Popfinger v. Yutte — 1 N.Y. St. Rep. 334

Majority

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Popfinger v. Yutte and wife.^[1]

(Court of Appeals,

Filed March 26, 1886.)

Headnote

1. Creditors’ actions—Jurisdiction of superior court as to—Code of

Civil Procedure, § 263, sued. 5.

Subdivision 5, section 263 of the Code of Civil Procedure, which purports to confine the jurisdiction of the superior court in actions by judgment creditors to actions on its own judgments, is inoperative.

2. Same—Want of jurisdiction—Matter of defense—Code of Civil

Procedure, § 266.

Want of jurisdiction by reason of the non-existence of any of the jurisdictional facts specified in section 263 is matter of defense, and is waived by appearance, unless pleaded.

3. Fraudulent conveyance.

At the time of entering judgment, Henry Yutte owned land in Hemp-stead subject to $7,500 in mortgages, and was indebted to one Reinig to the extent of $668. He conveyed the land to Reinig as security, who held the equity in trust for Yutte until June 10th, when he sold to Eliza Gierke, taking a third mortgage to himself, and a deed of a house in Jackson street, which he allowed to go to Christine Yutte. The latter exchanged it for a mortgaged house in Avenue C, which she sold, and realized $155. With this and other money she purchased a house in Sixth street, and sold it for a profit of $5 000, and purchased a house in Christie street. The court, in creditors’ action, found that the several conveyances to and by Christine Yutte were void a< to creditors of Henry, and that plaintiff was entitled to have the Christie street house sold, and to be paid from the proceeds $155. Held, error; that Henry Yutte’s intere t in the original property was of no value; that Reinig had a right to apply the Jackson property as he saw fit; and that the finding of fraud was unsupported.

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Appeal from order general term superior court, city of New York, modifying judgment in favor of plaintiff, granted by superior court without a jury.

Wm. G. McOrea, for appellants. '

Henry Whele, for respondent,

We think that the superior court of the city of New York had jurisdiction of this case. By the constitution of 1846 (article 14, § 12) the superior court was continued, until otherwise directed by the legislature, with its then present powers and jurisdiction. Under the Code of Procedure the superior court of the city of New York had, within its territorial limits, general jurisdiction in equity, co-equal with that of the supreme court. Bowen v. Irish Presb. Cong., 6 Bosw., 246 ; Porter v. Lord, 4 Drew, 682. This jurisdiction existed at the time of the adoption of article 6, which was on the 6th of December, 1869. By that article (article 6, § 12) it was declared that the superior court of the city of New York, with other local courts, was continued with the powers and jurisdiction it then possessed, and such further civil and criminal jurisdiction as might be conferred by law. The words “until otherwise directed by the legislature,” which were contained in section 12 of article 14 of the constitution of 1846, were omitted in the amendment of 1869. Although there was no express repeal or amendment of article 14, section 12, of the constitution of 1846, yet we are of opinion that, as the amended article 6, section 12, covers the same subject as section 12 of article 14, it must be regarded as a substitute therefor, and as superseding it, and permanently continuing the then existing jurisdiction of the superior court, with such further jurisdiction as might be conferred, and depriving the legislature of the power of taking away from that court any of the jurisdiction or powers which it possessed at.the time of the adoption of article 6. Ross v. City of Brooklyn, 69 N. Y., 605 . For this reason we think that subdivision 5 of section 263 of the Code of Civil Procedure, which purports to confine the jurisdiction of the superior court, in actions by judgment creditors, to actions on its own judgments, is inoperative. The objection is unavailable in this action, for the further reason that it was not taken in the answer, as the Code of Civil Procedure, § 266, provides that want of jurisdiction by reason of the non-existence of any of the jurisdictional facts specified in section 263 is matter of defense, and is waived by appearance unless pleaded.

The grounds of the plaintiff’s present action are that on. the 10th of June, 1882, she recovered a judgment in the

