Francis T. Baker, Respondent, v. Sarah F. Georgi, Appellant, Impleaded with Others, Respondents

Francis T. Baker, Respondent, v. Sarah F. Georgi, Appellant, Impleaded with Others, Respondents. Mortgage — when a conveyance absolute upon its face will be held to be a mortgage — the facts proved, not the claim in the pleadings, determine the relief. Where it appears that an agreement to convey real property was occasioned solely by the solicitation of a loan by the grantor, and there are no facts tending to show that the essential nature of the transaction was subsequently altered from that of a loan, but, on the other hand, there are circumstances tending to show the contrary, the presumption is that the conveyance was intended as security merely, and it will be held to be a mortgage. In an action brought to foreclose a mortgage, in which it was contended that a deed given by the mortgagor to his wife of a part of the mortgaged premises was fraudulent and void as to creditors, it appeared that the mortgagor was desirous of obtaining a loan from his wife, but that she declined to make the loan unless he gave her a deed of the premises in question; that on July 15, 1890, she loaned him §6,000, and that the deed in question, which was recorded on January 6, 1891, was dated July 16, 1890, and was stated to have been acknowledged on that date. The commissioner who took the acknowledgment of the deed testified, however, that it was not executed until the early part of December, 1890, while the mortgagor testified that it was executed within a week or two after its date. At tlie date of the' deed there were two mortgages upon the property conveyed, the first being the mortgage sought to be foreclosed in this action for $4,000, which covered property of which that alleged to have been fraudulently conveyed constituted nearly seventy per cent.. The second mortgage, which was for §25,000, was given to indemnify a surety upon a bond given by the mortgagor against any liability thereon. The surety, in fact, incurred no liability upon the bond, but this was not known until November 29, 1890. Held, that in view of the false statement of the commissioner in the certificate of acknowledgment, but little reliance could be placed upon his testimony; That the conveyance was not void as to creditors, as upon the evidence it was not intended to be an absolute conveyance, but was given merely as security for and not in payment of the §6,000 loan to the mortgagor; That the result reached was not affected by the fact that the answer of the grantee in the alleged fraudulent conveyance, simply set out the fact of the conveyance to her and claimed as a legal consequence that she was entitled to the whole of the surplus proceeds of the part of the mortgaged premises conveyed to her-. That a party might, in her pleading, allege a state of things more favorable to herself than the proofs made upon the trial warranted, but that the proofs must determine the judgment which should be rendered. Yan Brunt, P. J., and Rumsey, J., dissented. ■ Appeal by the defendant, Sarah F. Georgi, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 27th day of December, 1894, upon the report of a referee, in so far as said judgment determines or adjudges as between said appellant and her co-defendants that the instrument of conveyance, dated July 16, 1890, executed by the defendant, Otto H. Georgi, and recorded in the office of the register of the city and county of New York on January 6, 1891, purporting to convey to Sarah F. Georgi the premises therein described, was or is void and inoperative as against the creditors and persons having claims against the said grantor; also, in so far as the said judgment determines or adjudges the said deed to have been fraudulently made or delivered with intent to hinder, delay or defraud creditors or persons having claims against the said grantor; also, in so far as the said judgment determines or adjudges, as between said appellant and her co-defendants, that the lands purporting to be conveyed to said appellant by said instrument of conveyance continued, notwithstanding, to be subject to the rights and remedies of such creditors of the grantor in the same manner as if said deed had not been made, and also in so far as said judgment, determines or adjudges, as between said appellant and her co-owners, respecting the mortgaged premises, that the lands of said appellant, directed to be sold herein, are primarily liable for the payment of the moneys secured by plaintiff’s mortgage, or primarily liable to sale in satisfaction of said mortgage of the plaintiff. The action was brought for the foreclosure of a mortgage on property fronting on the westerly side of Third avenue, in the. city of New York, and south of One Hundred and Sixty-third street. The most southerly portion of the premises, having a frontage of about seventy-two feet, was owned by the defendant Otto H. Georgi prior to July 16, 1890. On January 6, 1891, a deed of the. premises from said Georgi to his wife, the appellant, Sarah F. Georgi, was recorded, said conveyance being dated July 16, 1890, and the acknowledgment clause reciting that it was acknowledged on that day. This portion of the mortgaged premises is spoken of as the appellant’s second parcel. After the commencement of the action it was referred to a referee to hear and determine