Pendleton v. Hughes

By the Court, Multan, P. J.

In 1866, the defendants T. W. B. Hughes and Asahel H. Heath became partners as brokers, in Broad street, in the city of Hew York. About July 12,1867, the plaintiff furnished said firm $1,000, with which to purchase for her a United States 5-20 bond of the amount of $1,000, to be delivered to her. It was subsequently claimed by them, and understood by the plaintiff, that such bond had been purchased and held by the firm, for her benefit. In the course of the same year, and in 1868, she furnished to said firm $1,500 more, of money to be invested in said bonds, and they claimed, and she understood, they had purchased and held that amount of bonds for her. Said firm paid the plaintiff some small amounts of interest on these bonds. The bonds were never delivered to the plaintiff, but were embezzled and appropriated to the use of said firm, but at what time, does not appear.

The plaintiff commenced an action for the conversion of said bonds, against the members of said Jrm, and recovered judgment thereon the 2d of February, 1869. An execution was issued on this judgment to the sheriff of the city and county of Hew York, which was returned nulla bona, for nearly the whole amount of it. This action is commenced to set aside a deed of a house and lot, in the city of New York, the title to which is apparently in the defendant Mrs. Heath. The facts relating to the real estate are as follows, viz : On the 8th of August, 1867, T. W. B. Hughes purchased said house and lot for the sum of $32,000, and paid down $15,500, and assumed a mortgage thereon for $17,000. Before this purchase was made Hughes had declared his purpose to have said house and lot conveyed to his wife. The deed was not taken to her, for the reason, as stated by Hughes, that it might injuriously affect his standing in Wall street. At sometime in February, 1868, after the conveyance of said land to Hughes, at the solicitation of his wife, he promised to convey said premises to Mrs. Heath, the mother of Mrs. Hughes, to the end that they might be conveyed to Mrs. Hughes; and Mrs. Heath and her husband agreed to convey said premises to Mrs. Hughes upon the execution of the conveyance to her (Mrs. Heath.) It is claimed by the plaintiff, and found by the referee, that the conveyance to Mrs. Heath was not to be delivered until the delivery of a deed of the same from her to Mrs. Hughes.

Hughes and his wife did make and execute a deed of said premises to Mrs. Heath, bearing .date the 8th of August, 1867, but it was not acknowledged, nor in fact executed, until about the 15th of February, 1868. It was delivered to Mr. Heath with directions to obtain a deed from his wife to Mrs. Hughes, and the delivery was upon that condition. Heath and wife retained the deed and refused, upon various pretexts, to execute a deed to Mrs. Hughes, and in violation of the condition and arrangement aforesaid, claimed said deed to be an absolute conveyance, the title to be retained by her until a debt alleged to be due from Hughes to her should .be paid.

The firm of Heath & Hughes became embarrassed, in January, 1868, having met with a loss of $60,000, which was the amount of their capital. They failed in November, 1868. About the time of the execution of the deed from Hughes and wife to Mrs. Heath, Hughes also transferred to Mrs. Heath all the furniture in the house. Hughes and family have continued to occupy the premises since the conveyance to Mrs. Heath.

The deed to Mrs. Heath was put on record the day before the failure of the firm of Heath & Hughes. Heath, when called bn to know why he did not procure a deed from his wife to Mrs. Hughes, gave as a reason, that should the deeds to and from his wife be put on record, it might induce creditors of the firm to assail the transaction.

The judge before whom the cause was tried, ordered judgment declaring the conveyance by Hughes and wife fraudulent and void, and that it be cancelled of record, and that the lien of the plaintiff’s judgment be enforced by sale on execution, or in any other legal and appropriate manner, and that the plaintiff recover against the defendants the costs of the action. Hughes and wife appeared and answered. Heath and wife did not. In' January, prior to the execution of the deed from Hughes and wife to Mrs. Heath, the firm became embarrassed. They had in their possession at least the bond for $1,000, belonging to the plaintiff. It is probable that they then, in January, 1868, converted that bond to their own use.

