Smith v. Reed — 34 N.Y. St. Rep. 489

Majority

p. 489

John N. Smith, App’lt, v. David C. Reed, Resp’t.

(City Court of Brooklyn,

General Term,

Filed November 24, 1890.)

Headnote

1. Fraudulent conveyance—Purchaser at execution sale mat impeach.

A purchaser of real estate at an execution sale acquires such a title as

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gives him. the right to impeach at law or in equity a prior conveyance of the judgment debtor as fraudulent against creditors.

3. Execution—Code Civ. Pro., § 1380.

The three years restriction in § 1380 of the Code has no application to cases where the judgment debtor died prior to July 10, 1879.

3. Fraudulent conveyance—Former adjudication.

A former action to set aside the conveyance as fraudulent was continued against the infant children of the grantor, who held under conveyance from the grantee. One of said infants, whose interest defendant now owns, was not served with summons in said action and did not apply to appear by guardian or otherwise, but a guardian was appointed for her on the plaintiff’s application. She was not shown to be a resident of this state temporarily absent iherefrom. Held, that the judgment in said action was not binding on the infant or defendant.

4. Same.

Proof that the grantor was indebted on notes at the time of a conveyance without consideration, which notes fell due shortly afterwards; that judgments were recovered thereon and executions returned wholly unsatisfied, raises the presumption of fraud and makes a prima facie case calling on defendant to contradict or explain away the inevitable inferences suggested thereby.

Appeal from judgment in favor of defendant.

Action to remove a cloud on title. Prior to November 20, 1874, one William H. Taylor owned ten-elevenths of certain real estate, which he on that day conveyed to one Felt by deed executed by himself and wife, and Felt conveyed to Taylor’s wife, Caroline.

At that time Taylor was indebted to the Nassau Bank on a note which was protested November 14, 1874. On April 9,1875, the Nassau Bank obtained judgment on the note against Taylor for $2,544.24, and docketed the judgment in Kings county.

On October 11, 1875, action was brought in the supreme court of this state in the city and county of New York by the Nassau Bank to have the deeds from Taylor to Felt and from Felt to Mrs. Taylor declared void.

On August 5, 1877, Caroline Taylor died, leaving a last will and .testament, giving all her property to her three infant children, Carrie, Demetrius and Henrietta. Her husband also survived her. The will was admitted to probate on September 24,1878, by the surrogate of Kings county.

On January 1, 1878, Taylor died. One of the children, Carrie Taylor, married one Henry M. Lowitz prior to February 13,1878.

On the death of Mr. and Mrs. Taylor an attempt was made to revive and continue said action to set aside conveyances against the infants, Carrie, Demetrius and Henrietta Taylor, but said infants were not served with the summons, nor was a supplementary summons issued, but a guardian ad litem was appointed and answered for the infants without service of the summons.

Judgment was obtained declaring the conveyance void on the 10th day of February, 1879.

On December 20, 1880, execution was issued on the said judgment of the Nassau Bank against the estate of said William H. Taylor, by thejleave of the supreme court and of the surrogate; and the interest which Taylor had on May 9, 1875, was sold to Har

p. 491

mer. That execution was issued subsequent to a decree obtained in the said action brought to set aside the conveyauces. The plaintiff claims title through that execution sale from H'armer, the purchaser.

On October 24, 1888, judgment was obtained in Rockland county against the said Carrie Lowitz, and J. E. Hedges was appointed receiver of her property in supplementary proceedings. The order appointing the receiver was filed in Kings county on November 1, 1888.

On September 9, 1889, Carrie Lowitz conveyed her interest in said property to the receiver.

On October 3, 1889, the receiver sold the interest of said Carrie Lowitz in said property to the defendant, whose title rests on that sale.

H. C. M. Ingraham,, for app’lt; Horace Graves, for resp’t.

This action was brought to remove a cloud from title of real estate. Judgment of the special term was for defendant and plaintiff appeals therefrom.

