fraud in result
%
Obviously not. Yanderbilt entered into his-contract with, full knowledge of all the circumstances, unquestionably considering the $5000 bond and mortgage well-secured, and willing to take his chances of its payment on foreclosure,, if not otherwise. Schreyer, making no representations or concealments, doubtless acted in the same belief;
*414
and when, after partial completion of tbe contract, be, to prevent delay in tbe future work, guaranteed payment of tbe bond and mortgage, be did so in tbe bélief that it was amply secured, and that be was assuming little or no risk in bis guaranty. If fraud or wrong was intended on bis part, obviously be would have refused to guarantee, and left Yanderbilt to take that which, bis contract entitled him to. Tbe very fact of his voluntarily assuming a risk which be was under no obligations to assume, and which in no manner inured to bis benefit, is satisfactory evidence that be bad no thought of fraud. Tbe subsequent depreciation of tbe value of real estate, and tbe failure to realize on the sale thereafter more than tbe first $16,000 mortgage, was something anticipated by neither party. It was one of those vicissitudes unexpected and unlooked for — not planned for — and doubtless an astonishment to all tbe parties. All tbe arrangements for tbe execution of these second mortgages to- Mrs. Scbreyer were made before any guaranty or personal liability on tbe part of Scbreyer was demanded or thought of, and it does not appear that be was in debt to any one at tbe time tbe arrangements were' so made. Surely this unnecessary and voluntary assumption on bis part in no manner indicates fraud in tbe arrangements already entered into and subsequently carried out, for tbe execution of these bonds .and mortgages to Mrs. Scbreyer. In tbe case of
Carr
v. Breese,
We have thus far considered the case as to these transfers from Sehreyer to his wife, as if they were purely voluntary; but according to his testimony, and there is none contradicting it, they were far from voluntary, but rather the passing of the legal title to his. wife, of property of which she was, prior thereto, the equitable owner, or in which she had. at least a large equitable interest. She had between twenty-fiv.e hundred and three thousand dollars in money when they were married, in April, 1854. She purchased the leasehold interest in the lots on 39th.Street, paying therefor out of her own moneys, $500 each. They lived on one of the lots, and the-building on the other was rented. Unquestionably, therefore, the rents belonged to her. She also kept boarders for a number of years, two of them living with her for at least ten years, paying $5.00 per week each. The balance of the money she had when married she passed over to him from time to time for improvements on the property, or use in his business. It is true that afterwards .buildings of considerable value were put upon these lots; and we do not wish to be understood as affirming that the entire cost of the property was the proceeds of her investment, or her earnings. All that the testimony fairly discloses is, that at the time of her marriage she was possessed of separate property, which was the foundation and largely the source of these subsequent accumulations. So that the conveyances in 1871 were not purely vol- *416 antary, but meritorious and upon good consideration. The same may.be said as to the bonds and mortgages placed in her name in 1874.
It is objected -by the appellees that Schreyer’s testimony is not to' be depended upon, because contradictory, confused and uncertain; that there is no definiteness in it as to amounts and dates; and that wrong in the transactions is evident, because the moneys received for rent after • the conveyances, were deposited by Schreyer in his own name, in bank, and were obviously managed and handled by him as his own, as no accounts were kept between husband and wife of their separate moneys, but all' were mingled in one fund, in his hands. But does all this indicate fraud? If his testimony is worthless and to be rejected, .then there is practically no testimony interpreting those transactions, and the court .never presumes fraud. The very confusion and ■ carelessness in the dealings between husband and wife make-against rather than in favor of the claim of fraud. There is no evidence that he was in debt at the time of these conveyances, at least beyond a trifling amount, which was subsequently paid; and if the parties had intended fraud and wrong,. unquestionably their accounts would have been kept carefully and accurately, and books would now be presented showing such accounts. Husband and wife evidently saw-no necessity of dealing with each- other at arm’s length; the title to the property was placed in her' name when there was no legal or equitable reason why it should not be done; ■and the rents and other cash receipts were not unnaturally kept in one account and handled as one fund. The lack.of substantial indebtedness and the record of the transfer being established, the carelessness of their dealings tends to prove honesty rather than to establish fraud.
Again, it is objected that the conduct of Schreyer, in respect to the bankrupt proceedings, is suspicious; th'at the bankrupt proceedings, though nominally at the instance -of a creditor, were really at his instance; that the bankrupt and the creditor found their counsel-in the same office; and that the other claims proved against him were in some suspicious way fixed up and adjusted, leaving only Vanderbilt’s claim unpaid. *417 Conceding all that is claimed by counsel in reference to these bankrupt proceedings in 1878, it is difficult to deduce therefrom any evidence of wrong in the transactions in 1871 and 1874. It may be that Schreyer did not want to pay Vanderbilt’s claim; and it may be, as claimed by counsel, .that he improperly sought the assistance of the bankrupt court to be - relieved from liability therefrom ; but it would be a very unjust conclusion from such facts, that in 1871, when he made the conveyances to his wife, and in 1874, when he made the arrangement for the execution of the bonds and mortgages to his wife, anterior to any known or expected liability to Vanderbilt, he was acting with a view of subsequently going through bankruptcy, or defrauding Vanderbilt or any other creditor. . •
Recapitulating, the conveyances in 1871 were meritorious, upon good consideration, made by one in . debt in only a trifling sum, and retaining an abundance of property for the discharge of those debts, and who in fact subsequently, and as they became due, paid them — made by one continuing and expecting to continue in the same profitable and not hazardous business in which he had been engaged for nearly a score of years, with no thought of entering upon any new, or hazardous business, and more than three years before any liability to .Vanderbilt was incurred or even thought of. And the placing of the notes, bonds and mortgages in 1874 in Mrs. Schreyer’s name was in pursuance of an arrangement entéred into when the husband was not' in debt, and when no obligation, fixed or contingent, to. Vanderbilt had been entered into or thought of.
Under these circumstances it is error to hold that the transactions were fraudulent and void as against Vanderbilt.
The decree of the Circuit Cowrt must lye reversed, and the case remanded, with instructions for further proceedings in accordance with the views herein expressed.