Weiser v. Kling

The facts appearing in this case are somewhat complicated, and, for a correct understanding of the case, it is necessary that they should be carefully recited: On the 5th of April, 1892, one Eebecca Weisel, with others, delivered to one Friend a bond and mortgage to secure the payment of $5,500, of which $1,000 was to have been paid on the 1st day of December, 1892, and a like sum on, the same day in each year up to and including 1895, and the remaining $1,500 on the 1st of December, 1896, with interest annually. On the 5th of October, 1895, Mrs. Weisel conveyed the mortgaged premises to the plaintiff in this action. By the deed it was stated that the premises were subject to two mortgages, one of $18,000, and one of $2,500, to which latter amount the Friend mortgage had been then reduced. At the time of this conveyance, Mrs. Weisel was indebted to the defendant Wright in a considerable amount of money, for which he recovered against her a judgment on the 12th of March, 1896. This judgment was duly docketed in New York county, and execution was issued upon it, which was returned unsatisfied; and Wright began a judgment creditor’s action against Weiser (this plaintiff) and Mrs. Weisel, in which he recovered a judgment that the - conveyance from her to Weiser was made by the said defendants, and each of them, with intent to hinder, delay, and defraud the creditors of Mrs. Weisel. The judgment directed that the premise© - should be conveyed to a receiver by the defendants in that action, and. should be disposed of by him, and the proceeds applied as more particularly stated in the judgment. Whether this direction of the judgment was fully carried out or not does” not appear. It does appear, however, that the receiver sold the premises at auction, and : conveyed them to the defendant Kling. When sold, they were subject to a mortgage of $18,000. Weiser was in possession of the premises from the date of his deed, in October, 1885, until they were sold by the receiver. While he was in possession, he paid, as he says, to Friend, what was due upon his mortgage, and procured a satisfaction piece thereof, which was executed on the 1st of December, 1896; the last of the payments having been made upon it on that day. After he had been dispossessed from the premises in pursuance of the receiver’s deed he brought an action against Friend-alleging that, for certain reasons stated in his complaint, he was - entitled to be subrogated in Friend’s place as to all the payment© made on the $5,500 mortgage, and asking that the satisfaction piece of that mortgage be vacated, and that he be declared to be the assignee of the mortgage. No other person than Friend was made-defendant in- that action. Friend, having no interest in the matter, made no substantial defense, and Weiser procured the judgment ■ which he asked for. Of that judgment it may be said that, as neither • Wright nor Kling were parties to it, it is evidence in this action of nothing but its own rendition; and it is only material as tending-to show that by some means Weiser has the title to the mortgage, and:,' that it is not satisfied. It neither establishes, as against the defendants in this action, that Weiser paid any money upon that mortigage, nor that he paid the money in good faith, nor that the mortgage was not properly reduced to $2,500 when Weiser took his cob- .

In the judgment creditor’s action, Wright, one of the defendants here, was the plaintiff. Weiser was one of the defendants, and Mrs. Weisel was another. That judgment, therefore, is evidence in this action between the parties as to everything which was decided in it, ar whatever fact lay at the basis of the decision, and was necessary to be established in order to warrant the decision therein made. House v. Lockwood, 137 N. Y. 259 , 268, 33 N. E. 595 . Wright alleged in that case that the conveyance by Mrs. Weisel to Weiser was made with intent to hinder, delay, and defraud her creditors, and especially himself. Weiser, in his answer, denied the fraud, and set up that he was a purchaser for a valuable consideration. To enable Wright to recover in that action, it was not sufficient that he should prove simply that the conveyance was not founded upon a valuable consideration (2 Rev. St. [9th Ed.] p. 1888, § 4), but, if it was voluntary, he was bound to prove, in addition, that, as a matter -®f fact, it was fraudulent, and made with a fraudulent intent. If, however, it was made to appear that the purchase was for a valuable consideration, then it was necessary for him to prove, not only that the grantor, Mrs. Weisel, made the conveyance with intent to hinder, delay, and defraud her creditors, but that Weisel had previous notice sf the fraudulent intent of his grantor. Id. § 5. Unless this fact appeared, it would not have been competent for the court to render a judgment that the conveyance was fraudulent. Therefore the judgment necessarily is a determination that the grantor made it with a fraudulent intent, and that the grantee had notice of that intent,— In other words, that the grantee participated in the fraud. ■