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marine court of the city of New York against Henry Yutte for $494.26, upon which execution was issued and returned unsatisfied. The trial judge found that the indebtedness upon which that judgment was recovered arose prior to the year 1877; that on and prior to July 16, 1877, Henry Yutte was the owner of a piece of land situate at Hempstead, N. Y., which was subject to two mortgages amounting together to $7,500, and was indebted to Carl Eeinig in $500 for money loaned, and in the further sum of $168.01, for a liability which said Eeinig had incurred as his surety on an undertaking on appeal; that on the 16th of June, 1877, said Henry Yutte conveyed said land at Hempstead to Eeinig as security for his indebtedness, and Eeimg held the equity of redemption in said land, over and above his claims, in trust for Yutte until June 10, 1878; that in November, 1878, said, land was sold under the foreclosure of the first of said two. mortgages, and did not bring at such sale enough to pay said mortgages; that Eeinig, while he held the title to said land, had paid an installment of interest on said mortgages (thus increasing his claim to $880, besides interest), and on the 10th of June, 1878, he sold said premises to Eliza Gierke, receiving a third mortgage thereon for $500 for himself, and a deed of a house in Jackson street, which he allowed to go to the defendant Christine Yutte; that Eeinig made the conveyance of the Hempstead property to Eliza Gierke at the request of Henry Yutte, and accepted the third mortgage of $500 in full satisfaction of the debts owing to him by Yutte, and Eliza Gierke, at the request of Yutte, immediately, on the conveyance to her of the Hemp-stead property, conveyed the Jackson street house to Christine Yutte, who paid no consideration therefor, and held the same for the benefit of Henry Yutte; that this conveyance was made to and accepted by her for the purpose of placing the house in Jackson street beyond the reach of the creditors of Henry Yutte, and was fraudulent as against his creditors; that in July, 1878, an action for the foreclosure of a 'mortgage on the Jackson street property was commenced, and that about August 1, 1878, and while said foreclosure was pending, Christine Yutte exchanged the Jackson street property with William H. Palmer for a house in Avenue C, and took the deed thereof for the benefit of Henry Yutte, so far as his creditors were concerned; that she sold said house in Avenue C on the 13th of January, 1881, and realized from said sale the sum of $155 over and above the incumbrances thereon, and ten lots of land in New Jersey, subject to a mortgage, the value of which lots was unknown; that she still held said lots at the time of the trial of this action, and offered to convey them to the plaintiff; that thereafter Christine Yutte, with the $155 realized from the

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sale of the house in Avenue 0, together with other money derived by her from other sources, purchased a lot in Sixth street, New York, from the resale of which she afterwards realized $6,500, in August, 1882, yielding to her a profit of $5,000 over and above the sum invested by her in the purchase of the property; and that with $5,500 of the proceeds of the Sixth street property she purchased a house and lot in Christie street, New York, and still holds the title to the same, and said several conveyances to and by her, and the several investments made by the defendants, were made with the intent on their part to defraud the creditors of Henry Yutte.

The court found that only $155 of the money derived by Christine Yutte from the sale of the Avenue C property was invested in the purchase of the Christie street property, and that all the rest of the purchase money of that property was derived from other sources which do not appear to be connected with Henry Yutte.

There is no finding that the conveyance from Henry Yutte to Carl Reinig of Hempstead property was fraudulent in any respect. A finding to that effect was requested by the plaintiff, but was refused by the trial judge. The conclusions of law of the learned judge were that the several conveyances to and by Christine Yutte were void as to the creditors of Henry Yutte; that in dealing with said premises, and in the several transfers mentioned, she acted as such trustee, to the exent of the interest of Henry Yutte therein;

• that the plaintiff had a hen upon the land in New Jersey to the extent of his judgment, and was entitled to an accounting for the rents and profits of the several pieces of land held by Christine Yutte in trust for the plaintiff, and to a judgment appointing a receiver, and directing a conveyance to Mm of the Christie street property, and a sale thereof by him, and the payment to the plaintiff, out of the proceeds of such sale, of the sum of $155, with interest from June 13, 1881, on the plaintiff’s judgment, with the costs of this action. On appeal by both parties to the general term from the judgment entered on this decision, the court modified the judgment so as to direct the execution by CMistme Yutte to a receiver of a full and valid warranty deed, with the ordinary covenants, of the Christie street property, and a sale thereof by such receiver, and the payment to the plaintiff, out of the proceeds of such sale, of the sum of $494.76, with interest from June 19, 1882, besides costs, etc.; and that the judgment, as modified, be affirmed, with costs. From the whole of this judgment the defendant, Christine Yutte, appeals to this court.

