Bruce v. Kelly — 39 N.Y. Super. Ct. 27

Majority

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EMMA BRUCE and others, Plaintiffs and Respondents, v. JOSEPH KELLY and others, Defendants and Appellants.

Headnote

i. EXECUTION.

1. Real estate, sale oe under, when set aside, although the judgment and proceedings leading thereto, and. the execution and sale thereunder and proceedings leading thereto, ave fair and regular ON THEIR PACE.

1. Where property of the value of $13,000 was sold for $180 (the judgment being for $103), and the attorney of the judgment creditor procured a person to become the nominal purchaser, and then set on foot and conducted an ingeniously contrived system of leases, mortgages and deeds, fair and valid on their face, but in reality wholly fictitious, and on the trial of the action to set aside the execution, neither the said attorney, nor the last grantee who was in court were called to sustain the bonafides of the transaction, and explain the suspicious circumstances,

HELD,

that the judgment at special term, setting aside the sale, was correct.^[1]

II. EVIDENCE.

1. Witness, weight op testimony how considered. a. Although a witness swears that he acted honestly and in good faith, yet the trial judge, in passing on his credibility, has a

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right to disregard, Ms unsupported or improbable professions, and construe Ms acts in the light which the facts and circumstances of the case throw upon his possible and probable motives, designs and interests.

2. Omission to produce material testimony, effect of.

1. Where the testimony is elearly within reach, an assumption that the omission to produce it was the result of knowledge or fear on the part of that party to the action with whom it laid to produce the testimony, that Ms case could not be improved by the production thereof, is justified.

3. Declaratons by alleged confederates, admission of BEFORE PROOF OF THE COMBINATION.

1. Not error if the combination is subsequently proved.

III. RESTITUTION ON SETTING'ASIDE A TRANSACTION.

1. When complete restitution ordered.

a. When property has been obtained by an active, fraudulent combination, all the guilty parties are answerable for the whole of it.

1. Co-defendants, adjustment of liabilities between. a. If they are entitled t* any such adjustment the attention of the court must be called to it.

IV. PLEADINGS, ADMISSION BY.—TITLE.

1. Admission of title in the plaintiff by the answer precludes defendant from insisting that the plaintiff was a mere trustee, and had no leviable interest.

V. TRIAL.—OBJECTION NOT TAKEN BELOW.

1. An objection that plaintiff’s remedy was at law and not in equity, if not taken below, can not be raised on appeal.

Before Freedman, Curtis and Speir, JJ.

Decided February 1, 1875.

Appeal from a judgment entered upon the decision of a judge at special term.

The action was in equity to set aside a sheriff’s sale of real estate under execution, his subsequent deed to Joseph Kelly, the purchaser, a deed of the latter to the defendant, Emma Weeks, and a mortgage from her to the defendant, Joseph W. Frazier, and a deed from Emma Weeks to defendant Van Alstine, upon the ground of a fraudulent conspiracy to sacrifice the property and to obtain the title to and the possession of it for the defendants.

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This real estate was of the value of thirteen thousand dollars. The plaintiffs owned it, as is admitted, up to October, 23, 1869. Prior to that date, on February 20, 1859, judgment had been entered against the present plaintiffs by default, in an action pending in the supreme court, Westchester county, for the sum of ninety-eight dollars and thirteen cents. In that action Thomas M. Wyatt was the attorney of the judgment creditor. Execution was issued to the county of Hew York, and the real estate in question was levied on and sold. The property was purchased at the sheriff’s sale for one hundred and eighty dollars, by Joseph Kelly, one of the defendants, on October 23, 1869. The fifteen months allowed for redemption expired on January 24, 1871. Kelly received his deed on April 17, 1871.

Kelly then claimed to have conveyed the premises for six thousand dollars to the defendant Emma Weeks, on May 27, 1871.

The defendant Emma Weeks claimed to have conveyed to the defendant Philip Van Alstine, for seven thousand dollars on July 18, 1871.

