Sloan v. Macartney

This action is brought to have certain real estate impressed with a trust in favor of the plaintiffs. It appears from the evidence that the plaintiffs and the defendant are the daughters and sole heirs at law of George R. Macartney and of his wife, Agnes Macartney, now both dead, and both of whom died intestate. On or about the 23d day of June, 1896, the said George R. Macartney was the owner of a house and lot known as No. 107 Tenth street, in the city of Buffalo, and his wife, Agnes Macartney, was the owner of three other houses and lots on the same street known as Nos. 106, 112, and 113. On the 23d day of June, 1896, the said George R. Macartney executed and delivered to his daughter, Agnes D. Macartney, the defendant in this action, a deed of conveyance of the premises owned by him; and on or about the 39th day of June, 1896, the said Agnes Macartney executed and delivered to the defendant Agnes D. Macartney a deed of conveyance of the three houses and lots owned by her. George R. Macartney died on the 8th day of July, 1896, and his widow, Agnes Macartney, died October 13, 1906. It is alleged on the part of the plaintiffs that these conveyances in each case were made without consideration, and were accepted by the defendant for the purpose and with the intent and upon the agreement that the defendant would hold the title to said property for the benefit of the grantor, and that she

The evidence shows that at the time of the making of the conveyances in question'a judgment for $863.44 had been taken against George R. Macartney in favor of one Chilson, and that at the same time another action was pending against Mrs. Macartney, brought by Chilson, which resulted in a judgment against her on the 33d day of January, 1897, for $164.30. The judgment against Mr. Macartney was paid and satisfied on the 33d day of June, 1896, the same day the deed was given by him to Agnes D. Macartney, his daughter. The judgment against Mrs. Macartney was paid and satisfied subsequent to its recovery. It is claimed, however, by the plaintiffs that Mr. and Mrs. Macartney had reason to anticipate other and further, demands by Mr. Chilson, growing out of their joint ownership of a lake vessel called the “Burton.” The evidence in this case does not disclose what, if any, foundation existed for any such apprehension on their part. Nevertheless it is insisted by the plaintiffs, and this case has been tried on their part upon the theory, that, in order to keep the property conveyed from the demands of Chilson and to hinder and delay him in their collection, the parents of the parties executed the conveyances in question with the understanding and agreement on the part of the defendant to hold the title for their benefit. The testimony on the part of the plaintiffs is to the effect that the defendant subsequently stated to them that, when these financial difficulties arose, Mr; and Mrs. Macartney sent for their nephew, Mr. John Donaldson, and that he advised them to get their property out of their hands as fast as possible; and that, acting upon his suggestion and advice, the deeds in question were given. Mr. Donaldson, on the other hand, was called as a witness for the defendant, and he testified that he drew and took the acknowledgment of these deeds; that he went to see Mr. and Mrs. Macartney in response to their request; that, when the deed from the father was drawn, he stated to Donaldson that his daughter Agnes had in the past loaned him considerable sums of money; that he owed her money then, and he might owe her money in the future, and he wanted to give her the house and lot in question to recompense her for what he did owe her, and what he might owe her in the future; that his other daughters were both happy, and well married, and their husbands could take good care of them, and he wished to give this property to Agnes for what he owed her, and for what she would do for him in the future, and he testified that Mr. and Mrs. Macartney spoke of Agnes taking care of them, and that they did not want Agnes to be teaching school all their lives, and they said that Agnes had agreed to care for them during their lives. About a week later the deed from Mrs. Macartney to Agnes was drawn, and as to that Mr. Donaldson testified that- he was requested by Mrs. Macartney to draw the deed, she stating that

The court cannot escape the conviction, when, all the testimony and surrounding circumstances are considered, that the conveyances both by Mr. and Mrs. Macartney were made with the purpose and intent of at least hindering and delaying creditors, and of making at the same time some provision for themselves in their declining years, with the expectation and doubtless with the understanding and agreement on the part of the grantee that from the rents and profits of these places she would provide and care for the grantors so long as they should live. Coupled with these motives and efforts to make- provision for themselves was also the wish to make some suitable provision for their daughter Agnes. The other daughters were happily married, .and had husbands who provided them with comfortable homes. Their future was assured. The daughter Agnes was unmarried. She was .a teacher in the public schools. She was living at home with her parents, caring for them and looking to their comfort. It was a most natural thing for her parents, considering her dependent condition and the care which she was to give them, to desire to specially provide for the defendant. That such was in fact the purpose, in part at least, of these conveyances, is sustained by the testimony of Mrs. Mould, apparently a candid and disinterested witness, who testified that Mrs. Macartney told her shortly before her death that:

“Agnes* [her daughter] did not need to go back teaching school if she did not want to, as the houses all belong to her.”

