New York & Harlem Railroad v. Kyle — 18 N.Y. Super. Ct. 587

Majority

p. 587

The New York and Harlem Railroad Company, Plaintiffs and Respondents, v. Alexander Kyle, Jr., and Justus Earle, Defendants and Appellants.

Headnote

1. In an action against two defendants to set aside a deed of land from one to the other as a fraud upon the plaintiffs as creditors of the vendor; the record of a judgment by the plaintiffs against such grantor, is conclusive evidence against him that he owed the amount of it when the suit was brought in which it was recovered.

2. It is also prima facie evidence of the same fact against such vendee, upon proof being made of the facts stated in the complaint in such action, as the cause of action therein; and an admission in the answer of the vendee in the suit against him and his grantor of the facts constituting such cause of action is sufficient evidence thereof.

3. The record of such recovery against such vendor, although recovered in an action in which said vendee was named as defendant in the summons and complaint therein, and although the complaint therein stated the -same facts to impeach the good faith and validity of said deed as the complaint in the last action, is of no effect as evidence for either party upon the question of the validity of such deed, such vendee not having been served with the summons, nor appeared in the first action.

4. A deed by one who at the time of making it is largely in debt, made with intent to defraud his creditors, is void as against them, when executed without consideration, though executed to a person ignorant of the fact that such grantor was insolvent and unable to pay his debts.

(Before Bosworth, Oh. J., and Hoffman and Moncrief, J. J.)

Heard, December 13;

decided, December 31, 1859.

p. 588

This is an appeal by Alexander Kyle, Jr., and Justus Earle, (the defendants,) from a judgment in favor of the New York and Harlem Railroad Company, (the plaintiffs,) rendered on a trial had in June, 1857, before Mr. Justice Hoffman, without a jury-

The action is one by the plaintiffs, as judgment and execution creditors of Kyle, to set aside a deed from Kyle to Earle, dated July 6, 1854, as fraudulent and void as against the plaintiffs and other creditors of Kyle.

At the trial the plaintiffs put in evidence the record of a judgment recovered by them against Kyle, April 11,1855, for $206,-624.50. It was recovered in an action in which Kyle and Earle were named as defendants, and which was commenced by the service of the summons on Kyle alone on the 19th of July, 1854.

The complaint in that action states, as a cause of action against Kyle, that he, being Secretary of the plaintiffs, fraudulently filled up and issued certificates of the stock of the plaintiffs amounting to over $240,000, and applied the moneys received therefor to his own use; and also alleges the fact of the said conveyance to Earle, and that it is fraudulent, and prays (inter alia) for an injunction and receiver, and for a judgment against Kyle for the amount received by him on the stocks so transferred by him. Kyle alone was served with the summons or appeared in that action, and the judgment recovered in it, is merely one against Kyle for $206,550 damages for the stock so fraudulently issued and applied by him to his own use, and costs , of the action, in all $206,624.50.

The issuing of an execution on that judgment and the return of it unsatisfied prior to bringing this suit, was admitted.

The defendants then moved to dismiss the complaint, on the ground that the record so given in evidence shows “ that the matters in issue in this action formed a part of the cause of action in the action in which that judgment was rendered, and that these matters were res adjudicata by that judgment,” which motion was denied and they excepted to the decision.

Further evidence was given, some of which (and some parte of the pleadings) are stated in the opinion of the Court.

p. 589

When both parties had rested, the defendants renewed their motion to dismiss the complaint on the ground before stated, and on the further grounds,

1st. That there was no proof of any fraud in the conveyance from Kyle to Earle, sought to be set aside, or that said conveyance was fraudulent as against the plaintiff.

2d. That the judgment roll produced was, as against Earle, only proof that the plaintiffs were judgment creditors of Kyle on the 11th day of April, 1855, and not proof of the facts stated in the complaint in the action in which the judgment was rendered, and consequently as against Earle there was no proof of the facts stated in that complaint, or that the plaintiffs were creditors of Kyle at the time of the conveyance.

