Baldwin v. June

HAIGHT, J.

This appeal comes here on exceptions taken to the conclusions of law. The evidence is not returned, and we must therefore assume that it fully sustains the findings of fact. The appellant, by bringing up the record without the evidence, accepts the findings of fact as correct; but he contends that under the facts, as found, the conveyance to Lucretia should have been absolutely set aside, and not retained as a security for any sum whatever. It is true, as we have seen, that the court has found that the defendant Lucretia was aware of the fraudulent intent of her husband in making the conveyance. This makes her a party to the fraud, and she must submit to such a judgment as the plaintiff is entitled to. The plaintiff, as a judgment creditor of the defendant Isaac, had a right to have the value of the Tuscarora street house applied upon his judgment. In awarding judgment, it was the duty of the court to see that this was fully done, and the plaintiff protected to the same extent that he would have been had the conveyance not been made. The trial court has found as a fact, as we have seen, that the defendant Isaac made the conveyance of the Tuscarora street house, and received a consideration therefor, “for the purpose of defrauding his creditors out of the amount which the value of the Tuscarora street house exceeded the consideration which was paid therefor.” Under this finding the plaintiff was defrauded only to the extent of the difference between the value of the two places. It must be assumed that the evidence supports this finding. To sustain it, it must have appeared that the plaintiff’s judgment had become a lien upon the Hollis house and lot, and that it had been, or he ivas entitled to have it, sold, and the value thereof applied .upon his judgment; otherivise, he would have been prejudiced by the fraudulent conveyance to the extent of the value of the Tuscarora street place, instead of the difference in the value of the two places. Under this finding he is fully protected by a judgment AA'hich preserves the deed of the defendant' Lucretia as a security for the A-alue of the Hollis lot, for on a sale of that lot he would obtain the ATalue thereof to apply upon his judgment, and, by a sale of the Tuscarora street house, the amount thereof, less the value of the Hollis lot, to also apply upon his judgment; thus preserving all of the rights which he would have had had not either conveyance been made. Bank v. Halsted, 134 N. Y. 520, 31 N. E. Rep. 900. I am aware that it has frequently been held that payments made by a fraudulent vendee upon the purchase of property cannot recover the same back, or have the same allowed to him in a judgment setting aside a conveyance which was fraudulent; that he, being a guilty participant in the fraud, was entitled to no relief from the court. But these decisions are founded upon the theory that the rights of the creditors would be impaired by the allowance of such payments.

In the case of Bank v. Halsted, supra, Parker, J., in delivering the opinion of the court, says:

“If A. ■ convey to B. his farm, worth $5,000, with intent to defraud his creditors, B. paying him $1,000 at the time of the delivery of the deed, the court, in the decree setting aside the conveyance, will refuse to grant him relief, not as a proper punishment for the offense, but because the creditors have an equity equal to the value of the property granted, which should be fully protected against him who fraudulently sought to despoil it. But for the convejmnce the entire property would have been applicable to the payment of the creditors. By the fraud it was put beyond the reach of an execution. Because of it, a court of equity declares the deed void. And to the request of B., that he be allowed the one thousand dollars paid to his fraudulent grantor, a court of equity refuses to listen, because the equity of the' creditors embraces the whole of the property, including, necessarily, the interest represented by the one thousand dollars paid to A.; and it cannot be cut down or interfered with by any payment constituting a part of the fraudulent transaction. But for the misconduct of B., .the creditors, presumably, could have reached the entire interest. Therefore the result of it must be borne by him, and not by the innocent party.”

The refusal to reimburse for moneys paid, in such a case, is not for the purpose of punishing a party because of his wrongdoing, but is for the purpose of preserving the rights of the creditors to the extent that they would have been had the conveyance not been made.

In the case of Loos v. Wilkinson, 113 N. Y. 485, 21 N. E. Rep. 392, the action was to set aside a conveyance of real estate made by a judgment debtor in fraud of the rights of creditors. In that case the grantee was a guilty participant in the fraud, and it was so adjudged, yet it was held he should be protected for payments made by him to an amount exceeding $20,000, for interest, taxes, repairs, fees of agents, etc. In that case the grantee had been ordered to account for rents received by him. Earl, J., in delivering the opinion of the court, says:

“And what does such an accounting mean? Does it mean that he shall pay for more rent than he has received, or could have received; for more profits than he has made, or could have made?' Shall he account to the creditors for more rents than they could have received if they had had possession of the real estate? If the grant be of a waste piece of land which the grantee has improved so as to make rent possible, shall he account for gross rents without any allowance for his improvements? If the fraudulent conveyance be of a vessel, unseaworthy, and the vendee makes her, by repairs, seaworthy, and then charters her, shall he be required to account for the gross charter money? Or, in the cases above cited, where the fraudulent vendee of slaves was compelled to account for their hire, would an allowance for their maintenance while they were working for hire have been denied? To answer these queries in the affirmative would, even in a court of equity, be a wide departure from the rule of compensation. It would be spoliation, not justice or equity. A court of equity does not sit for punishment of criminals. If a fraudulent grantee has violated the criminal law, he may be prosc-cuted and punished in the criminal courts. While such a grantee will not be allowed for permanent improvements made upon the granted property to suit his fancy, or simply to promote his supposed interests, when the creditors of the grantor come into a court of equity, seeking to compel him to account for rents and profits, the accounting must be upon equitable principles; and when he has been compelled to surrender the property conveyed to him, and to account for all the profits he has made, or could have made, or ought to have made, therefrom, the ends of justice have been completely and exactly attained.”

It is said that the defendant Lucretia does not come into court with clean hands; that she knew of the fraudulent intent of her husband. She does not come into court. She is brought in as a defendant, and the plaintiff is asking a judgment against her. The question is, what judgment is he entitled to? As we have shown, he is entitled to be made good for all that he lost by the fraudulent conveyance,—fully that and nothing more. It is not his privilege, or that of this court, to punish her, or enforce forfeitures against her, only in so far as to preserve the rights of the plaintiff as they existed prior to the conveyance in question. The lien of the plaintiff’s judgments immediately attached to the lands conveyed by her to her husband. It was not a payment to him in money, that he could pocket or secrete so as to keep it from his creditors, but was a payment in real property, which the plaintiff could sell, and apply the proceeds upon his judgments. The provision in the judgment in reference to the money owing her by her husband stands upon a different footing. It was an antecedent debt. While I do not question the right of a diligent creditor to secure the amount of his claim by judgment, deed, or mortgage, he must, however, not be guilty of wrongdoing in procuring the same. If he procures the conveyance of the property for his antecedent indebtedness, he must allow fair value therefor, and not unnecessarily prejudice the rights of other creditors. He cannot join with the grantor in a scheme to defraud them, and still be protected to the amount of his indebtedness. Stevens v. Brennan, 79 N. Y. 254. In this particular I think the judgment is wrong. The defendant Lucretia should be permitted to hold .the deed upon the Tuscarora street house as a security for the sum of $1,500, the value of her Hollis house and lot, and not for the amount of the antecedent indebtedness owing from her husband to her. The defendant Lucretia has the possession of the Tuscarora street house. until the same is sold, and therefore has the benefit of the rents, issues, and profits thereof. She should not, therefore, have interest on the $1,500. The judgment should be modified accordingly, and as modified affirmed, without costs of this appeal to either party.

LEWIS and MACOMBER, JJ., concur.