Kline v. McDonnell — 41 N.Y. St. Rep. 854

Majority

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Ann Kline, Resp’t, v. Lucy McDonnell, App’lt.

(Supreme Court, General Term, Third Department,

Filed November 30, 1891.)

Headnote

1. Fraudulent conveyance—Resulting trust.

In an action by a judgment creditor of the estate of one John McDonnell, who was his creditor at the time of the transfer hereinafter stated, it was shown that one Morris conveyed to McDonnell’s wife premises for $500 for which McDonnell gave his note, that he paid nothing upon it and died insolvent, that there was paid upon it from his estate $275.18 and that some other person paid the balance of said note. Held, that the case was within 1 R. $., 728, §§ 51 and 52, relative to conveyances by one person where the consideration is paid by another.

2. Same—Extent op trust.

A trust arose in favor of the judgment creditor in said premises but only to the amount of $275.18, interest thereon and costs.

Appeal from a judgment entered in Montgomery county upon the decision of the court upon the trial without a jury.

The action was to secure satisfaction of a judgment in favor of the plaintiff against the administrator of the estate of John McDonnell, deceased, out of certain premises granted to Lucy McDonnell by John Y. Morris, the consideration for which was agreed to be paid by John McDonnell, and was secured by his note, part whereof was paid after his death in the due course of the administration of his insolvent estate.

John Y. Morris, October 23, 1877, conveyed by deed to the defendant Lucy McDonnell a parcel of land for the expressed consideration of $500, for which John McDonnell, husband of Lucy, on the following day gave his promissory note for $500, payable one year from date. John McDonnell died February 5, 1878, intestate and insolvent. The defendant was appointed administratrix of his estate and in the due course of administration $275.18 were paid upon said note, part from a dividend declared by the surrogate from the proceeds of his personal estate, and part from a dividend from the proceeds of his real estate. The balance of the note was paid, but by whom does not appear. John McDonnell paid nothing upon the note.

The plaintiff is a judgment creditor of the administrator of the estate of John McDonnell upon a debt against said McDonnell existing at the date of the deed from Morris to Lucy McDonnell. She exhausted her remedies against the estate of said McDonnell before bringing this action. Her judgment is unsatisfied to an amount exceeding $2,000.

The trial court held that a trust resulted in favor of the plaintiff in the lands thus conveyed to the defendant, and directed the sale thereof to satisfy plaintiff’s judgment with costs.

Z. S. Westbrook, for app’lt; M. L. Stover, for resp’t.

We have no doubt that the giving of the deed by John V. Morris to Lucy McDonnell, and the giving of the note for the purchase price by John. McDonnell to Morris, should be regarded as contemporaneous transactions, although the note bears date one day later than the deed. ' The deed was doubtless delivered in expectation of receiving the note, and the note

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was delivered to close the transaction. The point urged by the defendant, that the note to secure the consideration was not delivered by John McDonnell at the time of the grant to his wife, but subsequently, does not meritoriously exist upon the facts, and need not be further considered.

The case is within the statute, 1 R. S., 728, §§ 51, 52, which provides, “ Where a grant for a valuable consideration shall be made to one person, and the consideration therefor shall be paid by another, * * * such conveyance shall be presumed fraudulent as against creditors at the time of the person paying the consideration; and where a fraudulent intent is not disproved, a trust shall result in favor of such creditors to the extent that may be necessary to satisfy their just demands.” Garfield v. Hatmaker, 15 N. Y., 475 .

Although John McDonnell gave his note for the entire consideration, he paid nothing upon the note in his lifetime and his estate paid only part of it Upon this state of facts the trust results in favor of the creditor pro tanto.

The statute is intended to protect creditors against the fraud of their debtors, and to apply the debtor’s property to their benefit, although he has changed the form of it and parted with his title to it. A literal reading of § 51 seems to require that the debtor shall pay the whole consideration in order that the trust result; but this would be inequitable, since the object is to reach what he thus diverts. A literal reading of § 52 seems to provide that whenever the trust does result in favor of the creditors it results “to the extent that may be necessary to satisfy their just demands,” irrespective of the extent or proportion of the debtor’s contribution toward the purchase price. But this cannot be so, since in that case the creditor might not only take the equivalent of the debtor’s contribution to the purchase price, but might confiscate that proportion of the land which his debtor did not pay for but which the grantee did.

Suppose John Doe had paid half the consideration and John McDonnell the other half; would not a trust result in favor of John Doe’s creditors in like manner as in favor of McDonnell’s ? The statute gave the creditor an equitable remedy; but an equitable remedy to repair his debtor’s wrong, not to enable himself to do a wrong to a third person who owes him nothing. The statute, therefore, when it declares that “ a trust shall result in favor of such creditors,” means that it shall result in respect of so much of the land as is represented by the debtor’s contribution to the purchase money.

These views find support in Botsford v. Burr, 2 Johns. Ch., 405 . True, that case was before the statute, and when the resulting trust arose in favor of the person paying the purchase money instead of, as now, in favor of the creditors of such person. But the principle upon which the trust, arose is the same in both cases. The statute changed the beneficiary of the trust. Chancellor Kent said in that case: “The cases recognize the trust where the money of A. formed only a part of the consideration of the land purchased in. the name of B. The land in such case is to be

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charged pro tanto.” Story’s Eq., 11th ed., § 1201c; McGowan v. McGowan, 14 Gray, 122 .

The trust resulting in favor of the plaintiff is in the land. But equity would be done if defendant should pay to plaintiff upon her judgment against the estate of John McDonnell the amount of the purchase money paid by him, with interest and costs, within thirty days after service upon her or her attorney of a copy of the judgment. Failing to make such payment the land should be sold as provided in the judgment appealed from, and from the proceeds, after payment of costs, at least the same amount should be paid the plaintiff. But in such case the plaintiff may take her pro rata share of the proceeds of the sale of the land, the costs being charged upon the defendant’s share. Our computation, made by adding interest on the purchase money to date of first payment, and deducting that payment, and adding interest on the balance to date of last payment, left unpaid at that date $298.76. The total paid was $275.18. The plaintiff’s equity is, therefore, 27518-57394ths, and in case of sale, if that equity exceeds the $275.18 and interest, the plaintiff will be entitled to the excess, free from costs.

Judgment modified accordingly, and as modified affirmed, without costs of this appeal.

Learned, P. J., and Mayham, J., concur.