Aaron Erickson et al., Respondents, v. Mary A. Quinn, impleaded, etc. Appellant

Aaron Erickson et al., Respondents, v. Mary A. Quinn, impleaded, etc. Appellant. The fact that a conveyance made by an insolvent debtor is without consideration, is a controlling fact upon the question of fraud; and where the conveyance purports upon its face to be for a valuable consideration, knowledge of its existence, and that the grantor is insolvent, cannot be deemed knowledge of facts constituting fraud. Until a creditor of the insolvent learns that the conveyance was without consideration, he cannot be said to have discovered the facts constituting the fraud. (Raparlo, J, Grover and Folqer, JJ., concurring.) Where a suit, therefore, to set aside such conveyance is commenced more than six years after knowledge of the conveyance and insolvency, but within six years after discovery of the fact that the conveyance was without consideration, the referee is justified in finding that the suit was commenced within six years after the discovery of the facts constituting the fraud; and such finding if not expressly made will be supplied by intendment in support of the judgment. (Church, Oh. J., and Allen, J., dissenting.) (Argued January 24, 1872; decided February 6, 1872.) Appeal from judgment of the General Term of the Supreme Court in the fourth judicial department, affirming a judgment in favor of the plaintiffs, entered upon report of a referee. This action is in the nature of a creditor’s bill, brought to reach certain real estate, alleged to have been conveyed to defendant, Mary A. Quinn, with intent to defraud the creditors of James O’Maley. Said O’Maley was originally one of the defendants. He died before trial, and defendant, Mary A. Quinn, was appointed administratrix, and the action was revived against her as such. The referee found that on the 21st March, 1861, the Union Bank of Rochester recovered judgment against James O’Maley for $7,256.51, upon two promissory notes given in renewal of other notes, and as a mere continuation of the indebtedness. Execution was duly issued, upon which was collected $2,451.18, and it was returned nulla bona as to residue. The Union Bank was converted into a national bank, under the name of ¡National Union Bank of Rochester, and the property of the former, including judgments, was transferred to the latter, by whom the judgment was assigned to plaintiffs. At the time the debt was contracted, upon which judgment was recovered, O’Maley was the owner in fee of the property described in complaint. On the 11th December, -■I860, he conveyed it to his son-in-law, John Quinn, husband of defendant, Mary A., for the expressed consideration of $6,500. At the time of making the conveyance, O’Maley had not sufficient property to pay his debts, and the conveyance was made with intent to hinder and delay creditors. John and Mary A. Quinn, on the 27th December, 1861, conveyed the premises to Felix Hart, and on the 13th May, 1862, he conveyed it to said Mary A. Quinn. This action was commenced April 5, 1869. The plaintiffs and their assignors knew of the deed from O’Maley to John Quinn more than six years prior to the commencement of the action, but they did not know it was without consideration until within six years. The referee found as a conclusion of law that the said deed to Quinn was a voluntary deed, and that it and the subsequent deeds were fraudulent and void as against plaintiffs. He ordered judgment setting aside the deeds and making the judgment a lien upon the property. J. O. Qochrcme for appellant. No conveyance can be adjudged fraudulent simply because it is without consideration (Dygert v. Remer Schneider, 32 N. Y., 636), where statute of limitation commences to run in continuous, and even in case of subsequent disability. (Peck v. Randall, 1 J., 165.) If original notes were paid by good indorsed paper, they were extinguished. (Gandolfo v. Appleton, 40 N. Y., 541.) As against subsequent creditors the deed to Quinn was valid. (Digert v. Remer Schneider, 32 N. Y., 648.) The facts affirmatively disprove intent to defraud. (Phillips v. Wooster, 36 N. Y., 412; Reade v. Livingston, 3 J. Ch., 481.) Deed only void when executed with a fraudulent intent. (Baker v. Gilman, 52 Barb., 24.) A finding that defendant holds in secret trust was necessary. (Bailey v. Ryder, 10 N. Y., 363 ; Wright v. Delafield, 25 N. Y., 266.) A creditor’s suit for fraud cannot be maintained against an administratrix. (Babcock v. Booth, 2 Hill, 186.) E. Harris for respondent. The deed to Quinn was fraudulent in fact and law. ( Waterbury v. Sturdevant, 18 Wend., 362; Robinson v. Stewart, 10 N. Y., 189; Wood v. Hunt, 38 Barb., 308.) This case does not come within the six years’ limitation. (Fort v. Farrington, 41 N. Y., 164.) A creditor may proceed at law or in equity. (Chau. Co. Bank v. White, 2 Seld.,236 ; Chau. Co. Bank v. White, 19 