The plaintiff was not, at the time of the conveyance, a creditor in the ordinary meaning of that term, but she was equitably entitled to protection against a fraudulent transfer of the property to the same extent as if she then held a debt for $1,000 against Heath & Hughes. (Jackson v. Myers, 18 John. 425. Wilcox v. Fitch, 20 id. 472.) The conveyance from Hughes and wife was unquestionably fraudulent. It was voluntary, being intended for the benefit of his wife, and also without consideration. It was given when the grantor was embarrassed, and his embarrassment ended in insolvency in the fall following. Without reference to the conduct of Heath and wife, the deed was fraudulent and void by reason of the conduct of the grantor alone.

The deed was taken by Hughes in his own name instead of thb name of his wife, as he had promised her he would do, in order that his credit might stand well in Wall street. The change of title was attempted to be made when his credit was impaired, and it was necessary to keep his property away from the reach of creditors. That his intention was to - cheat is proved by the fact that he transferred his furniture to Mrs. Heath, for' the benefit of his- family, although he had not, so far as the evidence goes, made any promise to his wife, that he would give it to her.

If it be true that it was the intention of Hughes and wife to obtain a deed to her from Mrs. Heath, and to put the same on record, the éffect of not recording the conveyance to Mrs. Heath was to give Hughes and his firm credit to the extent of the $15,500 which had been paid toward the house, when in fact he had, so far as he was able, divested himself of every dollar of it, and thus person's were induced to trust the firm, when, had the real state of the property been known, they would not in all probability have obtained a dollar.

The direct effect of the conveyance to Mrs. Heath, and of its concealment, was to defraud the • plaintiff out of all the property belonging to her, that came into the hands of the firm after such conveyance.

If she was strictly a creditor, the conveyance would be unquestionably held fraudulent and void as to her. This, proposition was directly decided in Case v. Phelps, (39 N. Y. 164,) and in Savage v. Murphy, (34 id. 508,) and Carpenter v. Roe, (10 id. 227.)

It would be difficult to furnish a reason for declaring such a conveyance'void as to creditors, and valid as to persons who," relying on another’s ownership of property are induced to trust that other with her property which he embezzles, and appropriates the proceeds of his wrongdoing to his own use.

In this view of the case, it is not important to inquire whether the plaintiff was in the position of a creditor, before, or after the fraudulent conveyance. In either case she is entitled to the relief that has been granted her.

I concur with the learned judge who tried this case, that the deed to Mrs. Heath never became operative, by reason of the non-performance of the condition on which it was delivered. The delivery was not, as it is claimed by the appellant’s counsel, to Mrs. Heath, but to her husband, to be delivered to her when she executed and delivered a deed to Mrs. Hughes. Heath could not, under such circumstances, make a delivery of the deed that would pass the title, except upon performance of the condition which he had promised to see performed.

Had the defendants, in them answer, admitted the allegation in the complaint, that the deed of Hughes and wife to Mrs. Heath had been delivered, it would have been a fact so conclusively established that neither party could be heard to controvert it, until the pleadings were amended. The defendants denied the allegation of the delivery of the deed ; it was therefore incumbent on the plaintiff to make proof of the delivery. When she attempted to support the allegation of the answer she failed, and the defendants’ denial was established. The fact that it was not delivered was thus established, and the plaintiff must thereafter proceed in the case upon the assumption that the deed had never.been delivered so as to pass the title. The finding that the deed was fraudulent is contained in the findings of the judge incorporated in the record of judgment. .

The facts thus found must stand as the findings in the case, and neither a judge or referee can find facts contradictory thereto. If such findings are erroneous, application must be made to the court to send them back for correction.

[Fourth Department, General Term, at Syracuse, January 7, 1873.

Mullin, Tcdcolt and M D. Smith, Justices.}

The only findings that a judge or referee- can make at the time of settling the case or exceptions, are in addition to those previously found, and not in contradiction thereof.

The judgment must be affirmed with costs.