It was also claimed that the defendant Emma Weeks made a bond and mortgage for five thousand dollars, on May 27, 1871, the day she claims to have received her deed from Kelly to the defendant, Joseph W Frazier. The mortgage was claimed to have been assigned by Frazier to one Oolton B. Ward by an assignment bearing date May 27, 1871. It was claimed, too, that Ward executed an assignment to one Cotton W. Bean, bearing date August 10,1871. Heither Ward nor Bean are parties to this action. These two assignments never appeared on record till April 8, 1873

The plaintiffs claimed that these different acts, the sheriff’s sale, the conveyances and the mortgage, were merely parts of one fraud, contrived by Thomas M. Wyatt, the attorney of the judgment creditor in the judgment for ninety-eight dollars and thirteen cents,

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and that the fraud was so contrived for the purpose of defrauding the plaintiffs of the real estate mentioned.

The court below, after making the necessary findings as to plaintiff’s"title, the rendition of the judgment, the filing of a transcript, the issuing of an execution, the levy and sale, and the different instruments executed to, by and between the defendants, found the following-additional facts:

Third. That at the time of said sheriff’s sale, on October 23, 1869, the plaintiffs, who were the judgment debtors in said action, were residents of the city and county of New York, as said Wyatt well knew, and had and possessed personal property much more than sufficient to fully pay and satisfy said judgment for ninety-eight dollars and thirteen cents, but such personal property was not subject to levy under execution. That no attempt was made by said sheriff to find any personal property of said judgment debtors, wherefrom to satisfy said judgment.

Fourth. That said sale by said sheriff under said execution of said premises, which were of the value of thirteen thousand dollars, for the price of one hundred and eighty dollars, was an oppressive use of process, and was made at the instance oí said Wyatt in collusion with said Kelly, and with the wrongful and fraudulent intent on the part of said Wyatt and said Kelly that said property should be purchased at a grossly inadequate price without the knowledge of the plaintiffs, and to thereby deprive and defraud said plaintiffs of said premises under color of process of law.

Fifth. That said, defendant Kelly made said purchase at said sheriff’s sale, at the instance of and in collusion with said Thomas M. Wyatt, who was the attorney of the judgment creditors in said judgment, and with the fraudulent intent on the part of said Kelly and of said Wyatt, that said premises should be sold, and. that said Kelly should purchase them at said sale for a.

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grossly inadequate price, and that the plaintiffs should be kept in ignorance of said sale, and should thereby be deprived of their right to redeem said premises, and should be deprived and defrauded of the said premises under color of a judicial sale. That said purchase by said Kelly was made, not in good faith, nor with any bona fide intent to become the purchaser thereof at the fair value thereof.

Sixth. That the fair value of said premises was the sum of thirteen thousand dollars.

Seventh. That at the time of said sheriff’s sale, there was due upon said judgment to said judgment debtors, the sum of one hundred and two dollars and eighty-six cents, principal and interest. That the amount of fees legally, chargeable by said sheriff rn executing and returning said writ of execution, and in making said levy and sale thereunder, were in all not more than the sum of fifteen dollars and seventy-five cents. That there remained of said amount of one hundred and eighty dollars, which was paid by said Kelly to said sheriff as the purchase money on said sale of said premises, at least the sum of sixty-one dollars and fifty-eight cents, which of right belonged to, and by law should have been by said sheriff paid to the plaintiffs, who were the owners of said premises, by said sheriffs, from the proceeds of said sale.

That said sheriff, in violation of law, retained the whole of said sum last mentioned, and willfully omitted and neglected to give any notice to said plaintiffs that said sum was due to them, or to make any attempt to pay the same, or give any such notice to said plaintiffs.

That said last mentioned acts, omissions, and neglects of said sheriff, were assented to and approved by, and were done and had at the instance of said Thomas M. Wyatt.

