Scofield v. Spaulding — 28 N.Y. St. Rep. 108

Majority

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Byron J. Scofield, as Receiver of William Spaulding, Resp’t, v. William Spaulding and Philo B. Spaulding, App’lts.

(Supreme Court, General Term, Fourth Department,

Filed December 7, 1889.)

Headnote

Fraudulent conveyance—Evidence—Declarations of grantor.

In an action to set aside a conveyance as fraudulent against creditors, declarations of the grantor made after the deed was delivered and recorded, and his testimony in proceedings supplementary to execution, are inadmissible as against the grantee, even though the grantor was in possession under a lease which is claimed to form part of the fraudulent transaction or a conspiracy to defraud be shown.

Appeal from a judgment entered in Otsego county in favor of the plaintiff in an action brought to set aside a conveyance of a house and lot in Oneonta, also a vacant lot, which conveyance-was executed on the 3rd day of January, 1885, and recorded on the day of January, 1885, and recited a consideration of $3,200. The grantee, Philo B. Spaulding, gave in exchange for the conveyance a deed of=a patent right for shears or pruning hook,, for the territory of thirty-one counties in the state of Pennsylvania.

The referee has found that the deed of the patent-right territory was of no value, and that the exchange was made “ with intent to cheat and defraud, hinder and delay the creditors of William, and that it was with a like intent on the part of PhiloB.” At the time of the conveyance in question the house and lot was of the value of about $3,500, and the vacant lot of the value-of about $250; and the grantor had goods in the store of the value of about $1,500, and he had accounts of the value of about $2,000, and he had a horse, wagon, harness and robes, etc., of the-value of $200, making the total value of his property some $7,400.. His indebtedness amounted to about $2,000. On the 28th of December, 1884, William transferred to his infant son, William H„ Spaulding, his horse, wagon, cutter, two harnesses, whip, buffalo-robe and lap spread, assuming thereby to pay a debt to his son of $200. This transfer was in the presence and with the knowledge of Philo. When the conveyance of real estate was made, Philohad notice that William was in debt. On the 16th of January,. 1885, William gave a chattel mortgage to his wife for the express-consideration of $2,410, covering the store and goods and all his accounts, and on the 26th of January, 1885, William gave his

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wife another chattel mortgage upon a quantity of tobacco which, he had received after the execution of the first chattel mortgage, making the second chattel mortgage collateral to the first one. William remained in possession of the real estate, taking a lease thereof for a year from Philo at a rental of $125 a year, and at the expiration of one year Philo gave a lease to William’s wife, and William and his family remained in the possession, down to the day of the trial, of the house and lot. No evidence was given tending to establish the indebtedness of William to his son or to his wife other than appear in the transfers made to them.

Evidence was given upon the trial tending to show a fraudulent intent on the part of William at the time of the execution of the conveyance, and that Philo had knowledge of William’s indebtedness, and that William desired and intended to cover up all his property, or put it beyond the reach of his creditors. Before this action was commenced the receiver offered to Philo a re-conveyance of the territory covered by the assignment and demanded a conveyance of the real estate. Philo refused to receive the deed of the territory and refused to execute a conveyance of the real estate.

M. B. Williams was called as a witness for the plaintiff and testified that he endorsed a note for William Spaulding, April 1, 1884, and that he had a conversation with him at the time of that endorsement, with reference to his property. He was then asked to state the conversation, which was objected to and the referee overruled the objections as to William Spaulding and sustained them as to Philo Spaulding. He stated the conversation, and he then added: “ I had a conversation with him after that, after his failure, transfer of his property; it was after it came out that he had put his property out of his hands and before the sale of the goods in the store; it was about the last of January or first of February.

“ Q. Tell us what occured then ?

“ Objected to by defendant’s counsel as incompetent, improper and immaterial, and as no evidence against P. B. Spaulding. Objection overruled. Exception by defendant’s counsel. A. He said he had property enough to pay me; I asked him where and he did not say where; but he said he could pay me; but he was going to beat that damned Keyes; I asked him how he could beat Keyes when I was the banker; says I, I have got to pay if you don’t pay; well, he said, he had enough to pay me, and keep still, I should have my pay; I don’t know whether I kept still or not; I presume I did not; I felt a little worked; I don’t remember anything further there; I had or heard a conversation with him at the Ballard house in Cooperstown, I think in May, 1887, when he was there at some court..

