Opinion
07-10-1902
BERLA v. MEISEL et al.
F. A. Borcherling and Chas. Borcherling, for complainant. Lowenstein & Lowy, for defendants Mrs. Meisel and Lewis Meisel.
Suit by Moritz Berla against Frederick Melsel and others. Bill dismissed.
F. A. Borcherling and Chas. Borcherling, for complainant.
Lowenstein & Lowy, for defendants Mrs. Meisel and Lewis Meisel.
EMERY, V. C. The bill is filed by complainant, as a judgment creditor of the defendant Frederick Meisel, to set aside, as fraudulent against him, a conveyance by the debtor to the defendant Cinnamon on June 1, 1894, of lands then owned by the debtor, anda conveyance of the same premises by Cinnamon to the debtor's wife, dated June 27, 1899. At the time of receiving this last conveyance, Mrs. Meisel, together with her husband, executed a mortgage for $500 on the premises to their son, Lewis Meisel. This mortgage was subject to two previous mortgages,—one of $7,500 to a building and loan association, and one of $850 to Cinnamon,—given by Mrs. Meisel and her husband at the time of receiving the conveyance from Cinnamon. An account of the amount due on these two prior mortgages is asked, but the mortgage to the son is alleged to be fraudulent. At the time of receiving his conveyance from the judgment debtor, Cinnamon held a second mortgage on the premises for $000, and this was subject to a first mortgage of $8,400, given to a building and loan association, upon which lastmentioned mortgage payments of interest and installments were four months in arrear. Payment on this mortgage to the extent of $500 or over had been made. Foreclosure of this building and loan association mortgage upon six months' default was probable, and Cinnamon, in taking title, was expected to keep up the monthly payments on the mortgage, advancing whatever was necessary over and above the rents received. At the time of the transfer Cinnamon executed a written agreement agreeing to reconvey the property to Meisel, or his nominee, at any time within five years, upon repayment of the amount of his entire investment in the property, with interest. This included the advances required for taxes, insurance, and payments on the loan mortgage. At the end of five years Cinnamon had advanced over $2,000. Meisel was not able to repurchase, and the agreement was extended orally for another year to June, 1899. No payments on account of the repurchase had been made by or on account of Meisel up to the end of the five years, but during the last year $500 were paid to Cinnamon by Lewis Meisel, the debtor's son, in small periodical payments, made out of the wages which the son, then in his twenty-first year, was earning. In June, 1899, Cinnamon, at the request of Meisel, conveyed the premises to Meisel's wife, receiving back from the proceeds of a loan on the premises effected by the wife the amount he had advanced to the building and loan association and expended on the property over and above the rents (about $3,000), except to the extent of $850, for which he accepted a second mortgage, canceling his original second mortgage. The third mortgage of $500 was given to secure to the son the amount he had advanced on his father's account toward the purchase. It is claimed on behalf of the complainant that the money advanced by his minor son belonged to the father, and that this mortgage subsequently given to secure the repayment was voluntary, and fraudulent as against complainant.
Upon consideration of the whole evidence, I reach the conclusions:
1. That the deed to Cinnamon was not fraudulent, but was for the legitimate object of securing his own second mortgage; and that the arrangement for repurchase, by which the debtor secured, in effect, the benefit of the entire equity of redemption in the property for the term of five years, made the transfer unassailable by existing creditors. Under the circumstances, the limitation of the right to repurchase to the term of five years was not such a surrender of the equity as gave an existing creditor a right to complain. Creditors had the right, I think, during the five years, to secure by proper proceedings and by indemnifying Cinnamon, the appropriation of the benefit of this contract of repurchase for the satisfaction of their debts. Complainant in fact knew of the transfer to Cinnamon, and of the agreement for reconveyance, soon after it was made; and the fact that he took no steps then either to attack the transfer or secure the benefit of the contract to repurchase was probably due to the fact that the property was considered to have little or no value over Cinnamon's claim.