The motion was denied and they excepted. The Judge found as facts, the execution and delivery of the deed of July 6, 1854, and set forth a copy of it, which purported to be made for the consideration of $7,000.

“ That such deed was duly acknowledged and recorded in the office of the Register of the city and county of New York on the 7th day of July, 1854.

“That at the time of the said conveyance the plaintiffs were creditors of Alexander Kyle, Jr., to the amount of their claim, as established by the aforesaid judgment.

“ That the said Kyle, prior to such conveyance, had defrauded such Company, and out of such frauds the debt arose which resulted in such judgment; and that such conveyance was made by him after the discovery, by some one or more of the officers of such Company, of the existence of such frauds.

“ That the defendant Earle is not proven to have had knowledge, previous to said conveyance, of any of the fraudulent acts of the defendant Kyle charged against said Kyle in the complaint and in the judgment aforesaid.

“ That the said defendant Earle, for some time previous to and at the time of said conveyance, was reputed to be worth no property, and to be wholly insolvent.

“ That no valuable consideration was paid by the said Earle to the said Kyle for such conveyance.

“ That from all the facts aforesaid I find, as a conclusion of fact, that the conveyance from Kyle to Earle was fraudulent' and

p. 590

void-as against the plaintiff, and made by Kyle to Earle with intent to defraud the plaintiff his. .creditor.

“And the Court’s conclusions of law-thereupon were,' that the judgment in the action upon which -the judgment was recovered by the plaintiff against Kyle only, as above stated, was not a bar to this action, and that the plaintiffs were - entitled to the judgment rendered in this action.”

• The' defendants duly excepted to the - several conclusions of the Court, and from the judgment entered on the decision, appealed to the General Term.

A. R. Dyett, for appellants.

I. Insisted that, the record produced was a bar to the relief claimed in this action; that it is of no consequence that the facts in issue in this were not directly passed upon in that action; it is enough that they, might have been. (3 Comst., 311; 16 J. R., 136; 10 id., 365; 13 id., 227; 1 J. C., 492; 8 Wend., 9 ; 5 id., 245;.2 Barb. S. C. R., 586; 7 id., 226.)

. H; That such record was not evidence-of any of the. facts therein averred; was void on its face because Earle was a party, and was not served and did not appear in it;- ( 5 Wend., 162 ; 12 J, R., 434;) that it was not evidence against Earle because-he was not served with process in it, (1 Paige, 35;) and therefore there was no .evidence that Kyle had defrauded the' plaintiffs, or was their-debtor when the deed was given.

IH. There - was no proof, of fraud in the conveyance from Kyle to Earle; the deed purports to be made for value and was produced by the plaintiffs; the Court -found as a fact, that Earle was not cognizant of the frauds of Kyle upon the • plaintiffs; the testimony that Earle was reputed’ to have no. property-. is - insufficient to repel the presumption of consideration furnished by the deed; the deed was in no sense voluntary.'. The mere fact that it was without consideration is not enough to set -it aside; there was evidence of services rendered by Earle for Kyle sufficient to. form a consideration; it. was not necessary for the defendants to prove there was a consideration. (1 Barb. Ch. R., 220; 4 Wend., 300 ; 7 id., 437 ; 8 id. 9; 18 id., 375; 8 Cow., 406 id., 496 ; 6 Paige, 526.)

p. 591

IV. Upon the facts found, the Court should have dismissed the complaint, and this Court will now do so.

Chas. W. Sandford. for respondents.

The judgment in favor of the plaintiffs, against Kyle, for $206,624.50, and the record of such judgment, establish prima facie, as against both Kyle and Earle, that the former were creditors of Kyle to that amount at the time that action was commenced. •

The complaint in that action alleges, as the grounds of' Kyle’s indebtedness, that while he was Secretary of the plaintiffs' Company, he fraudulently sold and assigned shares of its stock, and converted the proceeds to his own use. That action was commenced on the 19th of July, 1854. As a matter of legal necessity, it • must be prima facie true that Kyle had done these acts prior to the 19th of July, 1854.

