Fiedler v. Day — 4 N.Y. Super. Ct. 594

Majority

p. 594

Fiedler v. Day and others.

Headnote

An- assignment of personal effects to trustees, in trust for the separate use of the1 wife of the grantor, which effects continue in bis possession after the assignment^ is fraudulent and void against a subsequent creditor, whose debt arose during the. continuance of such possession.

The trustees under such transfer, took the grantor’s note for the effects so left in his hands, and- on the grantor’s afterwards failing, he assigned his property for the' benefit of his creditors, giving a preference to the note. Held,- That this assignment was fraudulent as- against creditors.

An assignment for creditors, fraudulent in respect of a principal preferred debt, is void. in toto, although another preferred debt, and the unpreferred debts provided for, be all due in good faith.

(Before Duer, Mason and Campbell, J. J.)

June 12 ;

July 14, 1849

This was a judgment creditor’s bill after the return of an execution unsatisfied. It was originally filed against George W. Day, the judgment debtor, and contained the allegation usual in such cases. It was afterwards amended by making the other defendants parties, and by setting forth that the defendant, Geo, W. Day,, had, with intent to defraud subsequent creditors, executed an assignment to the defendants, Mangum and Sayre, for the benefit of his wife, the defendant Mary Day. George W. Day answered the original bill, but suffered the amended bill to be taken as confessed, as did his wife. Mangum and Sayre put in their answer, to which a replication was filed.

The facts as they appeared from the pleadings were briefly as follows:

On the 6th of March, 1846, George W. Day executed to Man-gum and Sayre a deed conveying and transferring, together with a small interest in remainder in certain real estate, the sum of two thousand dollars, stated to be then invested by him as-capital in the mercantile firm of Day &. Sweet, of which firm he was a member ; in trust, to invest and reinvest the same, and to pay the interest to Mary Day, the wife of the grantor, for her sole and separate use during her natural life, and upon her death to convey and assign the principal to- the grantor and his heirs and assigns.

p. 595

The deed contained an authority to the trustees, if they should deem it expedient, to loan the $2000 to Day, or to any firm in which he was or might be a partner, with or without interest, on his or their own note, for as long a time as they should see fit.

Neither the money, nor the property in which it was invested, was delivered to the trustees, nor was there any change of the possession : but Day executed a note for $2000, -bearing even date with the trust deed, and payable on demand to Maugum ■and Sayre, as trustees.

The debt to the complainant was contracted in the beginning •of August, 1846. On the 13th day of that month, George W. Day failed, and executed an assignment to the defendant, Man-gum, of all his property, upon trust to sell and apply the proceeds in the first place to the payment of this note of $2000, and of other specified debts amounting to $790, and in the second place to distribute the remainder among the residue of his creditors.

W. Watson, for the complainant.

F. Sayre, for the defendants.

The deed of trust, to the defendants, Sayre and Mangum, was clearly void as to creditors. It was purely voluntary. There was no actual delivery of the money pretended to be conveyed to the trustees, or of the property in which it was said the money was invested, but the whole was retained in the hands of the grantor. The excuse offered by the trustees for not requiring it to be paid over is, that Day could not take the amount out of his business without great loss and sacrifice, and therefore they consented to let it remain in his hands without interest, merely receiving his note for the amount, payable to them as trustees. We are authorized to infer that it was without interest, as the answer does not allege that it bore interest, and the trustees were authorized to loan the amount to the grantor without interest. Nor does it appear that the note was negotiable, and no consideration having been given for it, as between the original parties, its payment could not have been

p. 596

enforced. By this arrangement the professed object of the deed, viz. to provide an income for the separate use of his wife, was entirely defeated, and Day, the grantor, retained the possession and enjoyment of the property in the same manner as if the deed had never been executed.

There is no ground on which the trust deed can be upheld. It was void at common law and by the express terms of the-statute, (2 R. S. 136, § 5,) and it is void not only as to creditors existing at the time of the execution of the deed, but also as to the plaintiff who became a creditor subsequently thereto, and while the property still remained in the possession and under the control of the debtor ; and this as well from the nature of the case, as by the express provisions of section six of the statute before referred to.

It is of no consequence that the defendants, Mangum and Sayre, deny all fraudulent intent. Such a denial is of no avail, when the answer admits facts conclusively showing the fraud. (Cunningham v. Freeborn, 11 Wend. 240 .) The defendant, Day, by not answering the amended bill, which alleged that the deed was made with the intent to defraud subsequent creditors, has expressly admitted the intent so far as he was concerned.

If the trust deed is void, then the subsequent assignment to Mangum of the 13th August, 1846, is also void. It provides for the payment out of the proceeds of the assigned property, of this very sum of $2000, to the defendants, Mangum and Sayre. Thus carrying out the fraudulent intent of the trust deed, and depriving the creditors of the amount thereof which they are entitled to have applied to the pajunent of their debts.

It was suggested on the argument, that the other preferred debts being for aught that appears, bona fide, and the assignment being for the benefit of all the creditors pro rata, after paying the preferred debts, this sum of $2000, if it cannot be lawfully applied to the purposes declared in the assignment, increases by so much the amount to be distributed among the general creditors, and that the assignment should be upheld as to all the bona fide claims provided for.

But the terms of the statute, (2 R. S. 137, § 1,) are peremptory ; they declare that the conveyance or assignment itself, made

p. 597

with intent to hinder, delay or defraud creditors, shall be void ; not that the provision or claims containing such fraudulent intent, shall be void; and the uniform construction of the courts has been that a deed void in part, as being in. violation of a statute, is void in toto. (Mackie v. Cairns, 5 Cow. 547 ; Grover v. Wakeman, 11 Wend. 187 ; Webb v. Dagget, 2 Barb. S. C. R. 9.)

The complainant is entitled to a decree declaring both the trust deed and the assignment fraudulent and void as to him, and that the defendant Mangum pay the amount of his judgment with interest and costs; it appearing from Mangum’s own affidavit, that he has received from the assigned premises more than sufficient for that purpose.

Cases cited

Mackie v. Cairns 5 Cow. 547 N.Y. p. 597