all the issues arising between the parties. He decided this conveyance to be void as. against certain defendants, judgment creditors of Otto H. Georgi, and the other creditors of said Georgi; that the liens and rights of' said defendants were not impaired or affected by said conveyance, and that they were entitled to be paid in full out of the proceeds of sale before the appellant received anything. From this part of the judgment entered upon the referee’s report the defendant Sarah F. Georgi appeals. John Aitken, for the appellant. T. M. Tyng, W. Arrowsmith and C. H. Young, for the respondents, the receiver and judgment creditors of Otto H. Georgi. Edward Russell, for the respondents Lisette Georgi and Emma. Georgi. [MAJORITY — Barrett, J.:] Barrett, J.: The only branch of the appeal which we need consider is that, relating to the validity of the conveyance of the appellant’s second parcel. That portion of the judgment relating to the order of sale of the different parcels seems to have been acquiesced in by the .appellant, since no ground of error with regard to it has been raised on the argument or presented in her brief. The judgment below decides the conveyance of July 16,1890, to be absolutely void as against the creditors of Otto H. Georgi. There are certain undisputed facts bearing upon that conclusion which should be noted. It is, for instance, undisputed that the appellant on July 15, 1890, mortgaged property belonging to her for $6,000 and lent the money to her husband. The appellant and her husband testify, without contradiction, that she declined to let him have the money unless he gave her a deed of this second parcel, and that the loan was made upon his promise to do so. At the time the loan was made there were two mortgages on the property. The first was the plaintiff’s for $4,000. It covered other property than the second parcel, but that parcel was nearly seventy per cent of the -whole. The second mortgage was one for $25,000, given to indemnify one Hupfel against liability as ■ surety upon a bond of Otto H. Georgi’s. It ultimately transpired that Hupfel was not held liable, and thus the mortgage did not in the end detract from the value of the equity. This, however, was not known until November 29, 1890. Upon the other hand, Murphy, the commissioner who took the acknowledgment of the deed in question, and upon whose testimony the case for the respondents mainly rests, testified that the deed was not executed until the early part of December. He is contradicted, Jhowever, by Georgi, who says that the execution was only a week or two after the date of the deed. Georgi seems to be a much more trustworthy witness than Murphy. Upon Murphy’s own showing as to his position and conduct in the matter, but little reliance can be placed upon his testimony. We should thus have great difficulty in affirming the judgment and finding that the conveyance was fraudulent, even if it were necessary to award the whole of the proceeds of sale either to the creditors on the one hand or the appellant on the other. We do not think, however, that the agreement of the appellant was to purchase the second parcel outright for the sum of $6,000. The appellant simply testifies: “ I mortgaged that lot for $6,000 with the understanding that he was to deed me the remaining land.” Georgi says: “I was very short of money in July, 1890. I tried to raise money then, but couldn’t get any. * * * I asked her would she mortgage that lot I had conveyed to her; I could get the money from Mr. Iiupfel on it, and she said yes, if I would give her a deed for the balance of the property that Mr. Iiupfel was holding that indemnity bond against. She did not care to let me have the money without the deed; I said yes, and so she mortgaged that lot for §6,000. I received the money paid on that mortgage and used it in paying for material and labor on the contract at New Rochelle.” It seems quite plain from the foregoing, which is substantially all the testimony on the point, that the conveyance was given as security merely. The sole occasion and cause of the deed was Georgi’s need of the loan. The appellant’s unwillingness at first, was the natural unwillingness of one person to lend money to another when there is any doubt about the latter’s ability to repay. The promise of the deed solved this difficulty, and the loan was thereupon made. The idea of a transfer seems never to have before occurred to either husband or wife; and when the arrangement therefor is considered in connection with the need which gave rise to, and the circumstances which attended it, there can be no doubt that it was intended as security. A sale implies a balancing of the value of the property on the one hand and the consideration on the other. Nothing of the kind appears here. The promise to give the appellant a deed was made at a time when it was not even known how much she was to lend. She did not have the money in hand, but was obliged to raise it by mortgage on other property belonging to her. She got §6,000, but there is nothing to show that this was the sum agreed upon. On the contrary, it appears that Georgi was anxious for as much money as he could get, and that the appellant was willing to lend him all she could raise on her other property. Real estate is not usually conveyed by one party to another for such an indefinite consideration as this. What