Eighth. That said defendant Emma Weeks did not, in fact, pay to said defendant Kelly the sum of six

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thousand dollars, nor any part thereof, as the consideration for said deed. That said deed from said Kelly to said Emma Weeks was made, delivered, and received, not in good faith, nor with any bona firle intent, thereby to grant or convey said premises to said Emma Weeks, but was made, delivered, and received, at the instance and request of said Wyatt, and in collusion with said Wyatt, Kelly, and others, and with the wrongful and fraudulent intent, thereby to make it appear that said premises had been conveyed to a bona fide purchaser, for value, without notice or knowledge of the frauds aforesaid, and to deprive and defraud the plaintiffs of said premises, and to hinder and delay the plaintiffs in recovering said premises from the defendant Kelly, and with notice on the part of said Emma Weeks of the frauds aforesaid.

Ninth. That said defendant Frazier did not loan or advance to said Emma Weeks the said sum of five thousand dollars, or any part thereof. That said mortgage was made and delivered by said Emma Weeks to said Frazier, and was accepted by said Frazier, not in good faith, nor with any bona fide intent thereby to secure the payment to said Frazier, or any other person, of any loan of money, in fact made, but was made, delivered, and accepted, at the instance of and in collusion with said Wyatt, Kelly and others, and with the wrongful and fraudulent intent, thereby to make it appear that said mortgage was a valid lien and incumbrance upon said premises, and to hinder and delay the plaintiffs from recovering said premises, and with notice on the part of said Frazier of the frauds aforesaid.

Tenth. That said defendant, Van Alstine, did not pay to said defendant, Emma W eeks, the sum of seven thousand dollars, named in said deed from said Emma Weeks to said Tan Alstine as the consideration thereof,

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nor any part thereof, and said deed was made, delivered and accepted, not in good faith nor with any bona fide attempt thereby to grant or convey said premises, but at the instance of and in collusion with said Wyatt, said Kelly and others, and with the wrongful and ¡raudulent intent thereby, to make it appear that said premises had been again conveyed to a bona fide purchaser for value without knowledge or notice of the frauds aforesaid, and thereby to defraud the plaintiffs of said premises, and to hinder and delay said plaintiffs in recovering the same, and with notice on the part of said Van Alstine of the frauds aforesaid.

Eleventh. That neither of the plaintiffs had any knowledge or actual notice of the recovery of said "judgment, or the issuing of said execution, or said sale thereunder, or of said conveyance from said sheriff to said Kelly, or from said Kelly to said Weeks, or of said Weeks to said Van Alstine, or of said mortgage from said Weeks to said Frazier, until long after the said issuing of said execution, and said sale, and said conveyances, and said mortgage.

That said plaintiffs continued in full, quiet and peaceable possession of said premises, and the rents and profits thereof, until some time between the 1st day of May and the 1st day of June, 1871.

Upon these facts the court found as matters of law: First.—That said deed from said James O’Brien to ■said Joseph Kelly, is fraudulent as between the parties to this action, and should be set aside, and said Kelly should execute and deliver unto the plaintiff a full release of all his interest in said premises, with covenants ^against his own acts, and that his wife, Ellen L. Kelly, should join in said deed and release all her right, title and interest, and right of dower, in and to the said premises.

Second.—That said deed from said defendant, Joseph Kelly, to the defendant, Emma Weeks, is fraudulent,

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and should be set aside, and said Emma Weeks should execute and deliver unto the plaintiffs a full release of all her interest in said premises, with covenants against her own acts.

Third.—That said mortgage from said Emma Weeks to said Frazier is fraudulent, and should, as between the parties to this action, be set aside, and said Frazier should execute and deliver to the plaintiff a full release of all his interest in the premises, and in and to said mortgage.

Fourth.—This said deed from said Emma Weeks to said Philip Van Alstine is fraudulent, and should be set aside, and said Philip Van Alstine should execute and deliver unto the plaintiffs a full release of all his interest in said premises, with covenants against his own acts to the present owner and holder of said mortgage, for principal and interest due on the said bond, purporting to be secured by said mortgage.

