Opinion
January Term, 1902.
Martin E. Halpin, for the appellant.
Ira Leo Bamberger, for the respondent.
The plaintiff's judgment is founded on a finding that a chattel mortgage which the defendant's intestate gave to the defendant for $15,000 was made with intent to hinder, delay and defraud creditors, in which intent she participated. On appeal from a judgment in favor of the defendant in an action brought by another creditor the same mortgage was the object of attack, but in that case the court at Special Term found that the plaintiff had failed to establish the allegations of her complaint, and concurring in that view this court affirmed the judgment. (See Edmondson v. Hamilton, 60 App. Div. 630.) In the present case the evidence abundantly sustains the findings of the court at Special Term and entitles the plaintiff herein to the relief which has been granted.
Without entering into minute details, it is sufficient to say that the intestate while engaged in the livery business in the month of June, 1897, had reason to apprehend that a number of suits would be brought against him because of the well-known Valley Stream disaster in which a railroad train collided with a coach driven by one of his servants. The accident occurred on Decoration Day, May 30, 1897, and suits were commenced and pending in the month of June. On the 11th day of June, 1897, a mortgage executed by him to his wife, the defendant, was placed on record covering all his personal property used in the business. The mortgage was made for $15,000, but he did not owe her that amount, nor does she claim that he owed her, if at all, more than the sum of $1,800. The mortgage bears date the 1st day of February, 1897, but was purposely kept from record until June 11, 1897, and that it was recorded in order to avoid the consequences of the suits is fairly proven. The intestate remained in full possession of the business and property until his death, conducting it in the same manner as before the filing of the mortgage and under his individual sign. The enforcement of the mortgage would have rendered him unquestionably insolvent. The plaintiff's dealings with him cover the period referred to, and on discovering the filing of the mortgage her agent had a conversation with him in reference to it in which he said by way of explanation, "I had a collision — one of my stages at Valley Stream; I expect to be sued, to be a party in the suit. * * * It is merely a matter of form; it is made to my wife; I can have it taken off at any time." The chief, if not the entire, dealings which occasion the plaintiff's claim were had thereafter, and presumably in the confidence engendered by these statements that the mortgage was not intended to hinder her. The defendant claims that she did not know that her mortgage was for an excessively fictitious amount, but the court has found to the contrary, and the finding is well based upon the facts that she filed a renewal statement claiming the entire amount as a just debt, that she foreclosed the mortgage, realizing and keeping nearly $3,000, and that she presented upon the accounting in Surrogate's Court a verified claim for over $12,000 as deficiency. This statement of the facts justifies the conclusion that the finding of fraud upon the part both of the mortgagor and of the mortgagee is supported by adequate proof.
The declarations of the deceased were competent as evidence against the defendant, notwithstanding that they were made after the mortgage, inasmuch as he still retained full possession of the property with her knowledge and consent. ( Adams v. Davidson, 10 N.Y. 309; Flannery v. Van Tassel, 127 id. 631, and cases cited.)
The mortgage is not available against the plaintiff, even assuming that the defendant had a just claim against the decedent for $1,800 at the time of its execution and delivery. The entire security is tainted by the fraud. ( Davis v. Leopold, 87 N.Y. 620; Baldwin v. Short, 125 id. 553.) As was said in Hardt v. Schwab (72 Hun, 109, 112), "a creditor having a just claim against a failing debtor must not use it for the purpose of placing the property beyond the reach of other creditors and for the benefit of the failing debtor. If he does he is liable to refund any sum that he has acquired by such attempt, and if it results in a loss of his claim, it is not too severe a punishment for the offense."
Although the plaintiff's entire claim may have been created since the filing of the mortgage and with knowledge of its existence, the defendant may not defeat it under the mortgage claim. The fact that the plaintiff's debt was subsequently contracted is not conclusive ( Savage v. Murphy, 34 N.Y. 508; Shand v. Hanley, 71 id. 319), and the assurance given the plaintiff that she might extend credit to the deceased with safety, notwithstanding the mortgage, and which assurance must, under the circumstances, be regarded as binding upon the defendant, if not made with her actual concurrence, adds an equitable consideration of great weight in reaching this conclusion.
The other points raised by the appellant have been examined, as also the assigned errors in ruling, and nothing has been found to compel reversal.
The judgment should, therefore, be affirmed.
All concurred.
Judgment unanimously affirmed, with costs.