Georgi obtained was a loan, and what he gave was security for it. There is no fact in the case from which it can be reasonably inferred that the deed was given in payment of the loan. Where it appears that an agreement to convey real property was occasioned solely by the solicitation of a loan by the grantor, and there are no facts showing that the essential nature of the transaction was afterward altered from that of a loan, but, on the other hand there are circumstances tending to show the contrary, the presumption is that the conveyance was intended as security merely, and it will be held to be a mortgage. The result reached is not affected by the form of the appellant’s answer. In her pleading she simply sets out the fact of the conveyance to her, and claims, as a legal consequence, to be entitled to the whole of the surplus proceeds of the parcel in question. In stating the result believed to follow from the facts, she erred. If, however, the pleading should properly be construed as alleging ownership in fee, the evidence adduced at the trial, and not the pleading, must control. A party may in his pleading, and often does, allege a state of things more favorable to himself than the proofs at the trial warrant. But the latter are what determine the judgment to be rendered.. We think that the undisputed evidence shows that the conveyance of July 16,1890, was given merely as security for the loan made by the appellant, and the judgment appealed from should be reversed and a rehearing ordered, with costs to abide the event, unless the respondents, the receiver and judgment creditors of Otto H. Georgi, stipulate to modify the judgment so as to provide that the appellant is entitled to be paid out of the proceeds of the second parcel, the sum of $6,000 and interest from July 15, 1890, next, after the payment of the plaintiff’s mortgage, and the necessary expenses of foreclosure charged by the judgment against this parcel. In case this stipulation is given within ten days, the judgment as thus modified will be affirmed, with costs to the parties represented upon this appeal payable out of the property. O’Brien and In&raham, JJ., concurred; Van Brunt, P. J., and Rumsey, J., dissented. [DISSENT — Van Brunt, P. J. (dissenting):] Van Brunt, P. J. (dissenting): This action was brought to foreclose a mortgage of $4,000 upon certain real property upon the westerly side of Third avenue, between One Hundred and Sixty-second and One Hundred and Sixty-third streets in the city of New York. The plot covered by the mortgage had a frontage of one hundred and nine feet on the westerly side of Third avenue ; of this frontage the most northerly twelve feet was owned by the infant defendant Lisette Georgi, in which twelve feet her mother, the defendant Emma Georgi, had a vested dower interest. The adjoining twenty-five feet had been conveyed to the appellant by deed, dated June 24, 1889, executed by her husband, the defendant Otto H. Georgi, and recorded November 27, 1889; and the remaining seventy-two feet of said frontage had been conveyed to appellant by her said husband by deed dated July 16, 1890, and recorded January 6, 1891. Various parties were made defendants as judgment creditors of said Otto II. Georgi, many of whose judgments were entered prior to the 6th of January, 1891, the date of the record of the deed last above mentioned, but subsequent to the date of the deed, July 16, 1890. The defendant Sarah F. Georgi by her answer claimed ownership of the land conveyed to her by her husband, stating an alleged consideration for the conveyance, dated July 16, 1890, and asking affirmative relief against her co-defendants that her title thereto be judicially established against all claims of her co-defendants, and also asking that the mortgage debt be apportioned as between the several owners of the mortgaged property, and that she be allowed to redeem upon payment pro rata of the mortgage debt. This answer was served upon all of her co-defendants as well as upon the plaintiff, and the court ordered a reference to hear and determine all the issues arising in the action. Answers were put in by some of the other defendants, but were not served upon any of the co-defendants. The action being tried before a referee, the referee found that the conveyance, of the first parcel mentioned, by Otto H. Georgi to his wife, Sarah F. Georgi, was valid as against the creditors of Georgi, but that the conveyance second above mentioned was made and received with intent to hinder, delay and defraud the creditors of Otto H. Georgi, and was fraudulent as against them. The referee further reported that the portion of the premises conveyed to Sarah F. Georgi, by deed dated July 16, 1890, should be first sold under the judgment of foreclosure and sale to pay the plaintiff’s debt and the claims of the judgment creditors of Otto H. Georgi; and that if the amount realized upon the sale of this pancel was insufficient to pay the amount of the mortgage debt then that the second parcel conveyed under date of June 24,1889, should be sold, and that if the sale of the two parcels should not produce sufficient to pay the mortgage debt of the plaintiff, with interest, then that the portion belonging to the defendant Lisette Georgi should be sold; and that if the sale of the three parcels should not be sufficient, then that the balance of