O'Connell v. Madden — 26 N.Y. St. Rep. 251

Majority

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Bridget O’Connell, as Adm'rx, etc., Pl'ff, v. Ruth C. Madden et al., Def’ts.

(Superior Court of Buffalo, Equity Term,

Filed October, 1889.)

Headnote

1. Fraudulent conveyance — Evidence of intent.

One M., being insolvent, conveyed his real estate, through a third person, to his wife, who paid no consideration therefor. After M.’s death his wife executed mortgages on such real estate to ceatain creditors of M., to secure debts due them at time of the conveyance toiler. Held, that the fact of M.’s insolvency, the want of consideration for the deed, and the fact that M.’s debts were of the same class, furnished evidence that the conveyance was made in fraud of creditors.

2. Trust — Does not exist in favor of one paying part of con-’ SIDERATION.

Where a deed is taken in the name of a husband, upon payment by him of a portion of the purchase money, with the knowledge and consent of his wife, no trust results in her favor, even though some portion of the purchase money legally belonged to her.

Action brought to set aside certain conveyances as being in fraud of the rights of creditors. The plaintiff is administratrix of John Madden, deceased, who died on the 18th day of October, 1886. Just previous to his death he was seized in fee of a house and lot situate on North Division street, in Buffalo. On September 25, 1886, John Madden and the defendant, Ruth 0., his wife, joined in a deed of said premises to one Charles Cooper, who thereafter, and on September 28, 1886, joined in a conveyance with his wife, Mary D. Cooper, of the same premises to Ruth C. Madden. No consideration was paid for these conveyances, the object being to vest title in Ruth C. Madden. John Madden, at the time of the conveyances, was indebted to Mary Madden in the sum of $1,800; to Maggie Ford in the sum of $600; to the plaintiff, $680. Some accrued interest was due upon each' sum. The premises conveyed were worth, at the time, $5,500, subject to a prior mortgage of $2,800. John Madden was possessed, at the time, of no other property than that conveyed, and was insolvent at the time of his death. After his death Mary Madden assigned her claim to Rodney W. Daniels, who thereupon, on June 24, 1888, took from the defendant, Ruth C. Madden, two bonds and mortgages bearing even date, for $925 and $900 respectively, the same being liens upon the premises conveyed. No consideration was paid by Daniels to Mary Madden for the assignment, except the subsequent assignment by him to her of the $925 mortgage, which was, by agreement, made a prior lien to the $900 mortgage; the consideration for both these mortgages was the cancellation of the claim held by Mary Madden against the estate of John. On June 26, 1888, there was executed by Ruth C. Madden, upon the premises conveyed, to Maggie Ford, a mortgage for $600.

Ruth 0. Madden was duly appointed administratrix of John Madden’s estate, but was by order of the surrogate subsequently

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removed, and the plaintiff appointed in her stead, who now brings this action as administratrix to set aside the said deeds, and cancel and discharge the said mortgages. Eodney W. Daniels having died, Ann E. Daniels, his executrix has been substituted in his stead.

While & Simons, for pl’ff; A. W. Hickman, for Ruth C. Madden and Maggie Ford; Rogers, Locke & Milburn, for Mary Madden and Ann E. Daniels, as executrix.

The deeds of conveyance which vested title in Ruth C. Madden were each without consideration. John Madden was at the time unable to pay his debts in full; his only property was the house and lot conveyed, so that at the time of the conveyance, as well as the date of his death, he was insolvent. The rule ■of law under such circumstances is, that failure of consideration and insolvency coupled together, furnish controlling circumstances for finding fraudulent intent. Erickson v. Quinn, 47 N. Y., 410 ; Royer Wheel Co., v. Fielding, 101 N. Y., 504 -7-8; Cole v. Tyler, 65 N. Y., 73 ; Potts v. Hart, 99 N. Y., 168 .

The law gives no preference to a vigilant creditor in the estate of a deceased debtor; it simply impounds his property for the benefit of all his creditors. Lichtenberg v. Herdtfelder, 103 N. Y., 302 -306; 3 N. Y. State Rep., 91.

In this case deceased at the time of the conveyance" was insolvent. The debts existing were more than the value of all the, property he then or subsequently owned; the conveyance was without consideration. This coupled with the fact that the debts were all of the same class, the obligation to pay being the same morally and legally, furnishes evidence sufficiently satisfactory upon which to base a finding that the deed from Madden to Cooper and wife, and by them to Ruth C. Madden, were in law fraudulent and void as hindering, delaying and defrauding creditors. Being so void, the estate became an asset in the hands of his administratrix for the payment of his debts, and it became and was her duty to pursue the estate in the hands of the fraudulent grantees, to the end that it might be applied to liquidate his indebtedness. Lichtenberg v. Herdtfelder, supra.