The complaint in the present action alleges that Kyle was such Secretary from the year 1847 until the beginning of July, 1854, and the answer of Earle admits “that Kyle was the plaintiffs’ Secretary as stated in the complaint.” The complaint in this action also alleges that during this period Kyle “ fraudulently filled up, sold and negotiated a large amount of the certificates of the capital stock of the said plaintiffs, and received the proceeds thereof and applied the same to his own use, to an amount exceeding $200,000 and upwards, for which said judgment was renderedthat after the discovery of said fraudulent transfers, the conveyance in question was made.

The answer of Earle admits his belief “ that Kyle, towards the latter portion of the period of his secretaryship, did, in connection with one Robert Schuyler, the President of the plaintiffs’ Company, fraudulently fill up and -negotiate certificates of the stock of the Company,” but denies any information as to the amount or value of such certificates.

The answer admits enough to support the conclusion- of fact that Kyle, prior to making the conveyance in question, “had defrauded such Company, and that out of such frauds the debt arose which resulted in such judgment, and that such conveyance was made by him after the discovery by some one or more of the officers of such Company of the existence of such frauds.”

p. 592

The Court, at Special Term, found the fact to be so. The testimony of S. M. Blatchford and Charles Denison, as to the time of the discovery of Kyle’s frauds, tends to support this finding. The judgment record, which was produced in evidence, establishes conclusively as against Kyle, and at least prima facie against Earle, the amount and value of the certificates thus fraudulently issued.

The conveyance by Kyle to Earle, which the judgment appealed from declares to be fraudulent, was made on the 6th of July, 1854, and the action, in which the plaintiffs recovered judgment against Kyle, was commenced on the 19th of said July, as is shown by the record of that judgment.

We think it sufficiently proved that Kyle had committed the frauds for which that judgment was recovered, prior to the 6th of July, 1854, and that the plaintiffs were then his creditors to the amount of the value of the stock which he had thus fraudulently transferred, and the proceeds of which he had applied to his own use, and that he made the deed of that date with intent to defraud the plaintiffs and prevent their reaching the property conveyed by that deed.

We think the evidence also supports the further conclusion of fact found by the Court at Special Term, “ that no valuable consideration was paid by the said Earle to the said Kyle for such conveyance.”

It was proved that Earle is the father-in-law of Kyle, and assisted Kyle while the latter was Secretary of the Company; that prior to his beginning to render such assistance he had failed in business, and that subsequently thereto he was out of business until he commenced assisting Kyle; that while so assisting him he lived with Kyle, and the Company paid him nothing; that when he went to live with Kyle, his family was broken up and his wife went to live with her father; that he had no visible means of support, and it was generally reported that Earle was worth nothing.

It is therefore established that the plaintiffs were creditors of Kyle prior to the 6th of July, 1854; that Kyle, after he knew that his frauds, out of which said indebtedness arose, had been discovered, made the conveyance of the 6th of July, 1854, with intent to defraud the plaintiffs, and made it to his father-in-law

p. 593

without consideration, and that the latter was not a man of any property.

Such a conveyance is void as between Kyle and the plaintiffs, and as between the latter and Earle. Where a person owing $200,000, created by his fraudulent acts, as soon as his frauds are discovered, conveys without consideration the only property that he owns, and the value of which does not equal the one-twentieth part of his indebtedness, such conveyance is void as against those who were creditors at the time it was made. (2 Kent’s Com., 440-443, and notes.)

We cannot assent to the proposition that the record of the judgment recovered by the plaintiffs against Kyle, shows that the question of the validity of the deed of the 6th of July, 1854, was determined in that suit, either in fact or in intendment of law.

That question could not have been litigated in that suit, even if Earle had been served with process in it. (Reubens v. Joel, 3 Kern., 488.)

The terms of the judgment do not import that it was considered. On the contrary, it recites that Earle was not served with process, and did not appear in the action. In substance and effect Earle was no more a party to it than if he had not been named in it.

We conclude, therefore, that there was no error committed at the trial, and that the facts found entitled the plaintiffs to the relief granted to them by the judgment appealed from.

Judgment affirmed.