KEEP v. KEEP

KEEP v. KEEP. City Court of Brooklyn; General Term, May, 1879. Fraudulent Conveyance.—Consideration.—Husband and Wife. —Marriage. The conveyance, by a man to a woman, of Ms property, in consideration of her marrying him, with her knowledge that the property remaining in his hands is not sufficient to satisfy the claims of his creditors, is void as against them.* It is not a sufficient consideration to sustain such a conveyance against creditors, that she gave up a profitable business to marry the grantor. Such a conveyance, made before marriage, upon a mere oral promise to marry, is void under the statute. If made for the taking care of the grantor by the grantee, it is void against creditors, as creating a trust for his own benefit. Appeal by defendants from a judgment, and from an order denying a motion for a new trial. This action was brought by S. Hopkins Keep, against Lester Keep and Caroline J. Yeomans Keep, in the nature of a creditor’s suit (on a judgment for $2,446.12, obtained in the supreme court June 18, 1878, against Lester Keep), to set aside the conveyance of a house and lot in the city of Brooklyn, by the latter to the other defendant. Lester Keep was a physician, and resided in his own house at the northeast corner of Gates and Vanderbilt avenues, in the city of Brooklyn. In 1866 the plaintiff, one of his sons, commenced practice as a physician, and resided with his father, who, in 1872, owing to feeble health and advanced age, almost entirely ceased from business, and his son paid nearly all the household expenses. This he claimed to have done under an oral agreement between himself and his father and mother, that after their death he was to be owner of the house, with the privilege of occupying it in the meantime. In March, 1875, his mother died, and thereafter he claimed that his father entered into a more definite arrangement with him, by which he was to occupy and use the house, pay all expenses thereof, including taxes, assessments, insurance, repairs and current household expenses during his father’s life, and provide him with a home therein without expense, in consideration whereof his father agreed to give him the house at his death, and to devise it to him by will. Under this arrangement he paid out for his father large sums of money, and in addition to that, in April, 1875, $525 for funeral expenses of his mother, for which his father gave him his note, and also in October, 1876, and January, , 1877, he paid a certain person, for his father, $1,146.50, for which he promised to give his note, but never did. * See In re Cornwall, 9 Blatchf. 114; and Livingston v. Gordon, p. 53 of this volume, and cases in note at p. 58. On March 27, 1877, his father married Miss Caroline J. Yeomans, a physician residing and practicing her profession in the city of New York. Some time in that month, but before his marriage, he executed a deed to her of his residence in Brooklyn, bearing date March 24, 1877, but not recorded until December 8, 1877. He also transferred to her about the same time upwards of $4,500 which he had in savings banks. In 1878 he obtained $500 on a chattel mortgage on his household furniture, to his wife’s brother-in-law, and gave her the money. He claimed that the consider ation for the conveyance of the house and giving the money was as a marriage endowment for marrying him, leaving her business in New York and going to Brooklyn and taking care of him. That he had promised to give her all he possessed if she would marry him. She gave him no money or property for it. A few months after the marriage, the plaintiff brought an action in the supreme court against his father, to recover on the $525 note and the $1,146.50 which he had paid for him. This action was sent to a referee. While this action was pending, and in January, 1878, the plaintiff having discovered, shortly before, the conveyance of the house by his father, to his wife, began another action in the supreme court, against both, to have the amount he had advanced under his agreement with his father, before his second marriage, ascertained, and adjudged a lien on the house.' This case was sent to the same referee as the other. Thereafter the following stipulation was entered into in both cases: “ Whereas, the above actions have been duly referred to Eugene H. Pomeroy, Esq., as referee, to hear and determine all the issues therein involved. “ And whereas, a large amount of evidence has been taken before said referee, during the trial of said actions. Now, therefore, it is stipulated and agreed by and between the above parties, that both of said actions, with all the issues therein involved, be and the same are hereby submitted to said referee for decision, upon the evidence already taken, and such further evidence as said referee shall desire to take; and that judgment may be entered in each of said actions upon and in accordance with the report of said referee, and with a view to make the decision of said referee final between the parties. It is hereby further stipulated and agreed that all objections and exceptions heretofore taken during the