the mortgaged premises should be sold. A decree was entered directing a sale of certain of the premises and adjudging the conveyance of the premises described in the deed of the 16th of July, 1896, to be fraudulent and void as against the creditors of Otto II. Georgi, and from so much of the judgment as determines that the lands conveyed to the appellant are primarily liable for the payment of the mortgage debt, without contribution by the owners of the other mortgaged premises, and from that part of the judgment which adjudges that the deed of July 16, 1890, from Otto II. Georgi to the appellant, was made with fraudulent intent, this appeal is taken. The appellant’s counsel, neither upon the argument nor in his brief, points out any ground upon which he claims that the determination of the judgment that the lands conveyed to the appellant are primarily liable in payment of the entire mortgage debt, is erroneous ; and as the principle of the inverse order of alienation has been applied, which is well recognized, there seems to be no ground for interference with the decree in this respect. He, however, insists that the evidence before the referee did not justify him in coming to the conclusion that the deed of July 16, 1890, was fraudulent and void as against the creditors of Georgi; that a full and adequate consideration was paid by Mrs. Georgi for the premises in question, and that die mere fact that the deed was not recorded until after the entry of the judgments did not justify any conclusion that it was fraudulently withheld from the record. In respect to the question of consideration, that depends entirely upon the question as to how much of an incumbrance the mortgage of $25,000 given to secure the surety of Otto II. Georgi upon his contract could be considered to be. As it turned out, nothing whatever became due upon this mortgage, and premises, which the evidence shows were worth about $25,000, were conveyed to Mrs. Georgi for less than one-half their value. It is true that this mortgage was outstanding, but the liability upon it had not been liquidated. It was not certain that there would be any liability upon it at all; it was not expected that there would be, and there seems to have been an inadequacy of consideration. That this conveyance was made by Otto H. Georgi, for the purpose of placing this property out of the reach of his creditors, cannot be disputed upon the evidence, and the only question is whether his wife is to be considered a bona fide purchaser for a valuable consideration. The evidence in regard to the execution of this deed seems to justify the conclusion of the referee, that it was not acknowledged until early in December, instead of on the sixteenth of July, as the certificate states, or in August, as claimed by the defendant Otto H. Georgi. The circumstances testified to by the witness Murphy and the witness Mohr, and the reasons given by the witness Murphy for being positive that it was certainly after September, show clearly that there is good foundation for the contention that this conveyance was executed in view of the judgments which were about being obtained against the grantor Georgi. It appears that, on the twenty-ninth of ¡November, the indemnity mortgage of $25,000 was gotten out of the way, and that a short time thereafter the conveyance was made, executed and delivered. It is undoubtedly true that the action of Murphy, the commissioner of deeds, in certifying that this mortgage was acknowledged in July, when the acknowledgment was taken in December, shows a gross violation of his duty and the commission of an offense against the law, and naturally causes a court of justice to look at his testimony with considerable suspicion. But when the testimony of a witness of this character bears internal evidence of verity it must be received, though not corroborated. But in the case at bar it seems to be singularly well corroborated by the evidence of the -witness Mohr. The excuse given by Mrs. Georgi for her failure to record this deed for six months after its execution, that she had not the money to-pay for the recording of the same, and that she only had it recorded when she found that judgments were being entered against her husband, does not seem worthy of credence. The deed was given to her as an afterthought, in view of the embarrassed circumstances in which her husband found himself after the settlement of November 29, 1890, and not in pursuance of any agreement made at the time the $6,000 loan was made. It is true that the deed might have been given in payment of that debt. But it would not make Mrs. Georgi a bona fide holder for a valuable consideration, because it is well settled that that means a present consideration. Under all the circumstances of the case we see no reason for interfering with the conclusion of the referee in respect to this matter, and are of opinion that the judgment should be affirmed, with costs as against the appellant. Rtjmsey, J., concurred. Judgment reversed and rehearing ordered, with costs to appellant to abide the event, unless the respondents, the receiver and judgment creditors of Otto H. Georgi, stipulate to modify the judgment as stated in opinion; in case this stipulation is given within ten days judgment as thus modified affirmed, with costs to the parties represented upon this appeal, payable out of the property.