Fanny Light, Appellant, v. Louis Fischer and Others, Respondents

Fanny Light, Appellant, v. Louis Fischer and Others, Respondents. First Department, May 15, 1914. Debtor and creditor — suit to set aside transfers made to defraud creditors—proof establishing fraud—injunction pendente lite. Where, pending an action to redover damages for personal injuries, the defendant, owning property which he valued at over $170,000, made himself insolvent by conveying his real estate to his wife for “ one dollar and other valuable considerations, ” no substantial consideration being shown, and she in her turn leased the same to a corporation which her husband caused to be formed to take over Ms business, and in which he owned the entire capital stock with the exception of four shares held by other persons to qualify them as incorporators, it is apparent that the defendant disposed of his property to defraud his creditors. Hence, where the plaintiff has recovered judgment and her execution has been returned unsatisfied, and she sues to set aside said transfers, she is entitled to an injunction pendente lite, restraining the defendant from disposing of or incumbering the property transferred. But a receiver should not be appointed in advance of trial. Appeal by the plaintiff, Fanny Light, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 21st day of April, 1914, denying plaintiff’s motion for an injunction pendente lite and for the appointment of a receiver. Morris J. Hirsch, for the appellant. Henry A. Friedman, for the respondents. [MAJORITY — Scott, J.:] Scott, J.: This is an action by a judgment creditor of the defendant Louis Fischer to set aside certain transfers made by him, as it is alleged, for the purpose of defrauding plaintiff and preventing the collection of her judgment. There is no substantial dispute as to the essential facts, although the parties are not agreed as to the inferences to be drawn therefrom. Prior to January, 1913, Louis Fischer carried on a restaurant at Fifty-eighth street and Eighth avenue in the city of New York, using in connection therewith a house and lot which he owned, known as No. 304 West Fifty-eighth street. On June 6, 1912, plaintiff was very seriously injured through the negligence of an employee of said Fischer, and in August, 1912, began an action to recover damages therefor. Fischer was insured against liabilities of this character and intrusted the defense of the action to the company by which he was insured. He did, however, verify the answer on January 9, 1913, and unquestionably knew of the pendency of the action. The cause came on for tidal on January 15, 1914, and no question was made as to Fischer’s liability, the only question litigated being as to the amount of damages, which the jury fixed at $15,000. Judgment was entered and execution issued and returned unsatisfied, notwithstanding the fact that in January, 1912, Fischer had stated to a mercantile agency that he was worth the sum of $172,929.78, including among his assets the real estate above mentioned, and the personal property appurtenant to and used in his business of restaurant keeping. This descent from affluence to execution-proof poverty is explained by Fischer’s actions after plaintiff had sued aim. On January 18, 1913, Fischer conveyed to his wife, the defendant Emma E. Fischer, the real estate above mentioned for the express consideration of “ one dollar and other valuable considerations.” On the same day that this lease was recorded Emma E. Fischer executed a lease of the premises to “Eeisenweber’s, Inc.,” at an annual rental of $6,000. What consideration Emma E. Fischer gave for the real estate conveyed to her, beyond the one dollar recited in the deed, does not appear. Defendants assert that she received substantial consideration, but they significantly refrain from stating what the consideration was. “Eeisenweber’s, Inc.” was a corporation organized January 13, 1913, to carry on the business formerly carried on by Louis Fischer. The incorporators were Louis Fischer, his brother Julius Fischer and an employee named John Wagener. Of the 2,000 shares of capital stock 1,996 were allotted to Louis Fischer and 2 shares each to Julius Fischer and John Wagener. To this corporation Louis Fischer transferred the restaurant business theretofore conducted by him, together with the personal property used in connection therewith. A case is seldom presented in which it more evidently appears that a man has deliberately put his property out of his hands to avoid the claims of a creditor. There are present all the indicia which are usually considered to furnish proof of fraud. (See Littmann v. Harris, 148 App. Div. 31.) The transfers were made while an action was pending against Fischer to which he evidently had no available defense, since none was offered at the trial. The transfer apparently stripped Fischer of all of his available assets and made him proof against execution. The transfer of the real estate was made to his wife, and of the personal property to a corporation of which he owned practically all the stock, and no substantial consideration is shown for either transfer. Under the circumstances disclosed by the affidavits it seems quite probable that plaintiff will recover judgment, and she should be protected against the probability of such a judgment proving to be as difficult of enforcement as Fischer has succeeded in making the judgment already obtained. We do not think, however, that a receiver should be appointed in advance of the trial. It will be sufficient if the status quo be preserved, and this can be done by granting an injunction pendente lite restraining the defendants from transferring, disposing or of incumbering the real and personal property transferred by him to his wife and to ‘1 Eeisenweber’s, Inc.” with the purpose, as it is alleged, of defrauding plaintiff. The order appealed from will, therefore, be reversed, with ten dollars costs and disbursements, and the motion granted to the extent indicated. Dowling and Hotchkiss, JJ., concurred; Ingraham, P. J., and Clarke, J., concurred in result. Order reversed, with ten dollars- costs and disbursements, and motion granted to extent indicated in opinion. Order to be settled on notice.