There is very little equity in the case made on the part of

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the plaintiff. The whole claim on her part is based on the receipt by the defendant, Mrs. Yutte, of a conveyance of the Jackson street property, which was part of the proceeds of the sale made by Reinig to Gierke of the land at Hemp-stead, which had formerly belonged to Henry Yutte. It is very clearly shown by the findings that Yutte’s interest in the property proved to be of no value; that, by the'consent of Mr. Reinig, Mrs. Yutte was allowed to receive the deed of the Jackson street property, which was afterwards exchanged for the Avenue 0 property, and thus ultimately yielded the sum of $155; yet that sum was much less than the amount found to be due to Reinig from Henry Yutte, and for which he held the Hempstead property as security under a conveyance which is no way impeached. He would have had a perfect right to apply that Jackson street property, or its proceeds, to the payment of his claim against Henry Yutte. The proceeds, up to the amount due Reinig, did not belong to Yutte, and in consenting to allow Mrs. Yutte to take the Jackson street property neither he nor Mrs. Yutte could in any way defraud the creditors of the latter. The finding of fraud in that respect is wholly fanciful and unsupported. The creditors of Yutte could not have obtained any benefit from the Jackson street property or its proceeds unless they exceeded the amount of Reinig’s claim had he insisted, as he had a right to do, upon retaining them for himself, and fraud could not be predicated of his consenting, with or without the procurement of Yutte, to Mrs. Yutte’s receiving the benefits derived from that property.

There is nothing in the case to show that Reinig consented to this arrangement for the benefit of Henry Yutte, or that the latter ever had any title, legal or equitable, to the Jackson street property. All that appears is that Reinig held the Hempstead property, under a valid conveyance, as security for a debt actually due him from Yutte; that the security was worthless; and that he consented to take for his debt a worthless mortgage for $500, and to give to Mrs. Yutte the benefit of the Jackson street house, by means of which she indirectly realized $155, which was much less than the amount due Reinig. The circumstances that, by adding to the petty sum thus obtained through the voluntary concession of Reinig, other money obtained by her from other sources, and which do not appear to have been derived in any way from her husband, she was enabled to make a lucky speculation in the purchase of the Sixth street property; by which she made a profit of $5,000, confers no equity on the plaintiff. The creditors of Henry Yutte were in no way prejudiced by any of the dealings, iior deprived of anything which they could have obtained. No funds of

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theirs or of their debtor were employed in the transaction, but only the sum of $155, which equitably belonged to Reinig, and which he could have obtained had he not consented to Mrs. Yutte’s taking the Jackson street property.

The modification made by the general term is still more inequitable. The whole reasoning of the general term is based upon an erroneous assumption, viz., that the trial court found that the transfer of the Hempstead property made by Henry Yutte to Reinig was made for the benefit of and in trust for Henry Yutte. On that assumption is built the theory that, as to Yutte’s creditors, the Hempstead property still belonged to Yutte; and that, the Jackson street property having been given in exchange for that, the consideration for the Jackson street property was furnished by Yutte; that consequently Mrs. Yutte took the title to the Jackson street property subject to a resulting trust in favor of the creditors of her husband, and is bound to account to them for all benefits derived from its proceeds through their subsequent mutations. A fundamental difficulty with this view of the case is that the trial court made no such finding as is attributed to it, but, although requested by the plaintiff, declined to find that there was any fraud in the transfer by Yutte to Reinig. On the contrary, the court found as facts that Yutte was actually indebted to Reinig for borrowed money, and that Reinig had other claims against him, and that the transfer of the Hempstead property was made to Reinig as security for that indebtedness, and that Reinig afterwards paid one installment of the interest on the $7,500 of mortgages to which the property was subject.

The .only reference to a trust for the benefit of Yutte contained in the findings is in the finding that Reinig held the equity of redemption in said land, over and above the amount of his claims against Yutte, for the benefit of and in trust for the defendant Yutte, up to the 10th of June, 1878, when he conveyed to Eliza Gierke. No fraud or invalidity in the transfer is shown by such a finding. All that it discloses is that Yutte was entitled to any surplus over the amount of claims of Reinig; and it is clear that there was no surplus, as all that was realized on the sale of the property was a third mortgage for $500, which was wiped out by the foreclosure of the first mortgage, and the Jackson street property, which was exchanged for the Avenue 0 lot, from which was realized ultimately $155, not enough to reimburse Reinig for the interest he had paid on the prior mortgages on the Hempstead property, to say nothing of his claims thereon for which he held it as security. Reinig had a perfect right to allow Mrs. Yutte to have the benefit of the Jackson street property, and to place it beyond the reach of the creditors of Yutte; and, even if this

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were done at the request of Yutte, it would not invalidate the transaction, nor make the property his. No money belonging to Yutte was therefore traced into the Sixth street property, and the creditors of Yutte could not, therefore, set up any resulting trust therein, nor in the Christie street property, which was purchased with the proceeds of the Sixth street property.

It is needless to discuss the question whether if $155 of Yutte’s money had been employed in the purchase of the Sixth street property, his crditors would be entitled to follow the entire profit of $5,000, realized therefrom, into the Christie street property.

The judgments of the general and special terms should be reversed, and a new trial ordered, costs to abide the event.

All concur.