Another most important circumstance cannot be overlooked in the disposition of this case, and that is that' for 10 years after the execution of the deeds in question the title to the properties were permitted to remain in the defendant, and her right and ownership in them remained apparently unchallenged. If it were the original purpose and intent of the grantors that the defendant should only remain the holder of the nominal title for the purpose of keeping the property from their creditors, with an agreement to reconvey, it seems strange that, after those dangers had long been passed, she should have been permitted without apparent protest to have continued to hold the property in her own name. The natural thing would have been for Mrs. Macartney to have procured a reconveyance of the properties.

Assuming, however, for the purpose of the argument, that the only object and purpose of the conveyances of the properties in question was to hinder and defraud creditors, as claimed by the plaintiffs, and that there was some tacit or even express agreement on the part of the defendant to hold the title for the benefit of the grantors, or an agreement to reconvey when requested, it would be very difficult upon principle to sustain a right of recovery in this action upon such grounds. The general rule of law is that courts of equity will refuse relief to set aside conveyances made for the purpose of defrauding creditors. If parties participate in such a fraudulent scheme, the courts will leave them to the consequences of their own unlawful acts, and refuse them assistance in restoring property parted with under such circumstances. Robertson v. Sayre, 134 N. Y. 97 , 31 N. E. 250 , 30 Am. St. Rep. 627 ; Renfrew v. McDonald, 11 Hun, 254 ; Manny v. Philips, 1 Paige, 472; Bolt v. Rogers, 3 Paige, 154; Garfield v. Hatmaker, 15 N. Y. 475 . “This rule is a penalty imposed by the law for the prevention of frauds and the protection of subsequent purchasers.” The heirs at law of the original parties to the transaction stand in no better position in this regard than the parties themselves. Robertson v. Sayre, 134 N. Y. 99 , 31 N. E. 250 , 30 Am. St. Rep. 627 ; Jackson v. Garnsey, 16 Johns. 189 . There appears to be an exception to the general rule where a lawyer, in whom his client reposes trust and confidence, advises his client to make such a conveyance to himself. Such were the cases of Ford v. Harrington, 16 N. Y. 285 , and Freelove v. Cole, 41 Barb. 318 . The doctrine of the rule has been extended even to the case of a financial adviser upon whose counsel the grantor has been accustomed to rely and act. Ingersoll v. Weld, 103 App. Div. 554 , 93 N. Y. Supp. 291 . In the case of Boyd v. De La Montagnie, 73 N. Y. 498 , 29 Am. Rep. 197 , the rule was also applied to the case of a gratuitous transfer of property from a wife to a husband, induced in part by representations on his part that she was liable for a debt, for which she, in fact, was not liable, and made in the belief that the effect of the transfer would be to delay the creditors or in some way save the property. As was said in Ingersoll v. Weld, 103 App. Div. 554 , 93 N. Y. Supp. 291 :

“The test is whether his advice operated upon the mind to the extent of controlling it in making the transfers.”

If we apply that test, then, to the facts in this case, we find they fall far short of bringing it within the exceptions to the general rule which leaves parties to a fraudulent conveyance to the consequences of their own acts. There 'is an entire absence of any evidence showing, or tending to show, that the defendant Agnes D. Macartney counseled or advised the transfers or that the grantors, her parents, were influenced in arty way by her opinions or by any solicitations on her part. On the contrary, what little evidence there is bearing on the subject is that, when Chilson’s claims were pressing, their nephew, John Donaldson, was sent for, and the plaintiffs contend that it was upon his suggestion and advice the property was deeded to the defend

It is true that there did exist between the defendant and her parents certain relations of trust and confidence; but, as was said in Renfrew v. McDonald, 11 Hun, 256 :

“The case represented, by the complainant is a bold case of a conveyance of the property in question, with an express intent to hinder, delay, and defraud the creditors of the plaintiff. The allegations that confidential relations existed between the parties, that the defendant was the adviser of the plaintiff in the transaction, and was some time a boarder at the defendant’s house, are allegations of character that might truly be made in most cases of such conveyances. The recipient of property with intent to defraud creditors possesses the intimacy and confidence of the fraudulent debtor, and advises the attempted fraud and consents to be the instrument thereof. To allow the grantor in such a case to set aside the grant and be restored to all her parted with for the illegal purpose would be to afford great encouragement to future attempts of that character.”

We therefore conclude that the plaintiffs cannot prevail in this action upon the theory that the conveyances in question were made to hinder, delay, and defraud creditors. These considerations end the case, unless it appears that the conveyance by Mr. Macartney was made at a time when he was irresponsible for his acts. So far as Mrs. Macartney is concerned, no such claim is made.