“ Q. Tell us what the conversation was ? ”

This question was objected to by the counsel for Philo Spaulding on the grounds before stated. The objections were overruled and the defendant took an exception. The witness answered, viz: “ Its too damned bad you are here, you have no business here ; says I, I know it; pay your bills and I will go out; he says, I

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have got property enough to do it, but I ain’t fixed just now so I can do it; he said Keyes drawed me into it; if I hadn’t went into it with Keyes I wouldn’t have went into it; I told him I didn’t know whether Keyes drawed me into it or he did ; I took it he drawed me into it, you compelled me to come; he said Keyes ought to be shot, he ain’t fit to live; there ain’t a Keyes on this side of Hell fit to live; I asked him the reason why, and he did not give me the reason why he was not fit.”

“ Q. What did you say about the transfer of his property, or why he transferred it ? A. He talked just as though he owned it; he asked me what I thought his property was worth; says I: it is worth what you appraise it at, $4,000; he said, yes, it is worth $4,500 ; that was about all there was in the conversation of the property business that I know. * * * I think he said Barnes had no business to be there for he had paid him up and I think he said he had got about $1,500 or $2,000 after he paid him. up out of the book accounts.”

Hubert Harding, a witness called for the plaintiff, testified that he heard a conversation between William Spaulding and Malcolm Keenan in the winter of 1885.

“ Q. Tell us what the conversation was.” This was objected to and the objections were overruled and exception taken.

The witness then stated that Keenan wanted Spaulding to renew a note. “ Mr. Spaulding said he was perfectly good, he owned a house and lot free and clear, and he owned a vacant lot: I think he said on River street or down that way, and $2,500 book accounts, and on that consideration Keenan renewed the note.” The witness then referred to another conversation which he heard between William Spaulding and Keenan, and he was asked:

“ Q. What was said at that time ? ”

This was objected to on the same ground ; overruled and exception taken. The witness answered, “ Mr. Spaulding had been in the shop and started to go out, and Mr. Keenan called him back and said, I want you to fix that up, and he says, I will, I will fix you all right, you wont loose a cent, it is the damned bank I ain after, and Mark Keyes, son of a bitch, he drove me to the wall; he says, I am going to beat him; he says, you shant loose a cent, and he went on out; I do not remember any other conversation with him and Mr. Keenan; I heard Mr. Spaulding talk about the Keyes, and the bank once at Cooperstown ; I think it was in 1887.”

“Q. What was it?”

This was objected to on the same grounds as before, and the objections were overruled, and the defendant took an exception, and the witness answered, viz.: “ A. He was talking to Mr. Williams about this debt and he said he would pay him, and Mr. Williams asked him when he would pay him, and he did not tell him when he would, that I heard; he was talking about Mr. Keyes and the bank; he called both Keyes damned thieves and robbers, that is about all I heard; I did not pay much attention to it; I did not hear him say anything about transferring his property or why he had done it.”

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Marquis L. Keyes, called as a witness for the plaintiff, testified that he was cashier of the First National Bank, and he stated that the bank held a note which matured on the 11th of December, 1884; after the maturity of the note, he had a conversation with defendant. That conversation was objected to, and an exception taken. The witness stated that he made an effort to secure a mortgage from William, and that thereafter he had another conversation with him sometime in January. That conversation was objected to by the counsel for Philo, and an exception taken to the ruling. The witness answered, viz.:

“ I asked William Spaulding why he did not do as he agreed by placing this mortgage on his property ? lie said he had concluded to do otherwise and I looked through his property to see what he had. ” The witness continued: “ In that conversation he said he had transferred his property to his brother, his real estate, for a patent right on pruning shears; I said to him, what was you thinking about; you are evidently concocting some scheme to beat your creditors every debt you honestly owe them; and to that he did not say anything in particular. lie said he had sold his real estate for thirty-one counties of the patent pruning shears in Pennsylvania ; he said he received no other consideration whatever; he did not say anything about having transferred property to his minor son ; he said he had given his wife a claim on his business. I said to him: you said to me you did not owe your wife a dollar ; he then claimed he had given her a claim on- his business for $2,400 to pay her off; that is the way he termed it.”