Weiser claims, as the ground for his subrogation to the rights of Friend in this mortgage, that he paid every dollar of the money which was paid upon it, both before the conveyance was made and after-wards. In his bill of particulars he states that he had paid before the 15th of August, 1895, on account of the principal of this mortgage, §3,700, and on account of interest $675. He alleges in his answer to the creditor’s bill that he was a purchaser of the premises for a valuable consideration. He testifies in this case that he received that conveyance of the 5th of October, 1895, for the money which he had let Mrs. Weisel have to pay upon this mortgage. He had previously testified to that fact in supplementary proceedings, and he repeats his testimony in this action. There was no dispute in regard to that matter in this case; and the justice who decided the case finds as a fact

The judgment creditor’s action was brought about the 9th of April, 1896; that being the date on which the complaint was verified. It was tried in February, 1897. At the time of the trial, Weiser, as appears by his bill of particulars, had paid everything that was due upon this mortgage; and the total amount of Ms payments, principal and interest, was $6,318, of which $3,700 of principal and $675 of interest was the consideration for Ms conveyance. He did not seek, in the judgment creditor’s action, either that the conveyance should be permitted to stand as security for the money advanced by him,, or that he should be reimbursed what he had paid while in possession of the premises to satisfy this incumbrance. If he had actually made these payments as a consideration for the conveyance, and had not been actually guilty of the fraudulent intent, the proof of these payments would undoubtedly have required the court either to dismiss the complaint as to him, or if, for any reason, the court had. determined that there were suspicious circumstances as to the fairness of the transaction, so that equitably the judgment creditor should have been permitted to have recourse to the property for the payment of his debt, it would have decreed that the conveyance to Weiser should stand as security for the amount of his advances, as was done in Boyd v. Dunlap, 1 Johns. Oh. 478. But if the conveyance was fraudulent, and Weiser was a party to the fraud, he was not entitled to any protection, and the conveyance would be held absolutely void, and would not be permitted to stand as security for any purpose either of indemnity or of reimbursement. Davis v. Leopold, 87 N. Y. 620 ; Bald

But if the case were an open one, and the judgment were not a bar in that regard, yet it undoubtedly is a conclusive adjudication that the conveyance by Mrs. Weisel to Weiser was made in fraud of her creditors, and that both grantor and grantee were parties to that fraud. So much is directly adjudged by it. The determination of that fact was absolutely essential to the rendition of the judgment, which without it could not have been made. Weiser, therefore, started, as against these parties, upon the foreclosure of this mortgage with a determination conclusive against him that the conveyance which he received from Mrs. Weisel was fraudulent. He testified on this trial that the consideration for that fraudulent conveyance was the money which he had paid for Mrs. Weisel’s benefit to Friend, and which was applied to reduce this mortgage. That fact was found by the justice, and the finding was undoubtedly sustained by the evidence. When he received the conveyance upon such consideration, he ceased to have any claim against Mrs. Weisel for her debt to him, because he had taken the property for that debt. He had no recourse against Wright to have-the mortgage declared as a security, because he was a fraudulent participant in the conveyance. When he took the conveyance in payment of his debt, the debt was extinguished;- and, unless he can revive it, he cannot have any ■ standing to be subrogated to the amount paid upon the mortgage, because the right to subroga tion arises solely out of the fact that some one owes him for the money which he paid to reduce the mortgage. But he cannot revive the debt as against Wright, because the proceeding by which the debt was ■paid was with intent to defraud Wright, and for that reason the court will not hear Weiser to say that it is valid for the purpose of procuring a lien upon this land. He could not do it in-.the judgment cred

The judgment of the court below should therefore be affirmed with costs. All concur; IHGRAHAM, J., in result.