Winans v. Graves

| N.J. | Jun 15, 1887

The opinion of the court was delivered by

Reed, J.

. The bill in this cause was filed by Robert Graves, assignee of a judgment against William H. Lilliston, to reach certain real estate now owned by Sarah E. Winans, but which, as the bill charges, was bought by Lilliston, the title put in his wife’s name for the purpose of evading his creditors, and was conveyed by her to her daughter, Catharine Dewing, and by the last-named person to Mrs. Winans, a sister of Mrs. Lilliston.

Graves, the respondent, got the judgment from one Middleton, who was the assignee of the judgment creditor, Wild.

Wild was an attorney in the city of Brooklyn, and recovered the judgment in the Brooklyn city court on April 19th, 1875. This judgment is said to have been founded on a debt for fees and professional services which Lilliston owed Wild. Wild received from Lilliston full satisfaction for this judgment.

The payment was brought about in the following way: Lilliston had, as guardian of some infants, exchanged some of the property of his wards for other property, which, he says, subsequently depreciated in value. He was pursued, on behalf of the infants, for the cash value of the exchanged property. The court ordered him to execute a mortgage to a Mrs. Voss, one of the wards, who had arrived at her majority, in the sum of $2,800 to secure to the infants that sum.

He arranged to get the title to certain lots, known in this cause as the Halsey street lots, in such shape that he- was enabled to give the required mortgage of $2,800 to Mrs. Voss for the Wardell infants.

It appears, however, that his difficulties in respect to the estate of these infants continued or were revived, for subsequently he was threatened with imprisonment on a proceeding to attach him for contempt for failing to do something in regard to his trusteeship, which does not very clearly appear.

The proceedings against Lilliston for an attachment for contempt were being pushed by a Mr. Burnett, a lawyer in Brooklyn, but Burnett’s movements seem to have been controlled by Mr. Wild, who really represented the movement against Lilliston in the professed interests of the infants. Mr. Wild, at this juncture of affairs, concluded that the time to. make his judgment had arrived. He represented to Lilliston that he had it in his power to stop the prosecution of the contempt proceedings, and that he would stop them if Lilliston would consent to do what Wild wished. He wished to get for his judgment the three Halsey street lots, free of encumbrance.

There was upon these lots the $2,800 mortgage for the security of the infants already mentioned. Wild proposed to rid the property of this encumbrance by advising Mrs. Voss that it was for the interest of the infants that she should release this property from the mortgage.

He told her that it was inadequate security and that the infants would do better by suing the sureties on Lilliston’s bond. Act- ' ing under this advice, Mrs. Voss released the property from this encumbrance by canceling the mortgage. Logan, who held the title to the equity of redemption on these lots, then conveyed them to the person indicated by Wild, and the property passed under the control of Wild; so that Wild had received pay for his judgment by advising Mrs. Voss to cancel her mortgage upon the property which he got, and by stopping the proceedings for contempt taken in the interest of the infants, whom he really represented.

Lilliston had consented that those who had become sureties for his conduct should be mulcted for his default, while this property should be passed over to his wards’ attorney.

By this arrangement, the evidence is conclusive that Wild received this property of Lilliston in full satisfaction of his debt. Instead of entering satisfaction of his judgment, it appears to have been assigned to one Middleton. The advisory master who heard the cause below concluded that the judgment was satisfied íd Wild’s hand, but that Middleton got a title to such judgment by the assignment just mentioned, because Middleton had surrendered an interest which he then had in these lots.

This interest is alleged to have arisen as follows: At the time when Lilliston was ordered by the court to give the mortgage to Mrs. Voss upon these Halsey street lots, they were subject to a mortgage of $750. Middleton claims to have advanced the money to pay off this mortgage so that Lilliston could give to Mrs. Voss a first mortgage. He claims that he took a deed for the property, which he never recorded, and that after the Voss mortgage was canceled he destroyed his deed, so that the title could be made to Wild’s appointee to pay the Wild judgment; that he was to be repaid for his destruction of this deed by an assignment of the judgment.