Robert Keenan was called as a witness for the plaintiff and stated that he heard a conversation between William Spaulding “ and another man in February, 1885; I couldn’t say who the man was that he had the conversation with.

“ Q. Then state what you heard William Spaulding say?

Objected to by P. B. Spaulding on the same ground as last above. Overruled and exception taken.

“A. I think it was before the sale of goods in the store; he said, anything to beat the damned bank; he said they tried to beat him out of his house, but he would show them; I do not remember anything else that he said; I think he said, By God, I have got it all fixed; anything to beat the damned bank, that is my recollection.”

William Spaulding had been examined in proceedings supplemental to execution before Charles L. Wilber, as referee.

. The plaintiff offered to read portions of the evidence thus taken and given by William Spaulding, from the referee’s report taken on the 16th of May, 1885. Specific objections were taken by the counsel for Philo B. Spaulding. The referee made the following ruling, viz.: “If the testimony covers declarations and transactions previous to the first of January, 1885, that I exclude; so far as details which occurred after the time Philo Spaulding is shown to have connection with it, that I will hear.” The plaintiff then read the following testimony, viz.: “I have transferred my real estate to my brother, Philo B. Spaulding ; I transferred real ■estate first on tlie second of last January, to my brother. * * *

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$3,200 was the consideration for which the deed was given ; I did not get the money for this deed; I got territory on the Ainslct patent shears; I got a deed of the same patent territory; this territory is in Pennsylvania; there was thirty-one counties in this territory.”

Charles L. Wilber testified that he saw the Spauldings, both of them, in the Windsor hotel bar room on one occasion. * * *

“ Q- What did you hear said by William Spaulding ? ” Objected to and exception taken. “ There was something said by some one about Mr. Spaulding changing his business; William said this; William said Mark Keyes was trying to drive him to the wall, or to beat him; I can’t give the language; but it was generally that Mark was trying to injure him, or to drive him to the wall, or to beat him out of his property, and if he got his debt before he was ready to pay it, he would be smarter than he was; * j think there was something said about a patent right but I could not pretend to give the conversation upon that subject; I think there was something said that he had transferred his real estate for a patent right, or a patent right territory; * * * I think he said he had made a deal with his brother, Philo.”

This conversation was also detailed by the witness Potter; and the same in substance was repeated by the witness Peck, who says: “ William made the remark that he had been making a deal with him; that he had traded off his house and lot for a patent right and was going into the patent right business; I asked the question what the patent right was; he said it was a patent pruning hook or shears; that is about all that was said about that: William said he did not propose to be beat out of what he had; that was in the presence of Philo and in his hearing; they stood right together in the west side of the bar-room.”

Evidence was given on the trial tending to show that the patent right was worthless; some twelve years of its life having run. While the evidence was contradictory in respect to the value of the invention, the finding of the referee that it was worthless is abundantly sustained by the evidence. William’s wife did not execute the deed. It was admitted by the counsel for Philo, “ that he was in possession of the shares when the production of the same were demanded of him by plaintiff’s counsel in order that he might have an opportunity to cross-examine the witness in relation thereto. That the defendant’s said counsel refused to produce the same, as did also the defendant.”

S. M. Lindsley, for app’lts; Melville Keyes and James A. Lynes, for resp’t.

Upon the evidence before the referee the ques- - tian of whether or not the conveyance in question was made with intent to hinder, delay and defraud the creditors of William Spaulding, was one of fact. Peck v. Crouse, 46 Barb., 151 ; 3 R. S. (7th ed.), 2329.

We think the evidence fully warranted the referee in finding as a matter of fact that the conveyance was made with the fraudulent intent on the part of the grantor, and received by the

Concurrence

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grantee with the like fraudulent intent Starin v. Kelly, 88 N. Y., 418 .

(2.) We are of the opinion that the admission or declarations of William were competent evidence against him, as he was a party defendant He remained in the possession of the property, and although it is said that it was under a lease, yet the position of the plaintiff in attacking the conveyance is that the lease is only a part of a fraudulent contrivance to keep the property beyond the reach of William’s creditors.