2. The question whether the transfer on the debtor's consent or request by Cinnamon to the debtor's wife in June, 1899, was fraudulent depends, in my judgment, solely on the determination of the question of fact whether at that time the debtor, by consenting to or directing this conveyance to his wife, who paid nothing to the husband for the conveyance, did, in effect or substance, give away voluntarily any property of value. If the property was not worth more than the amount of the mortgages then placed on it ($8,850), counting the son's mortgage as a valid incumbrance in estimating the value, then the voluntary direction or consent that the conveyance should be made to his wife was not a fraud on the existing creditors. 14 Am. & Eng. Enc. Law (2d Ed.) p. 256, and cases cited. As to the value of the property, my judgment upon the whole evidence is that at the time of the transfer $8,500 in cash would have been an outside estimate of its value. $9,000 or $9,500 might perhaps have been realized if mortgages for nearly the whole purchase money had been given; but I doubt whether even as much as $8,500 would have been realized at a fair (but not a forced) cash sale. A fair sale for cash is the standard of value by which the character of the transaction must be judged, and I conclude that, even if the debtor voluntarily, and of his own choice, had procured the conveyance to be made to his wife, instead of taking it in his own name, it was not a surrender of property then of any substantial value, and was not a fraud on his creditors. But it further appears that the debtor himself, for lack of necessary credit with the association which was to advance the $7,500 necessary to pay off Cinnamon, could not procure the loan, and that the complainant himself declined to secure the debtor's bond for this purpose to the extent of $1,000, even upon the consideration of securing his present claim by a mortgage next after the $7,500 and the Cinnamon claim. The effort of the defendantto repurchase for himself was abandoned as Impracticable, and the direction to convey to his wife was made only after the association had agreed to make the loan to Mrs. Meisel on her son Lewis agreeing with the association to help her with the payments. Under these circumstances it strikes me that the direction to convey to the wife cannot, at least by this complainant, be alleged to have been for the purpose of voluntarily giving away something which Was then in the debtor's hands, of value to his creditors, or to have been, therefore, a fraud on them. The fact that the wife and son, by the use of their own credit, and at their own risk of the value of the property and of making future payments, secured the possible benefit of a contract to repurchase, which was about to expire, and was worth nothing to the debtor or his creditors, because of the debtor's inability to take advantage of it himself, does not, in my judgment, give the judgment creditor the right to follow the transfer to Mrs. Meisel as a fraud on him, or give Meisel's then existing creditors the benefit which may possibly have resulted from the repurchase by reason of a subsequent rise in the value of the property.
3. Upon the assumption that the value of the property at the time of the transfer to the wife was over $8,350 (the amount of the prior mortgages to the building and loan association and to Cinnamon, to which any creditor's rights must clearly be subject), the next question is whether the mortgage for $500, given by Mrs. Meisel to her son, Lewis, as security for the repayment of the advances or payments made by him during his minority on account of his father's contract of repurchase, was a voluntary conveyance, and therefore fraudulent against an existing creditor. The basis of this claim is that the wages earned by the minor son belonged to the father; that the payments made by the son to Cinnamon were for the father's benefit, and were, by the agreement between Cinnamon and the son, to be returned to the father, if he did not desire to carry out the contract, or if Cinnamon sold to any one else than the father during the year after the expiration of the written contract. It is further claimed that the money so advanced to Cinnamon by the son, being thus in fact the money of the father already expended by him on account of the repurchase, the mortgage to secure its repayment to the son was necessarily a voluntary and fraudulent conveyance as against the father's existing creditors. The evidence of both father and son shows that the wages earned by the son had always been paid to him, and not to the father. Payment of a minor's wages to a minor child by authority of the parent has been considered of itself a virtual act of emancipation, and sufficient to entitle the minor to sue the employer for his own services, and to recover the wages as his own money. Snediker v. Eveingham (Sup. Ct. 1858) 27 N. J. Law, 143, 148; Costello v. Brewing Co. (Err. & App. 1894) 52 N. J. Eq. 557, 560, 30 Atl. 682. In the present case there is also the additional fact that before the payments in question the minor paid to his parents $3 to $4 a week board, and retained the balance of his earnings for himself. These facts show, I think, an emancipation of the son, and that the wages earned by the son, when paid to him, as they always seem to have been, were his own money, and not his father's. This being so, the advance by the son of his own money to Cinnamon, on his father's account, made the son prima facie a creditor of the father, and did not, as between him and his father or his father's creditors, deprive the son of a right to the return of the money. Cinnamon, in his account with Meisel of the money due him on his investment in the property at the time of the transfer, gave Meisel credit for the $500 paid by the son; and, unless the advance by the son was intended to be a gift of the money to the father himself, absolutely and for all purposes, the son, as a creditor of the father, was entitled to be secured for his advances toward the purchase by the father, who received the benefit of his payments by Cinnamon's credit of it in his account of the money due from the father to himself on his investment. There is no evidence which, in my judgment, would justify the conclusion that the money advanced by the son to Cinnamon to secure the benefit of the contract to repurchase was a gift of this character, and I think that the son, on the conveyance of the lands by Cinnamon to his mother, or any grantee other than the father, who got the benefit of his payment, was entitled to its repayment by the grantee, and that the mortgage upon the premises to secure the repayment is valid against creditors.
The bill must be dismissed.