trial of said actions be, and the same hereby are waived and withdrawn, and that the judgment to be entered upon said reports shall be final and conclusive upon all the parties, and no appeal be taken therefrom ; and that said referee, in making his decision and report, shall be at liberty to decide the questions involved in said actions in such manner as he shall deem just, fair and equitable, irrespective of the legal rights of the parties to the controversy; and that the pleadings in said actions may be amended, if necessary, so as to conform to said reports ; and it is further declared, stipulated and agreed, that the matters and things, and causes of action set forth in the pleadings herein are the sole and only causes of action or matters of difference in any manner or in any wise existing between the parties plaintiff and defendant to the herein above-named actions.” This stipulation was signed by all the parties and their attorneys. The referee reported in the first action for the plaintiff the full amount claimed, and judgment was entered for $2,446.12. In the other action he reported that the amount laid out and expended by plaintiff under the agreement, after allowing all proper offsets, was $5,073.73, and that plaintiff had an equitable lien on said house for that sum, enforceable after the death of Lester Keep, with costs against defendants personally. From these decisions the defendants appealed to the general term. The plaintiff moved to dismiss the appeal on the ground that the stipulation provided that there should be no appeal from the referee’s decision. But the motion was denied (See 16 Hun, 141). Subsequently defendants moved to set aside the judgment. This was denied at special term, but the general term reversed that decision in part by holding that the award as to Mrs. Keep should be set aside, but affirming the judgment against Lester Keep (See 17 Hun, 153). An execution issued in the first action was returned wholly unsatisfied, and the defendant Lester Keep, in his examination in supplementary proceedings, testified he had given to his wife all his property, and was unable to pay the judgment. The plaintiff thereupon filed a creditor’s bill to set aside the conveyance of the house, with a view to recover the amount of the judgment. The trial was had in October, 1878, before Hon. Alexaxdeb McCue. In his findings of facts he stated that at the time of the delivery of the deed the amount of the indebtedness then existing of the defendant Lester Keep, to the plaintiff, greatly exceeded the value of his property not transferred by him to his wife, all of which was at that time well known to her, and that the conveyance was made by him to her with intent to hinder, delay and defraud the plaintiff, and that she was not a purchaser in good faith, but took the conveyance with full notice of the fraudulent intent. He directed judgment in favor of plaintiff, setting aside the conveyance of the house as fraudulent. Thereafter defendants made a motion for a new trial on affidavits, showing that the general term of the supreme court had vacated and set aside the judgment entered in the other action. This motion was denied, it appearing that the plaintiff had, on the trial of this action, waived the benefit of the judgment in that action, so far as it was evidence of any facts material to the issue herein, and had proved the facts by evidence outside of the judgment. The defendants appealed from the judgment, and also from the order denying a motion for a new trial. P. & D. Mitchell, for defendants, appellants. There could be no fraudulent disposition of the household furniture, for it was exempt from execution (Youmans v. Boomhower, 3 N. Y. Super. Ct. 21). It does not matter whether there was a written agreement drawn up between the parties or not, containing the terms of the marriage contract; it was executed before the marriage, and that took it out of the statute of frauds (Wood v. Jackson, 8 Wend. 9 ; Storrs v. Arden, 1 Johns. Ch. 261; Verplank v. Story, 12 Johns. 552; Starkey v. Kelley, 50 N. Y. 676 ; Crane v. Gough, 4 Md. 316; Billsborow v. Titus, 15 How. Pr. 95 ; Weller v. Wagland, 17 Johns. 102). Even a mere knowledge of inability to pay debts is not sufficient to invalidate a conveyance (Loeschighe v. Bridge, 42 N. Y. 426). One that takes property with knowledge of prior equities, under a bill of sale or other agreement, is not to be considered a purchaser with notice that the seller intended to defraud creditors. Such evidence is not even pertinent to such an issue. The intent to defeat a prior purchaser and intent to defraud creditors are entirely two different things (Burgin v. Burgin, 1 Ired. 453, and our own statutes on that point; Seward v. Jackson, 8 Cow. 406). Erastus New, for plaintiff, respondent. Conveyances to hinder or delay creditors are void (2 Rev. Stats. Edm. Ed. p. 142, §§ 1, 5 ; Young v. Hemans, 66 N. Y. 382; Goodrich v. Downs, 6 Hill, 438; Mackee v. Cairns, 5 Cow. 547; affi’g S. C., Hop. Ch. 424; Grover v. Wakeman, 11 Wend. 187; Barney v. Griffin, 2 Comst. 