There is great difficulty in arriving at the truth of this claim. It seems that the title to these Halsey street lots had been put in the name of one Bilyew, a nephew of Mrs. Lilliston. Bilyew made the deed to Lilliston on December 28th, 1874, and Lilliston made the mortgage to Mrs. Voss December 30th, 1874. Middleton intimates in his testimony that Bilyew made him a deed at the time of the loan of the $750, and it was before the Voss mortgage was given.

It is difficult to conceive why a deed should have been made to him at that time, or indeed at any time, to secure the loan. Middleton knew the purpose of the loan, which was to clear the property so as to permit the making of the Voss mortgage by Lilliston. He knew that the property was worth less than the amount of the Voss mortgage. A deed taken by him, either before or after the making of the Voss mortgage, would be of no value as security. If taken before, his title would be subjected to the lien of the mortgage, of which he was cognizant, while of his title the mortgagee was not apprised; if taken after, he got no title, because it was already in Lilliston, who conveyed to Logan. And the fact that Lilliston, after giving the Voss mortgage, conveyed the property to Logan, who recorded his deed and held the title until called upon to reconvey to Wild’s appointee, is a curious feature in this transaction, if it be assumed that Middleton had already a title to the same property. In any aspect of the case, when it is so clear that the mortgage would not have been satisfied unless upon the understanding that Wild should obtain the property — and it also appears that Middleton’s interest in it, while mortgaged, was worthless — I do not see how it can be said that he surrendered any valuable interest in the property at the time of the assignment of the judgment.

If we assume, however, that Middleton was a creditor of Lilliston, and that as between him and the parties to the judgment an assignment of the judgment might be valid as against Lilliston and subsequent encumbrancers of his property, yet I am convinced that the facts disclosed in the testimony in this case would exclude him from any assistance from a court of equity in enforcing this judgment. The circumstances show convincingly that the pri mary object of this assignment was to keep the judgment alive as a shield against the claims of other creditors of Lilliston. It seems obvious that Middleton did not wish the assignment as a security for any indebtedness of Lilliston, nor did he intend to use it for the collection of any such debt. The relations between him and Lilliston, both before and after the assignment, were entirely confidential. Lilliston says that he used Middleton, among others, as the repositary of the titles of the properties which he owned, because he had so many suits and judgments against him that he could not hold any property in his own name. He was in as strong a position to secure his debt without as with this judgment. And his conduct after the assignment fortifies this view. He knew — for he says that Lilliston told him — that he (Lilliston) had lands in his wife’s, his stepdaughter’s, and his sister’s names. About the time of the assignment — although the exact date does not appear —Middleton had in his name the title of the Tompkins avenue property, and although he says he was then a creditor of Lilliston, he permitted Lilliston to collect the rent.

From the time of the assignment, in the spring of 1876, down to 1882, he took no steps to collect the judgment. At the end of that time he filed a bill in the city court of Brooklyn to reach some property, which he charged had been put in the name of a third person by Lilliston, in fraud of his creditors. But it is obvious that Lilliston was himself behind the complainant in that suit. The cause of the litigation grew out of Lilliston’s troubles with his wife. She had ceased to live with him early in 1881. She filed a bill in July, 1882, and in August, 1884, got a decree of divorce from him on the ground of adultery. This condition of affairs between himself and wife led to this suit.

When their relations became such that he lost control over the property which, under the use of her name, he had been concealing from his creditors, he cast about for some means of reaching it. He resorted to the use of this judgment as a method of accomplishing by indirection what he could not do directly. From all the testimony, I am satisfied that the statement of Logan, who had been an attorney for Lilliston, relative to the assignment of the judgment, is substantially accurate. His statement is this, namely: “When the judgment was satisfied, it was deemed best not to satisfy it on the record ; and Lilliston gave me the name of Middleton, and said that Middleton was sheriff or deputy-sheriff, and that Middleton, being in the sheriff’s office, could be of service to him, and that instead of being satisfied of record, it should be assigned to Middleton.” Mr. Logan then proceeds to state how the judgment in Middleton’s hands could be of service to Lilliston. It would be a first lien on all his property, held by a friend, and besides, by the custom of the sheriff's office, as Middleton, who was deputy-sheriff, would hold the first execution, all other executions against Lilliston would go into the hands of the same deputy. So I am forced to the conclusion that the assignment was one of the devices resorted to by Lilliston to baffle his creditors, and that Middleton stood as assignee of this judgment, as he had stood as grantee of many conveyances in the posture of an abettor of Lilliston’s design. He would have no standing in a court of equity as a suitor asking its assistance in collecting this judgment. Besides, I am satisfied that these suits were brought in the interest of Lilliston to enable him to reach property which he had fraudulently concealed. In this the court will not- lend its aid. Ruolcman v. Conover, 10 Stew. Eq. 588.

