Opinion
March 14, 1949.
Appeal by defendant from so much of a judgment as adjudges that plaintiff has title to certain real property, directs defendant to execute a deed thereto to plaintiff, and grants other incidental relief. Judgment, insofar as appealed from, reversed on the law and the facts, and a new trial granted, with costs to abide the event. For the purposes of a new trial, findings of fact are reversed and conclusions of law disapproved. At the time of the purchase of the real property, a dwelling in Yonkers, in February, 1946, the parties were husband and wife. In May, 1948, less than a month before the trial of this action, a judgment of divorce in favor of plaintiff husband and against defendant wife was granted in New York County. Upon the trial of the present action, plaintiff admitted that during the years 1944 and 1945, he engaged in business operations, apart from his activities as an employee, in which he earned a total of $10,000, and that these business operations included "black-market" dealings. Plaintiff further admitted that he knowingly failed to report such earnings in his Federal income tax reports for those years. Apparently in furtherance of his design to prevent detection, he turned over to his wife, the appellant, these additional earnings. The purchase of the dwelling required a payment of $8,100 in cash. In order to make up this amount, defendant produced $3,100 out of the moneys accumulated and saved as a result of plaintiff's earnings, including those of his illegal dealings, and plaintiff borrowed $5,000 from a bank, to be repaid at the rate of approximately $200 a month. Plaintiff testified that the resort to a loan was occasioned by their reluctance "to use our last money", whereas defendant testified that he had told her that he would borrow the money because he did not want the Government to discover the amount of his earnings. It was the further testimony of plaintiff and also of two disinterested witnesses that defendant, at the time of taking title, orally agreed to convey the property to plaintiff whenever he wanted it, but this was denied by defendant. Respondent may not have relief in a court of equity, if the taking of title in appellant's name was a part of his general design to avoid detection of his illegal black market dealings and tax fraud, and to defraud the Government. In our opinion the determination in favor of respondent was contrary to the weight of the evidence. Further, the admission of evidence that upon the trial of the divorce action, the court had remarked that the testimony of appellant and her witnesses had been "given with the intent of deceiving the Court" and that their testimony was "rejected as untrue and not worthy of belief", was not conducive to a fair and impartial appraisal of appellant's testimony upon the present trial. Sneed, Wenzel and MacCrate, JJ., concur; Carswell, Acting P.J., and Johnston, J., dissent and vote to affirm on the authority of Tiedemann v. Tiedemann ( 201 App. Div. 614, affd. 236 N.Y. 534) and Boyd v. Boyd ( 252 N.Y. 422). [See post, p. 770.]