National Bank v. Levy

The question, therefore, is whether she had such right When the common law remedy of a creditor to charge the fraudulent vendee of his deceased debtor as an executor de son tort for the purposes of relief was by statute taken away and the right of action in such cases given to the personal representatives of the decedent, it was through them and their right of action that the creditor at large must necessarily seek relief against-the disposition in his lifetime by the deceased debtor of his property in fraud of his creditors. 2 R. S., 449, § 17 ; Babcock v. Booth, 2 Hill, 181 ; Bate v. Graham, 11 N. Y., 237 . Those cases related to personal property, and such was the application made of the statute.

The provisions of chapter 314, Laws 1858, are broader in their sbope and meaning, and they are in effect that any executor or administrator may for the benefit of creditors interested in the estate or property disaffirm, treat as void and resist all acts done, transfers and agreements made in fraud of the rights of creditors; and that every person who shall in fraud of the rights of creditors have received, taken or in any manner interfered with the estate, property or effects of any deceased person shall be liable in the proper action to the executors or administrators for the same or the value of any property or effects so received or taken. While the administrator does not take the real estate of his intestate, and as to that property he is not a trustee, it is to be appropriated for the payment of the debts of the decedent in default of personal estate for the purpose. At the time this action was commenced it was in the power of the administratrix, etc., of Eyan to take proceedings for the sale of the real estate for the payment of the debts of her intestate, with which it was then chargeable. Code, § 2750. In view of the statute of 1858 it was said by Judge Earl in Lichtenberg v. Herdtfelder, 103 N. Y., 302 ; 3 N. Y. State Rep., 91, that where land of the decedent has in his lifetime been conveyed by him in fraud of his creditors it is the duty of the executors to pursue and reclaim it for the benefit of such creditors, as the want of personal estate to pay them renders the realty assets for that purpose. And the same was held in Barton v. Hosner, 24 Hun, 467 .

The purpose of the statute in its effect was beneficially so enlarged, as without it the remedy of the creditors would depend upon a sale of the land subject to the embarrassment which the apparent title in another might furnish, and as the consequence its marketable value in that condition would or might be greatly reduced and .the proceeds realizable from the sale much less than otherwise would be produced by it. The same rule applies with equal reason to an apparent lien by mortgage upon the lands of the decedent created for like purpose. It is, however, urged that as the instrument in question was not executed by the intestate, it was not a mortgage upon the land described in it and therefore no action by the administratrix would lie to cancel it. It may be observed that the person named as mortgagee took it to the county clerk for record and caused it to be-recorded in May, 1877, and by his answer he alleged that the intestate Eyan exe

outed and delivered to him the mortgage; and the administratrix alleged upon information and belief that such mortgage was genuine and valid. The defendants were persistent in that defense on the trial, and that issue was there tried, and exception was taken to the conclusion of the referee that the mortgage was not executed by Ryan. It stood as an asserted lien upon the land with the claim of the alleged mortgagee and his personal representative that it was genuine and valid as such, aided so far as it could be by the adoption and approval of the personal representative of the alleged mortgagor. If, therefore, the instrument is a cloud upon the title to the land, the person named as mortgagee has by means of it “interfered with the estate” of the intestate in fraud of the rights of creditors, and it is entitled to the same treatment for the purposes of the remedy and relief as if it had in fact been made and taken with such fraudulent design by "the parties to it. While a mortgagee as such has no title to the land he is deemed a purchaser sub modo and his mortgage in a like qualified sense is a conveyance. Ledyard v. Butler, 9 Paige, 132; Packer v. Rochester, etc., R. R. Co., 17 N. Y, 287 . And when the equity of redemption is foreclosed, the purchaser takes ■the estate the mortgagor had at the time he gave the mortgage. Rector, etc., v. Mack, 93 N. Y., 488 . Until then the title is held subject to the mortgage and to the extent of its amount the estate of the mortgagor in the land is practically diminished. This is what Levy sought to accomplish upon the land in question, and if his efforts were effectual the estate attending the legal title would be reduced in value $5,000, and that much, by his interference with it, taken from the assets of the intestate.

The purpose of this action is to reclaim the premises from that apparent charge placed upon them by such interference, and to have such act judicially treated as void for the benefit of the creditors. And although the mortgage appears by the finding of the referee, supported by evidence, to have been forged, the purport of the record of it is that it was duly executed and acknowledged, and without the proof of extrinsic facts to the contrary it would be deemed valid and effectual as a mortgage upon the premises described in it. The presumption of validity thus arising from the record, and requiring extraneous evidence to overcome it, and to show that it was falsely there represented, presents a case for the exercise of equitable jurisdiction for its cancellation as a cloud upon the title to land. Remington Paper Co. v. O'Dougherty, 81 N. Y., 474 ; Sullivan v. Finnegan, 101 Mass., 447 . These views lead to the conclusion that the case presented was properly one within the statute for the maintenance of an action by the personal representative of Ryan, deceased, to relieve the premises from the cloud which the alleged mortgage by the record purports to have created. And that being so, the plaintiff as a creditor, on the refusal of the administrator to bring the action, was at liberty, as it did, to do so, making her a party defendant, with a view to the same equitable relief which may have been awarded if she had been the party plaintiff. Bate v. Graham, 11 N. Y., 237 ; Greaves v. Gouge, 69 id., 154; Crouse v. Frothingham, 97 id., 105.

The facts essential for that purpose appear hy the record before us. to have been alleged in the complaint and proved on the trial.

The maini ground upon which the conclusion in the general term was reached, as appears by the views expressed in the leading opinion there delivered, was that the docketing of the plaintiff's judgment in Albany county, and the return unsatisfied of execution upon it, were essential .to support the action. Since that decision it has been held that such requirement is not-applicable to a case of this character, as the action is not in the nature of a creditor’s bill. Harvey v. McDonnell, 113 N. Y., 526 ; 23 N. Y. State Rep., 501; National Tradesmen's Bank v. Wetmore, 124 N. Y., 241 ; 35 N. Y. State Rep., 316; No other question seems to require consideration.

The order should be reversed; and judgment entered upon the-report of the referee affirmed.

All concur, except Follett, Ch. J., and Parker, J., not voting.