(3.) After the evidence was given tending to establish a conspiracy to defraud the creditors entered into by William and Philo, the admissions or declarations of William were competent evidence as against him. Cuyler v. McCartney, 40 N. Y., 228 ; Loos v. Wilkinson, 110 id., 195; 18 N. Y. State Rep., 110; Waterbary v. Sturtevant, 18 Wend., 359 . When the admissions and declarations of William were offered, they were competent evidence against him, and, therefore, the court could not have excluded them. Wright v. Nostrand, 94 N. Y., 31 . Before the evidence closed there was abundant testimony for the referee to find that there was a combination and conspiracy between the grantor and grantee to hinder, delay and defraud the creditors of the grantor. The conversation held in the presence of Philo in the Windsor hotel, detailed by the several witnesses, was sufficient to indicate the fraudulent purposes of the grantor and grantee, and to establish a scheme to hinder, delay and defraud the creditors of the grantor. Philo was present at the conversation according to the testimony of the witnesses, and made no statement or declaration contrary to the avowed purpose of William in making the “ deal” with Philo by transferring his real estate in exchange for patent right; he is, therefore, presumed to have acquiesced in the statements. 1 Cowen & Hill 1STotes 191, 192.

However, as the referee received in evidence declarations of William made after the deed, as well as testimony taken in proceedings supplementary to execution, against the objection of Philo, thus in effect holding they were competent evidence against Philo, we think an error was committed. .

The opinion of Martin, J., considers this question in extenso, and the views expressed in his opinion must prevail Therefore, we must reverse, and order another trial

Merwin, J., concurs.

I fully concur in the opinion of Mr. Justice Hardin that the evidence justified the referee in finding that the transfer in question was made with an intent on the part of the grantor to hinder, delay and defraud his creditors, and that the grantee was a participant in such fraudulent intent.

The more difficult questions to be solved in this case arise from the admission of certain evidence which was objected to, and admitted under the appellants’ exception. On the trial the respondent was permitted to prove the declarations of the grantor, made after the transfer in question was perfected and recorded, to the

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effect that the purpose of such transfer was to defraud the judgment creditor represented by the plaintiff, and to prevent the collection of its debt. The referee' also permitted the testimony given by the grantor in proceedings supplementary to execution to be read in evidence against the grantee. All this evidence was received under the objection of the grantee that it was incompetent as against him.

It must be admitted that as a general rule the declarations of a grantor which form no part of the res gestee are not competent to prejudice the title of his grantee, especially when made after the transfer. Cuyler v. McCartney, 40 N. Y., 221 ; Bullis v. Mont gomery, 50 id., 352 ; Tilson v. Terwilliger, 56 id., 273 ; Burnham v. Brennan, 74 id., 597; Tabor v. Van Tassell, 86 id., 642 ; Truax v. Slater, id., 630; Coyne v. Weaver, 84 id., 386; Vidvard v. Powers, 34 Hun, 221 ; Burhans v. Kelly, 17 N. Y. State Rep., 552.

_ It is, however, contended that an exception to this rule exists where the grantor remains in possession. The claim here is, that although the grantor had given a deed of the premises, which had been recorded, and taken a lease from his grantor, under which he claimed to hold possession, still, as the grantor was in possession, the case falls within the exception, and the evidence of the declarations of the grantor were admissible against bis grantee.

In Gibney v. Marchay, 34 N. Y., 301 , it was held that the declarations of a party in possession of real property are admissible against the party making them, or his privies in blood and estate, but are not competent to attack or destroy a title which is of record. In Vrooman v. King, 36 N. Y., 477 , it was also held that declarations made by a grantor of premises after he had sold them, though he continue in the occupation up to the time of making such declarations, were not competent evidence as affecting the rights of his grantee. In Hutchins v. Hutchins, 98 N. Y., 64 , it was said: “ It is only where the party making the declarations has, at the time of making them, the title to the property, that such declarations bind his successor.” In McDuffie v. Clark, 39 Hun, 170 , it is said: “ The declarations of a party in possession are admissible in evidence against the party making them, or his privies in blood or estate, not to attack or destroy the title, for that is of record and of a higher and stronger nature, and cannot be attacked by paroi evidence. Such admissions are received in evidence simply to explain the character of the possession in a given case.”

The doctrine of these cases seems adverse to the respondent’s claim. Hor do I find anything which upholds it in the cases^ of Adams v. Davidson, 10 N. Y., 309 , or Loos v. Wilkinson, 110 id., 195; 18 N. Y. State Rep., 110.