The direction, assuming it to have been made by John Madden to pay Mary Madden’s debt, created no trust in her favor to have her debt first paid. It may be assumed that if Ruth C. Madden obtained title to the property by virtue of an agreement to pay the debt of Mary Madden, so that she became personally liable for its amount, that it would furnish sufficient consideration to .uphold the conveyance. Such is the contention of Mr. Locke. It must fail, however, for the reason that it finds no basis in fact. Ruth C. Madden nowhere so testified; on the contrary, her claim is that she owned one-half of the property, and was consequently entitled to it upon John Madden’s death, while Mary Madden says that just previous to John’s death he stated to Ruth, in her presence, “ for her to pay me all the money he ever owed me, and the interest. He didn’t say where she was to get it. * * * She (Euth) asked how much it was.. * * * Ho told her $1,800.

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“ Q. What did she say ? A. Some friends came in, and she didn’t say any more.”

She further testified that she did not know of the conveyance to Ruth until after John’s death. This evidence fails to establish the agreement contended for, and there is none other adding to its strength. It cannot, therefore, be said that the payment of Mary’s debt formed, or was intended to form, any consideration for the ■execution of the deed, nor did Ruth C. Madden at any time assume to enter into any agreement by which she charged herself personally with the payment of the debt as a condition upon which she accepted the conveyance. John Madden’s object, so far as expressed, was that he desired Ruth to have the benefit of it upon his decease in preference to his heirs. There was no intimation made at the time of the conveyance as to the condition or rights of the other creditors. So that in no aspect did Ruth become in any manner chargeable with the payment of their debts. Such being the status of the property, and the conveyance which vested title in Ruth G. Madden being void, it became part of the estate of John Madden, and as such, liable for his debts.

As already seen no vigilance will enure to secure a preference in a deceased person’s estate, and the debts all being of the same class they each stand upon the same footing. As a consequence of this the mortgages executed by Ruth C. Madden to Rodney W. Daniels and Maggie Ford, as well as the assignment by Daniels to Mary Madden, do not avail to secure a preference in their favor as against the plaintiff or other creditors, but they must be can-celled and discharged as liens upon the property, and each creditor paid in full if the property be sufficient, or pro rata as the case may be. The portion subject to the creditors’ lien being the proceeds of the property subject to the lien of the prior existing mortgage and the dower of the widow. The conveyances are also sought to be upheld upon the doctrine of a resulting trust, in favor of the grantee Ruth G. Madden. This contention finds support, if at all, in the testimony of the witness Cooper as to the declaration of John Madden made just prior to the conveyance that “ he wanted to make provision for Ruth, she owned half interest in this property down below when this deed was made out of the house and lot, and he wanted she should have the property while she lived, and no one else have it until she got through with it. He said they had no heirs, and she was the one that ought to have it.”

Assuming this testimony competent, for the purpose of this case, it falls short of establishing, as a clear fact, that any portion of what was called the property down below went to furnish, in whole or in part, the purchase price of the property affected by the present action. Moris this position aided by the testimony ■of Ruth, as, at the most, it was a mere supposition upon her part The title to the property on Seneca street was held jointly by Madden and his wife; they each, therefore, became seized of the entirety. Bertles v. Nunan, 92 N. Y., 152 .

When this property was sold, assuming its proceeds went to

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parchase the present property, it nowhere appears that there was then any understanding or claim made by Ruth C. Madden that she had or claimed any interest in the property affected by this action; the fact that title was taken by the husband alone rebuts such presumption, and, in addition, it was so taken with knowledge^ her part; her legal title was thus wiped out and gone. Nor was it kept alive by virtue of any agreement, nor was any equitable interest claimed. From this we are quite able to say her legal title has not survived, and the claim is not now available to defeat the creditors of John Madden. Niver v. Crane, 98 N. Y., 40 _

_ But if we treat one-half as paid by the wife, no trust resulted in her favor, as the statute provides that where the compensation is paid by one person, and the title is taken in the name of another, no trust results in favor of the person paying the money. 4 R. S., § 51, chap. 1, part 2, page 2437 (8th ed.). See Niver v. Crane, supra.

The exceptions in the statute are not applicable here. It thus appearing that the deed was taken in the name of John Madden upon payment by him of a portion of the purchase money, and that such title was so talc.en with the knowledge and consent of Ruth C. Madden, no trust resulted in her favor even though some portion of the purchase money at the time legally belonged to her. Hurst v. Harper, 14 Hun, 280 .

It is not overlooked that there may be established an implied or resulting trust recognized at common law notwithstanding the statute, but careful examination of the cases cited fail to convince my mind that they are applicable to the facts developed here, for the reason that the evidence is insufficient to show any equitable interest in Euth 0. Madden at the date of the conveyance, beyond her dower interest. H these views are correct, it follows that the plaintiff should have judgment setting aside the conveyances from John Madden to Cooper, and from Cooper to Euth C. Madden. Also a judgment setting aside and cancelling the three mortgages, viz.: That to Eodney W. Daniels, assigned by him to Mary Madden, the one now held by Ann E. Daniels as executor, etc., and the mortgage to Maggie Ford. Also a decree adjudging that the said property be sold under the direction of the court, and out of the proceeds thereof, there be first paid the prior mortgage, and the widow’s right of dower, and that the balance be applied in payment of the just debts of John Madden in full if there be sufficient for that purpose, and if not, then pro rata equally upon each. Costs of this action to be paid out of the property.