365; Nicholson v. Leavitt, 2 Seld. 510; Dunham v. Waterman, 17 N. Y. 9 ; Freeman v. Pope, L. R., 5 Ch. Ap. 536 ; Cole v. Tyler, 65 N. Y. 77; Reade v. Livingston, 3 Johns. Ch. 481; Carpenter v. Roe, 10 Id. 230; Babcock v. Eckler, 24 Id. 623 ; Dygert v. Remerschnider, 32 Id. 648 ; Curtis v. Fox, 47 Id. 300 ; Herrlich v. Brennan, 11 Hun, 195; Williamson v. Brown, 15 N. Y. 354; Union Bank v. Warren, 12 Hun, 308 ; Briggs v. Merrill, 58 Barb. 389 ; Ward v. Hunt, 38 Id. 302). It seems quite clear from the evidence that the transfer to Mrs. Keep was not absolute, but in trust for the benefit of both defendants. For this reason the transfer was void (2 Rev. Stat. Edm. Ed. p. 140, § 1; Young v. Herrman, 66 N. Y. 375). The effect of the transfer was to postpone and defeat altogether the collection of plaintiff’s claim, and to allow the debtor to have the beneficial use and enjoyment of the property transferred. Although marriage is a valuable consideration, yet the alleged agreement, prior to the marriage, for the transfer of this property in consideration of marriage, not being in writing, was void (2 Rev. Stat. Edm. Ed. p. 140, § 2; Dygert v. Remerschneider, 32 N. Y. 629; Read v. Livingston, 3 Johns. Ch. 481; Borst v. Cary, 16 Barb. 136; Matter of Willoughby, 11 Paige, 257; Bump on Fraud. Conv. 291, 2 ed.; Battersby v. Farrington, 1 Swanst. 106; Spurgeon v. Collier, 1 Edw. 55; Warden v. Jones, 2 De Gex & Jones, 76). The motion for a new trial was properly denied (Church v. Kidd, 3 Hun, 254 ; Marvin v. Marvin, 11 Abb. Pr. N. S. 103; Clark v. Brooks, 2 Id. 385 ; 5 Hun, 538 ; Patterson v. Copeland, 42 How. Pr. 461; Forrest v. Forrest, 25 N. Y. 501; Clapp v. Fullerton, 34 Id. 191; 2 Thomp. & Cooke, 52). As to conveyance after marriage, through fictitious third person, see David v. Williamsburgh City Fire Ins. Co., p. 47 of this volume. [MAJORITY — Neilson, Ch. J.] Neilson, Ch. J. It appeared on the trial, that, at the time the defendant, Lester Keep, transferred his property to the other defendant, he was indebted to the plaintiff, and that the property which remained in his hands was not sufficient to satisfy the claims of his creditor. On a careful examination of the proofs, I am satisfied that the fact that the defendant, Caroline, had knowledge of those matters, was correctly found. That finding of fact is important, must make itself felt in every possible view of the case. If the deed granting the land to her be regarded as a voluntary conveyance, that fact, as found, would be a fatal objection to her title, on the intervention of a creditor whose claims existed at the time; nor could it, if fraudulent, be supported even as against subsequent creditors. As Story says: 66 It is not sufficient that it be upon a good consideration or bona fide. It must be both” (Story Eq. § 353). In view of the circumstances of the case, we need not consider the distinction which exists between a voluntary conveyance and one that is not; between a merely good and a valuable consideration; nor the principle upon which a purchase, made in good faith, of one insolvent may be, and often is, supported. We have rather to consider the act of one who makes himself insolvent by giving away his property, and the concurrent act of one who accepts the gifts thus misapplied. If the defendant, Lester Keep, had applied the money which he had in the bank, and that raised on the chattel mortgage, to the payment of the plaintiff, the conveyance of his house to the other defendant, on her becoming his wife, would have been more equitable. I am constrained on these proofs to hold that there was no valid consideration for the transfers of the property. On his examination the defendant, Lester Keep, states the inducement at large ; and the considerations take three forms: First, the leaving of a profitable business in New York and coming over to Brooklyn. It is hardly necessary to say that the debtor could not, to the prejudice of his creditor, apply any of his property to meet such a sacrifice. Secondly, the marriage. The deed was made some time before the marriage, and upon a mere oral promise to marry—a form of contract which, for a purpose like this, is void under the statute. The case is not to be confounded with those where a contract merely executory is made and is regarded as meritorious, or not prohibited, and is respected when afterward performed. Thirdly, the closing element— the coming over and taking care of himself. That is subject to the objection which, since the statutory revision or codification of 1830, has been applied freely where a grantor or assignor of property has sought to create a trust for his own benefit. Mr. Keep further states that, in their negotiation, he said to the other defendant: “ I told her, if she would marry me,.. I would give her all I possessed.” It is apparent that purpose was carried out. She had the land, the money in bank, and that raised on the chattel mortgage. There can, then, be no doubt that, as she knew he did not intend to pay his debts, and that he retained no means for that purpose. I am of opinion that the judgment appealed from should be affirmed, with costs. Reynolds, J., concurred.