In the Adams case the validity of a general assignment for the benefit of creditors was involved. The declarations of the assignor before delivery of the property assigned, as to the purpose of the assignment, were admitted in evidence, and their admission was sustained. Although this case, if not overruled, has been quite pointedly criticised in subsequent cases in the same court,

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still, if regarded as authority, it does not justify the rulings complained of in the case at bar.

In the Adams case the transaction was incomplete when the declarations were made, as no delivery of the property assigned had taken place. In the case at har the transaction was at an end. The deed had been given and recorded, and a lease of the premises taken by the grantor from his grantee. The whole transaction was not only complete, but it was valid and binding between the parties and as to all the world until set aside.

In the Loos case the conveyance was a secret one, and the declarations of the grantors were to the effect that they still owned the property. Such declarations were held competent on the ground that they were a part of the fraud, and it was there said: “ They are in the nature of res gestee, declarations, and on the question of fraud clearly competent.” In the case at bar the declarations proved were no part of the fraud, nor did they constitute any part of the res gestee. They were at most mere declarations or admissions as to a past transaction. To constitute a j)art of the res. gestee the declarations must be made at the time the act was performed which they are to characterize. Here the act referred to had been performed and fully completed. The fraud, if any, had been fully consummated.

It is said, however, that the lease was a part of the fraudulent scheme, and hence the grantor’s possession was not under the lease, but under his original title. The question of the validity of such lease was one of the questions being tried, and until determined, and the deed- and lease were set aside, I am unable to see how the court could hold that the grantor was in possession under his original title. The question was as to the admissibility of evidence, and not as to the rights of the parties as they should finally be determined. The scheme, if fraudulent, was an executed one, and as between the parties their contracts were binding, and their claimed rights were their real rights. I cannot think that these declarations were any part of the res gestee, nor that the possession of the grantor at that time, under the circumstances disclosed by the evidence, rendered the declarations of the grantor competent evidence against his grantee.

It is also said that the evidence was sufficient to justify the referee in finding that there was a conspiracy between the grantor and grantee to defraud the creditors of the former, and, therefore, his declarations were admissible against the grantee. If it were conceded that such conspiracy existed, it would be difficult to perceive how it rendered the evidence of such declarations competent against the grantee.

Although when the connection of individuals in an unlawful enterprise is shown, every act and declaration of each member of the confederacy in pursuance of the original plan and with reference to the common purpose is, in contemplation of law, the act and declaration of all, and is therefore evidence against each, still, an act cannot be varied, qualified or explained by a declaration which amounts to no more than a mere narrative of a past transaction. Acts and declarations of conspirators are thus admissible

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.only when made and done during the pendency of the unlawful enterprise and in furtherance of its objects. If made or performed at a subsequent period, they are merely narrative and not admissible. 1 Greenleaf on Evidence, § 111; Taylor on Evidence, Text Book Series, §§ 589, 590, 593; N. Y. Guar. & Ind. Co. v. Gleason, 78 N. Y., 504 , 515; People v. Gorham, 16 Hun, 93 .

As the evidence under consideration consisted of mere declarations in regard to a past transaction, and were not made in furtherance of any unlawful purpose, it was not, we think, rendered competent by the previous existence of such purpose, nor by any conspiracy that may have existed to accomplish that purpose.

I find nothing in the case of Wright v. Nostrand, 94 N. Y., 31 , to sustain these rulings. It was there held that where a judgment debtor was called as a witness for the defendant to give material evidence, his testimony in supplementary proceedings was admissible not only against him, but also against all the defendants for the purpose of affecting his credibility by showing conflicting statements. In this case William Spaulding, the grantor, was not called or sworn as a witness. There was no objection to the evidence in his behalf. The objection was specific that it was incompetent against Philo B. Spaulding, the grantee. Under such an objection the evidence was received.

The evidence of the grantor’s declarations made subsequent to such transfer, and his evidence given in proceedings supplementary to execution, was, I think, incompetent as against Philo B. Spaulding, the grantee, and that the exceptions to its reception were well taken. For the error in admitting such evidence, I think, the judgment should be reversed.

Judgment reversed on the exceptions and a new trial ordered before another referee, with costs to abide the event.