It is true that the present suit is brought by Mr. Graves, an assignee of Middleton, instead of Middleton himself. The assignment is said to have been made in payment for professional services rendered to Middleton by Graves, who is a lawyer. But I think it clear he occupies no better position than his assignor. Nor is it necessary to put this conclusion upon the ground that an assignee takes a judgment subject to all the defences against it while in the hands of the assignor, and that the fraud which tainted this judgment was of that kind which an assignment in good faith and for value does not purge.

I think it not necessary to decide how far his rights would permit him to press this claim if he occupied a different position, because of the fact that Mr. Graves has been concerned, more or less, in the transactions out of which the assignment of this judgment sprang, from the beginning. He was Middleton's attorney for a number of years. In 1876 he was Lilliston’s attorney in respect to the proceedings against Lilliston to collect the amount he owed the Warded infants. Out of this proceeding came the order to give the Voss mortgage, and subsequently the payment of and assignment of the Wild judgment. He knew of Lilliston's habit of concealing his property, for he speaks of such a practice existing as early as 1874. He brought the suit in Middleton’s name, in the Brooklyn city court, in 1882, ■and it was during the progress of that suit that Middleton became tired of the litigation, he says, and assigned the matter to Mr. Graves.

While Mr. Graves is not chargeable with any active participation in the original assignment or its purpose, yet his close connection with all these and the subsequent proceedings relative to it must have apprised him of the character of the transaction long before the date of the assignment to him.

He is chargeable with notice of the design for which the judgment was kept alive, and took it burdened with Middleton’s inability to invoke the aid of a court of equity to enforce it.

I am further of the opinion that Sarah E. Winans is a bona fide purchaser for value. I think it is probable that her grantors, immediate and remote from Mrs. Lilliston, knew, at the time when each acquired her title, of the design of concealment, and so each took the title with notice of that purpose. But the conclusion that Mrs. Winans occupies the position of a bona fide purchaser for value defeats the claim of the complainant under the bill filed in this cause. ■ It is filed for the cancellation of the conveyance to her, which cannot be decreed except upon the assumption that she took the title with notice or without paying any consideration.

Under a bill drawn for that purpose it would be proper to charge upon the property the amount found by the advisory master to be due upon the judgment, as the difference between the amount paid by Mrs. Winans and the value of the property is equal to the sum so found due. Mrs. Winans would be protected only up to the amount of the consideration paid by her. Muirhead v. Smith, 8 Stew. Eq. 303.

I am speaking of that aspect of the case, aside from the fraudulent character of the assignment of the judgment already discussed. I remark again that upon a proper issue the charge upon Mrs. Winans’s property might have been made. And this court-will sometimes direct the amendments to be here made. But there is another obstacle in the way of reaching this result. It lies in a defect of parties to the suit. Miss Dewing, who sold to Mrs. Winans, is not made a defendant-. She would not be bound by a decree based upon her fraudulent act in selling the land to Mrs. Winans. She would therefore, notwithstanding the land had been charged with Graves’s claim, have her action against Mrs. Winans for the unpaid part of the purchase-money. The question of Miss Dewing’s fraud would then have to be tried de novo, with possibly a different result. In such an action Miss Dewing, while not estopped by the decree in this cause, would be prejudiced by its existence. The effect of an absence of necessary parties, when the objection is raised for the first time at the final hearing, rests very much in the discretion of the court, to ■be exercised in view of the effect of the decree upon the rights •of the omitted parties and of the value of the decree to the complainant. Wood v. Stover, 1 Stew. Eq. 248.

The court will also consider the character and importance of the suit, as well as the time consumed in its prosecution.

In this case, if there existed doubts as to the character of the ■assignment upon which the complainant stands, I should yet regard the absence of Miss Dewing as a party defendant as a serious objection to the decree in this cause.

The decree should be reversed.

Decree unanimously reversed.