It has been pretty well settled by our court of last resort that, notwithstanding a judgment debtor has made a prior fraudulent conveyance of his real estate, the judgment creditor may sell upon his execution such real estate, and “the purchaser thereat will ' have the right, and will take the risk of impeaching such conveyance.” Chautauqua Bank v. Risley, 19 N. Y., 369 ; Erickson v. Quinn, 15 Abb., N. S., 168; Bergen v. Carman, 79 N. Y., 153 ; White’s Bank v. Farthing, 101 id., 344; 1 N. Y. State Rep., 15; Duell v. Alvord, 41 Hun, 199 ; 4 N. Y. State Rep., 197.

The plaintiff in this action represents the interest derived from the purchaser at an execution sale of premises alleged to have been fraudulently conveyed by the judgment debtor prior thereto. Defendant represents an undivided one-third of the interest in the premises derived from Carrie Taylor (now Carrie Lowitz), one of the devisees of the grantee in such conveyance. That being so, then the purchaser under the execution sale in the judgment of the Nassau Bank v. Taylor acquired, provided the execution was legally issued, such a title to or interest in the premises sold as would give him the right to impeach at law or in equity the prior conveyance of the judgment debtor, on the ground that it was fraudulent as against the judgment creditor. See authorities above cited. Was this execution illegally issued? The respondent’s counsel, to sustain his contention that it was, calls our attention to a single ground, viz., that it was issued prematurely under § 1380, Code Civil Procedure. But he must have overlooked that the three years’ restriction therein has no applicaiton to cases where the judgment debtor died, as in this case, prior to July 10, 1879. See § 2, chap. 542, Laws 1879. The facts of this case will not uphold the defense that defendant was a bona fide purchaser without notice.

The plaintiff was in possession at the time of defendant’s purchase of his interest, and such possession was notice of plaintiff’s claim of title and interest. Phelan v. Brady, 119 N. Y., 587 ; 30

p. 492

N. Y. State Rep., 256. The judgment in the case of The Nassau Bank v. Cleland, Carrie Taylor et al., declaring this deed of the judgment debtor void for fraud, is not binding upon Carrie Taylor or the defendant, who now owns her interest. Carrie Taylor, at the time that action was brought, and judgment was granted therein, was an infant; she was never served with the summons in that action, and never made any application to appear therein by guardian or otherwise. Code Civ. Pro., §§ 453, 426.

The contention of plaintiff that this judgment was binding upon Carrie Taylor is not helped by the circumstance that one Cameron was served with the summons, and that he had been appointed guardian ad litem of Carrie Taylor on the application of the plaintiff in that action. She was not shown on such application to be a resident of this state who was temporarily absent therefrom. Code Civ. Pro., § 473.

Did the pleadings in this case raise the issue that this eonveyveyance of the judgment debtor was fraudulent, and, if so, did the evidence justify the finding that it was not fraudulent ? The complaint sets forth that the judgment debtor was indebted on notes at the time of this voluntary conveyance without consideration, which notes fell due shortly after the date of conveyance, and were put in action soon thereafter, which resulted in judgment against defendant, though defended, and executions issued thereon were returned wholly unsatisfied. The complaint further set forth that the conveyance was void for fraud against creditors. The trial court found these allegations to be true, except that the conveyance was fraudulent It does seem to us the facts so alleged and proved raised the presumption of fraud, and made out a prima facie case calling upon the defendant to contradict or explain away the inevitable inferences that such circumstances suggest. Dunlap v. Hawkins, 59 N. Y., 342 ; see 346 and 347; Cole v. Tyler, 65 N. Y., 78 ; Seward v. Jackson, 8 Cow., 406 ; Carpenter v. Roe, 10 N. Y., 227 ; Erickson v. Quinn, 47 id., 410.

It is apparent from the record, and to us from the argument of this appeal, that but little attention or effort was devoted' to the trial de nova of this issue of fraudulent conveyance. Plaintiff’s chief reliance seems to have been upon the so-called adjudication of this same issue in the other action, and defendant's main effort was to'show that it did not bind Carrie Taylor, whose interest devolved upon defendant. We have already indicated our opinion of that supposed adjudication, and think that a new trial should be had, in which both parties will doubtless give more attention to the vital issue, if not the only one, presented to us in the appeal book.

Judgment reversed and new trial ordered, with costs to abide the event

Clement, Ch. J., concurs.