Opinion
05-20-1918
CARTAN et al. v. PHELPS et al.
Durand, Ivins & Carton, of Asbury Park, for complainants. Fort, Hunt & Shipman, of Newark, for defendants.
Action by Andrew J. Cartan and another against Ernest L Phelps and another. Decree in accordance with the opinion.
Decree affirmed 89 N. J. Eq. 599, 105 Atl. 240.
Durand, Ivins & Carton, of Asbury Park, for complainants.
Fort, Hunt & Shipman, of Newark, for defendants.
FOSTER, V. C. This action is brought to set aside a deed of conveyance made by the defendant Phelps to the defendant Badgley for lands near Matawan in Monmouth county, because the same was made to defraud complainant and other judgment creditors of Phelps.
The proofs in this case satisfy me—particularly the testimony of Mr. Oeran, who prepared the deed, and of Mr. Bentley, the attorney of Phelps in the Conover Case—that Phelps, in executing the deed in question, made it to secure to Badgley the payment of an indebtedness of $1,000 or $1,200, and that Phelps also intended by this conveyance to prevent his property being reached, in case of an adverse verdict in the Conover Case, which was then about to come to trial, and the trial of which resulted in a verdict of $7,000 against him, which was subsequently set aside. I am further satisfied that the conveyance from Phelps to Badgley was a voluntary one on Phelps' part, unsolicited at the time by Badgley; and that the conveyance was in the nature of a security or mortgage further appears from the facts that the deed was not delivered until some months after its execution; that it was not recorded until some months after is delivery; that Phelps continued, after the delivery of the deed, to exercise acts of ownership over the property and rented the same and collected the rents thereof for some time; and that, subsequently, he made a further arrangement with Badgley, according to Badgley's testimony, whereby the deed was to be regarded as an absolute, rather than a conditional, conveyance of the property, upon Badgley paying to Phelps the further consideration of $1,000. Assuming that Badgley did pay $700 or $800 of this amount, as he claims, to Phelps, he also states that he has not paid the balance of this additional consideration, and never intends to do so. He thereby puts himself in the position of refusing to perform and complete the contract of purchase of the property, if such a contract were ever made. For the reasons stated, I am satisfied that the principal purpose of the conveyance of this property from Phelps to Badgley, as far as Badgley was concerned, was merely to secure him for the money owing by Phelps to him, and not to convey the property to him, except in a conditional way. Badgley, while he claims the amount of the indebtedness is nearer $3,000 than $1,200, as Phelps stated to Geran and Bentley, is unable to produce any vouchers to substantiate his statements, and I am therefore obliged to rely upon the only tangible proof in the case regarding the amount of this indebtedness, viz., that given by Mr. Geran and Mr. Bentley, based upon statements made to them by Phelps at the time when he had the deed prepared, and shortly thereafter; and, while Phelps' statements would not be conclusive as to the amount of the indebtedness owing by him to Badgley, in the absence of any proof to the contrary, they must be accepted as stating the facts.
I think the interests of all parties in this cause can be conserved and protected by a decree that the conveyance in question is, in effect, a mortgage between Phelps and Badgley, and that the property should be sold under the direction of a special master, and from the proceeds of the sale the amount due Mr. Badgley of $1,200, with interest, should be first paid, the balance of the proceeds, if any, can then be applied to the payment of the several judgments, in the order of their priority; and the surplus money, if any, can be paid into this court to await such further order as the court may make on the application of either Phelps or Badgley, or any other party interested in the surplus fund; and, a decree will be advised accordingly.