Fifth.—That an account be taken before a referee to be appointed by this court, of the rents and profits which have been received, or which might have been received, by the defendants or any of them, of said premises, and of any damage or waste done or suffered to said premises while any of said defendants have been in the possession of said premises through their lessees or otherwise, and that the plaintiffs are entitled to judgment against the defendants, Joseph Kelly, Emma Weeks and Philip Van Alstine, severally, for the amount of such rents, profits, damage and waste found upon such accounting to be charged against them severally.

Sixth.-—That the plaintiffs are entitled to judgment, in accordance with the foregoing findings, and for their costs and disbursements of this action against the defendants, Joseph Kelly, Weeks and Van Alstine, but that the plaintiffs recover no costs against defendant

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Frazier, but the defendant, Frazier, is not to recover costs against the plaintiffs. And I do hereby order and direct an ad ditional allowance to be made to the plaintiffs of five hundred dollars.

Judgment having been entered in accordance with, the decision, the defendants appealed.

The following opinion was rendered at special term:

The defendant Kelly, in testifying, gave out at first, if he did not assert, that his relations with Mr. Wyatt were slight and casual. As long as possible he withheld the bank-book, which led to proof from himself, that in fact those relations were intimate and confidential. The examination of the records made by him was clearly not for the purpose of informing himself, but to give him the semblance of a person acting independently and in his own interests.

I am convinced that the conveyance to Mrs. Weeks, and^the mortgage to Mr. Frazier, did not represent substantial transactions, but were mere forms. Carter and Kelly may have moved on different lines, without personal communication, up to the time of the conveyance and mortgage, but they were consciously co-operating when they met with the others ; they took part in, as it were, a dramatic representation, which might after-wards be narrated as a real transaction.

I do not know who owned the money used on that occasion, but am satisfied that it was not lent to Mrs. Weeks, except as a form, and that it was not paid over to Kelly to be kept by him as the consideration of the conveyance.

The Dunn lease evidently was a device by which the premises were left vacant, that the parties claiming under the sheriff s sale might obtain possession without a resort to the law.

On the whole case, I believe that Mr. Van Alstine

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took his conveyance with notice of the real situation of the facts.

In combining all the circumstances, I can not avoid the conclusion that the parties acted as directed by Mr. Wyatt, and in concert with him, from the first, and that at first Kelly became purchaser upon instructions from him and as jointly interested with him, since the first, the real parties-interested, have retained their interest in a part of it.

These being the results of the testimony, the law .applies the rule omnia presumantur contra spoliatorem. The law does not deem that there can be so much machination and concealment without design and a substantial motive, viz., to prevent that being known which would set aside the sale. The burden of proof rests upon the parties defendant to show affirmatively that nothing occurred which would invalidate the sale, not only that all the forms as to all kinds of notices, &c., were complied with, but that the sale was fairly conducted, bidders not kept away, &c., and «that nothing was done to prevent notice of the proceedings reaching the owners who, upon notice, would without doubt, rather have paid two hundred dollars than lose their property. Every intentional deviation from the usual and ordinary course of affairs, is a circumstance ■of testimony that there is a weak point to be hid. At this point it becomes a very important consideration, that the defendant, acting, as we have-seen, in concert with Mr. Wyatt, did not call him as a witness. He is the only one who could affirmatively show that there ' was no legal or equitable cause for setting aside the sales. The witnesses who were called on that point show that such of those forms were complied with as, in favor of a bona fide purchaser, create a presumption that the sale and the subsequent proceedings were regular, but, as we have said, that does not cover the jground to be established.

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The conveyances, to Kelly, Mrs. Weeks and to Mr. Van Alstine, should be set aside, and also the mortgage to Mr. Frazier, as between the parties to this action. The plaintiff should have costs against the defendants, excepting Mr. Frazier, but he is not to have osts.

Erastus New, Henry F. Pultzs, J. B. McEwen, Philip Van Alstyne, attorneys, and W. A. Beach, of counsel, for appellants.

Hammond and Stickney, attorneys, and Albert Stickney, of counsel, for appellants.

