Decker v. Decker — 13 N.Y. St. Rep. 131

Majority

p. 131

Sarah Decker, Resp’t, v. Hattie E. Decker App’lt.^[1]

(Court of Appeals,

Filed January 17, 1888.)

Headnote

1. Creditor’s bill—Transfer of property to defraud creditors— When done by means of judgment.

One Simon Decker bound himself to his wife to pay a stipulated annuity and gave his bond and mortgage as security for the performance of that agreement. Suits upon these securities were brought against Decker and judgments recovered, hut the executions issued to enforce the judgments were returned unsatisfied. Prior to the recording of the plaintiff’s mortgage a judgment had been recorded against Decker by one Lee. After the recording of said mortgage executions were issued on the judgments obtained in the Lee suit, and the land in question was sold at sheriff’s sale and bid in by one Jackson, who received the sheriff’s deed. Jackson purchased it under a fraudulent arrangement to take the title for the benefit of Decker who furnished the needed funds, and to hold it as a cover and shield to ward off and defeat tfie claim of the plaintiff and the lien of the mortgage held by her. The scheme was completed by a further transfer to the defendant of substantially the whole of Simon’s property. Held, that it did not alter the character of this fraudulent arrangement or enable it to defy justice that it was accomplished through the agency of a valid judgment regularly enforced.

2. Same—Proper remedy.

The transfer to Jackson could he assailed only on the ground of fraud, and a creditor’s bill to reach and follow the proceeds of the fraud in the hands of fraudulent beneficiaries was a proper and suitable remedy.

3. Same—Statute of Limitations—Code Civ. Pro., § 382.

The action was only barred by the lapse of six years from the discovery of the fraud.

4. Same—Pleading—Defect of parties—Remedy—Code Civ. Pro., SS 488, 498, 499.

Where there is a defecf of parties plaintiff or defendant, and such defect appears on the face of the complaint, the remedy is by demurrer (Code Civ. Pro., § 488). If the defect does not appear on the face of the complaint, the objection must be taken by the answer (sec. 498), and is waived if not taken as prescribed (sec. 499).

Appeal from a judgment of the supreme court, general term, fourth department, affirming a judgment in favor of the plaintiff entered upon the report of a referee.

J. McGuire, for app’lt; Walter Lloyd• Smith, for resp’t.

The validity of the contract by which, during the pendency of an action for a limited divorce, Simon Decker bound himself to his wife to pay a stipulated annuity to her for her support and maintenance and gave his bond and mortgage to Van Dusen as security for the performance of that agreement, cannot in this action be questioned. The securities having been transferred to the plaintiff, she brought one or more actions upon them

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against Decker and recovered. Their validity and that of the contract out of which they grew was directly involved in the recognition of plaintiff’s alleged cause of action and should then have been litigated if the question was intended to be raised. The judgments, therefore, are conclusive against Decker and cannot be assailed in this action! Carpenter v. Osborn, 102 N. Y., 552 ; 2 N. Y. State Rep., 520.

The executions issued to enforce them were returned unsatisfied and the present action is a creditor’s bill to reach property of the defendant Decker ,alleged to have been fraudulently transferred to Hattie Decker, who succeeded the plaintiff as his wife. The process by which the fraud is said to have been accomplished was by utilizing for that purpose an honest judgment against Decker and the regular process of the court. One Alfred Lee had recovered a judgment against Simon Decker for nearly $1,000 in 1861, and some years before the plaintiff’s mortgage was recorded. After that record Lee recovered a further judgment for costs on appeal. Executions were issued on these judgments and the land now in question sold at sheriff’s sale and bid in by one George Jackson, who afterwards received the sheriff’s deed. Jackson appears to have made the purchase on his own credit, but under a collusive and fraudulent arrangement with Simon Decker to take the title for his benefit, he furnishing the needed funds and hold it as a cover and shield to ward off and defeat the claim of the plaintiff and the lien of the mortgage held by her. The finding of the referee was to that effect. The scheme was completed by a further transfer to the defendant Hattie Decker, of substantially the whole of Simon’s property.

It does not alter the character of this fraudulent arrangement or enable it to defy justice that it was accomplished through the agency of a valid judgment regularly enforced. That often may be made an effective agency in accomplishing beyond its own legitimate purpose a further result of fraud and dishonesty and may even be selected as the suitable means by reasons of its inherent character.

The complaint here is not of the judgment but of the use which was made of it. In truth it was paid by Decker. If he had been the purchaser in form as he was in fact, the transaction would have resulted in a payment and satisfaction of the Lee judgment and a preservation of the lien of the plaintiff’s mortgage, But the legal title was kept in Jackson as a shield against creditors. He sold a part of the premises to Dunham, who gave back a purchase money mortgage for $8,000, which Jackson assigned to the defendant, Hattie Decker. That she was a participant in, and the beneficiary of, the attempted fraud was quite fairly

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established and judgment has gone against her for the foreclosure of the Van Dusen mortgage on the unsold parcel and for a deficiency not exceeding the Dunham mortgage and interest.

The further objections to that recovery appear to be three in number.

It is first claimed that the representatives of Jackson who is dead were necessary parties. If there was a defect of parties plaintiff or defendant and such defect appeared on the face of the complaint, the remedy was by demurrer. ■ Code, § 488. If the defect does not appear on the face of the complaint the objection must be taken by the answer (§ 498), and is waived if not taken as prescribed (§ 499). The defect now asserted was not made ground of objection in either form and must be deemed to have been waived, if in fact it existed.

The statute of limitations was relied on as a defense and it is now argued that the purchase by Jackson left a resulting trust in the creditors of Simon Decker which they could enforce; that the present action is in substance one for such enforcement and was barred by the limitation of ten years. If the purchase by Jackson was on his own credit and in reliance upon an after reimbursement by Decker, as seems to have been the fact, no trust resulted and the title vested in Jackson. We so held in Niver v. Crane ( 98 N. Y., 40 ), in which case the reason of the rule and the authorities which support it were very fully stated. The transfer to Jackson could therefore be assailed only on the ground of fraud, and a creditor’s bill to reach and follow the proceeds of the fraud in the hands of fraudulent beneficiaries was a proper and suitable remedy, and I think might have been chosen even if a trust had resulted. There would have been a choice of remedies. The action, therefore, was founded on fraud and came within section 382 of the Code of Oivil Procedure. It was only barred by the lapse of six years from the discovery of the fraud, and the finding that it was not so discovered until within that period is sufficiently supported by the proofs.

It is further objected that the judgment for a deficiency against Hattie Decker is improper. She was liable for plaintiff’s debt to the extent of the property fraudulently transferred to her and the proceeds of such as she herself had sold. The award of the referee limited her liability to such property and its proceeds. The judgment entered, did not, in terms, conform to such direction, but the remedy was by motion to correct and settle it, and make it conform to the decision. No ■ such motion was made, probably for the reason that the error was immaterial since the amount

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fraudulently received by .Hattie Decker with the accrued interest was greater than the deficiency to be recovered.

Other questions have been examined but without discovering any just reason for a reversal of the judgment.. It should be aSSrmed with costs.

All concur.