If the transaction was induced and carried through with the intent to hinder, delay, and defraud creditors, it is a matter of no consequence in this case whether there was or was not a parol agreement to hold the title for the benefit of the grantors, or whether or not, but for the presence of this element in the case a constructive trust might be established against the defendant. In this connection, however, this court is bound to say that, eliminating any question of a purpose to hinder, delay, and defraud creditors, the court would not feel justified, from the evidence as presented, in finding an agreement on the defendant’s part to hold the naked title in trust for the grantors further than to provide for her parents so long as they lived. Certain facts are proved, which, standing alone and by themselves, might raise a strong suspicion that there was some tacit or secret understanding on the defendant’s part to treat the houses and lots conveyed as other than her absolute property. It is quite evident that after these conveyances and during the life of her mother, the defendant gave to her mother a considerable portion of the moneys derived from the rents, and permitted h'er mother to do or cause to be done in reference to the houses many things by way of repairs and renting and receiving rents, as though she had a personal interest in the properties. On the other hand, it also appears that the defendant and her mother lived together; that the defendant was a school teacher and during school hours was necessarily away from home and unable to give personal attention to every detail of management; that, according to Mr. Donaldson’s testimony, the defendant had obligated herself to care for her parents during their lives. These circumstances very greatly impair the force and effect of acts which under other conditions would have a far greater significance.

The fact that the defendant purposed to do something for her sisters in this connection is a strong argument for the plaintiffs, but this court cannot, in weighing the force of the testimony, give that fact and circumstance greater effect than the positive and explicit evidence of Mr. Donaldson as to what was actually said and done at the time the deeds in question were executed, corroborated as it is by the testimony of Mrs. Mould as to the declarations made by Mrs. Macartney that the houses belonged to her daughter Agnes, and she would not be required to teach school all her life because of her ownership of these properties. A trust cannot be impressed upon what appears by deed alone to be an absolute title in the defendant, without clear proof showing a beneficial interest in another as well as its nature, character, and extent. Hutchins v. Van Vechten, 140 N. Y. 120 , 35 N. E. 446 ; Wadd v. Hazleton, 137 N. Y. 215 , 33 N. E. 143 , 21 L. R. A. 693 , 33 Am. St. Rep. 707 ; Van Cott v. Prentice, 104 N. Y. 45 , 10 N. E. 257 . Those elements are wholly lacking in the evidence produced for the plaintiffs in this action. Courts in proper cases will impress properties with a trust to prevent and redress a fraud, and such trusts will be unaffected by the statute of frauds and will be enforced. The general rule is that where .a person, through the influence of a confidential relation, acquires title to property or obtains an advantage which he cannot conscientiously retain, the court to prevent the abuse of confidence will grant relief. Goldsmith v. Goldsmith, 145 N. Y. 318 , 39 N. E. 1067 ; Wood v. Rabe, 96 N. Y. 426 , 86 Am. Rep. 640 . In the case at bar, however, the preponderance of evidence is against the contention that at the time the deeds were executed and delivered there was any promise or agreement on the defendant’s part to hold the title of the properties for the benefit of the grantors beyond caring and providing for her parents during their lives. '

There remains, however, for consideration another ground upon which the plaintiffs seek relief as to the house and lot No. 107 Tenth street deeded the defendant by her father, George R. Macartney. It is contended that at the time he executed the deed in question he was mentally incompetent to transact business, and his mind so affected by disease as to render him incapable of making a valid conveyance. Mr. Macartney was at the time of the transaction in question a man of about 70 years. He had been suffering for a considerable time with a peculiar form of diabetes which had greatly impaired his physical powers. The evidence of those, who had the best opportunity of observing him seems

It is not claimed that any consideration for the conveyance passed' at the time of the execution of the deed beyond the dollar expressed, and the money previously advanced by the defendant and the promise to care for him as long as he lived. All these amounts were grossly inadequate consideration when compared with the value of the property. While Mr. Macartney had a perfect right to deed the property to his daughter for nothing, nevertheless, if while so doing he was suffering from such unnatural mental conditions that he was unable to-fully and fairly know and appreciate his acts and their consequences, then the defendant ought not to continue to hold the property. The exact nature and extent of the mental impairment of Mr. Macartney is not easily to be determined. It is only fair to say that some of his neighbors and acquaintances observed none. The evidence produced shows a case of mental weakness where the operations of the mind appear to have been far from normal. In such cases the law imposes upon the person receiving the benefit of the conveyance the burden of showing the perfect fairness of the transaction and the capacity of the other party. Pomeroy’s Equity Jurisprudence, § 947; Shakespeare v. Markham, 72 N. Y. 400 ; Cowee v. Cornell, 75 N. Y. 91 , 31 Am. Rep. 428 ; Nutting v. Pell, 11 App. Div. 55 , 42 N. Y. Supp. 987 . We do not think the defendant in this case has met these requirements. At the same time, we attribute no purpose on her part to defraud her father or her sisters in the transaction, but simply hold that at the time of the giving of the deed by her father we believe he was not entirely mentally responsible for his acts, and, as the consideration was inadequate, we think the transaction should not stand. The fact that the grantor George R. Macartney was not wholly responsible for his acts relieves him from the consequences of having voluntarily deeded away his property to hinder and delay creditors.