The court at special term found, that the sale was an oppressive use of the process of the.court, made at the instance of Wyatt, the attorney, in collusion with Kelly, and with a wrongful and fraudulent intent on the part of both of them ; that the conveyance to Mrs. Weeks, the mortgage to Frazier, and the conveyance to Van Alstine, did not represent substantial transactions, but were mere forms, and as such they were gone through with to defraud the plaintiffs out of said premises, and to hinder and delay them in recovering the same; and that in these various matters all the defendants acted in collusion and concert with, and as directed by, Wyatt.

The evidence is sufficient to sustain these findings.

True, Kelly and Frazier, who of all the defendants were the only ones that were called to the witness-stand, claimed to have acted honestly and in good faith. But the judge who had them before him, and who observed the manner and the tone of their testimony, had the right to pass upon the credibility, and in doing so, he had the right to disregard their unsup

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ported or improbable professions, and to construe their acts in the light which the facts and circumstances of the case threw upon their possible and probable motives, designs, and interests. Upon the*whole testimony, which is by far too voluminous to be satisfactorily adverted to here, it is impossible for any candid mind to believe that there could have been so much plotting and concealment, and yet so much harmony and concert of action, to accomplish a certain result, as the case discloses, without the presence of a master-mind, who organized and perfected the whole plan, and who from time to time set the parties in motion as circumstances seemed to require. That this master-mind was Wyatt, is-a conclusion which, on a critical examination of the testimony, can not be resisted. He it was, therefore, that more than any other witness could have shown by explanatory testimony, if the fact could be shown at all in the face of the facts already established by the plaintiffs, that no legal or equitable grounds existed for setting aside the sale and the subsequent conveyances. The defendants, however, did not call him as a witness, nor did they account for such omission. Neither did Van Alstine, though present in court, see fit to take the stand. In view of this failure to produce material testimony clearly within reach, the court was justified in assuming that such failure was the result of knowledge or fear on the part of the defendants that their case could not be improved by the- production of such testimony. On the other hand, upon the case as left by the defendants, the conclusion was almost unavoidable that all the defendants had been engaged in the fraudulent combination at the instigation of Wyatt.

This being so, the findings of fact made below can not be disturbed. Nor can I discover any error in the conclusions of law based upon the facts as found. The relief awarded in this case was not awarded against a

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purchaser for value, nor against, a purchaser at all, nor against an innocent party who had received, without fault, through the fraud of another, property which in equity belonged to the plaintiffs. It was a case of an active, fraudulent combination, and in such a case the law gives complete restitution, and all the guilty parties are made answerable for the-whole of the property (Troup v. Wood, 4 Johns. Ch. 260 ).

If any of the defendants were entitled to an adjustment of liabilities as between themselves, the attention of the court should have been directed to it, which was not done.

The defendants have argued that the legal estate of the property in question was in Mr. Bruce, as trustee for the plaintiffs, and that the plaintiffs had no leviable interest in the realty. But they are not in a position to raise this question, having by their answers admitted title in the plaintiffs (Paige v. Willet, 38 N, Y. 28 ; Thomas v. Austin, 4 Barb. 265 ).

The objection that the plaintiffs should have sought their remedy at law is equally untenable. The point was not raised below, and defendants submitted to the equitable jurisdiction of the court without complaint.

Finally, it is insisted that the court erred in admitting the declarations of the alleged confederates before proof of the combination. But this was a matter resting in the discretion of the court. Evidence of a conspiracy must have a beginning. The remarks and declarations of conspirators, directions given by them, and their conversations held during the carrying out of the conspiracy, are acts and as such part of the res gestee. If the conspiracy is finally, on all the evidence, clearly made out, the order in which the proof was given, is not material. It therefore rests solely in the discretion of the court to determine whether or not, at a particular stage of the proceedings, a sufficient

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foundation has been laid to admit evidence of such declarations (1 Greenl. on Ev. § 111).

The judgment should be affirmed with costs.

Curtis and Speir. JJ., concurred.

Cases cited

Thomas v. Austin 4 Barb. 265 N.Y. Sup. Ct. 1848-09-05 p. 39