N. Y., 369.) An action to remove fraudulent deed can be commenced at any time during existence of lien. ( Ward v. Van Bokkelen, 1 Paige, 100.) [MAJORITY — Rapallo, J.] Rapallo, J. The referee has found, as a conclusion of law, that the action was not barred by the statute of limitations. To sustain the conclusion, he must have found, as a fact, that the action was commenced within six years after the discovery of the facts constituting the fraud. The only express finding on this point contained in the case or report is, that neither the plaintiffs nor their assignors discovered that the deed was made without consideration until within six years. This finding must be taken in connection with the finding also contained in the case, that at. the time of giving this deed O’Maley had not property sufficient to pay his debts. The fact that a deed is without consideration is not of itself sufficient to mate it fraudulent as to creditors, 2 R. S., 137. But if the grantor is insolvent at the time, the want of consideration is a controlling fact on the question of fraud. It is more than mere evidence; it is a fact from which a fraudulent intent may be inferred. The conveyance purported on its face to be made for a valuable consideration. Knowledge by the creditor of the existence of this conveyance, and of the indebtedness of the grantor, without knowledge that the conveyance was voluntary and without consideration, could not be deemed knowledge of the facts constituting the fraud. Until he learned the fact last mentioned, he cannot be said to have discovered the facts constituting the fraud. Although the main question of fact upon which the invalidity of the conveyance depends is the intent to defraud creditors, yet that intent is a mere conclusion or inference from other facts. Ignorance of the facts from which that conclusion is to be drawn, is ignorance of the facts constituting the fraud, within the meaning of the statute. In the present case, the fundamental fact from which the conclusion of a fraudulent intent is drawn, is the absence of any valuable consideration for the conveyance. So long as the creditor was ignorant of that essential and controlling fact the statute ought not to run against him. But assuming that the finding of the referee is imperfect in form, and that he should have found that the plaintiffs did not discover until within six years that the deed was made with intent to defraud creditors, that defect in the finding should, according to well settled rules, be supplied by intendment, in support of the judgment, provided the case contained evidence which would have warranted the referee in making the proper finding. The case does contain such evidence. Erickson, one of the plaintiffs, who was president of the Union Bank at the time of the transactions in controversy, testifies that he learned of the conveyance when he took the judgment to the Union Bank, but that he ascertained the facts relating to it at about the time this suit was commenced. That at that time O’Maley told him that the conveyance was made for the purpose of preventing the recovery of the debt to the bank, and without consideration. That that was the first knowledge he ever received of it; that when O’Maley gave the judgment, he said the conveyance was bona fide, and that he was indebted to Quinn. Jennings, who was cashier of the bank at the same period, testified that until the occasion when O’Maley sent for him shortly before his death, he never knew any fact tending to show that the conveyance was in fraud of creditors. Mumford, the other plaintiff, who appears to have been-attorney for the bank at the time of the transaction, states that he knew nothing about the conveyance except what he learned at about the time of the commencement of the action. The evidence shows that the Union National Bank was the same institution which recovered .Jhe judgment, converted pursuant to the statute into a national bank; and there is no evidence that there was any person other than the witnesses above named, who could have any knowledge of the matters in controversy. Upon this evidence it should be intended, if necessary, that the referee was satisfied that the facts constituting the fraud were discovered within six years before the commencement of this action. The referee has found that at the time of the conveyance the defendant Mary Ann Quinn did not know that her father was indebted; and there was nothing to show that she was intentionally a party to his fraud. I think that she should not be charged personally with the costs, and that the judgment should be modified so as to make them a charge upon or payable out of the proceeds of the property only, and as thus modified should be affirmed with costs, payable in like manner. Grover and Folger, JJ., concur; Peckham, J., concurs in result; Chuboh, Oh. J., and Allen, J., dissent. Judgment accordingly.