Opinion
03-12-1898
LONG BRANCH BANKING CO. v. DENNIS et al.
Parker & Van Gelder, for complainant. Fay & Van Note, for defendants.
Bill by the Long Branch Banking Company against Sarah E. Dennis and others to subject certain land to the lien of a judgment Heard on bill, answer, and proofs.
Parker & Van Gelder, for complainant.
Fay & Van Note, for defendants.
PITNEY, V. C. The object of the bill is to subject certain lands, the title whereof is vested in the defendant Sarah E. Dennis, to the lien of a judgment which the complainant holds against Edwin Dennis, who was previously the admitted owner, and conveyed them to Sarah E. Dennis by deed dated January 18, 1896. On the 29th of January, 1897, the complainant obtained judgment in the Monmouth county circuit court against Edwin Dennis and Charles E. Dennis for the sum of $872.34 and $38.90 costs,—in all, $911.24. The judgment was based upon four promissory notes, made by Charles E. Dennis, the husband of Sarah and son of Edwin Dennis, to the order of and indorsed by the latter, which matured on the 8th, 13th, 14th, and 16th of October, 1896, respectively. Those notes were given in renewal of other like notes, which were discounted by the complainant bank for Charles E. Dennis, and which renewals ran back to a period prior to the date of the conveyance in question. The consideration mentioned in the deed from Edwin Dennis to Sarah is one dollar and other good and valuable considerations, and the premises included the whole of the grantor's property. Thus briefly presented, and in the absence of any other facts, the case would be this: That on the 18th of January, 1896, Edwin Dennis, being contingently liable as indorser for his son Charles, to the amount of between $800 and $900, to the complainant bank, made a gift of the land in question to his daughter-in-law Sarah E. Dennis, the wife of his son Charles. Thus stated, the case would be within the doctrine of Severs v. Dodson, 53 N. J. Eq. 633, 34 Atl. 7, reversing Dodson v. Severs, 54 N. J. Eq. 305, 38 Atl. 28. The gist of the decision in that case, as I read the opinion, is that a contingent liability as an accommodation indorser of a promissory note on the part of a person making a gift of land is not, of itself, conclusive proof that the gift was made for the purpose of defrauding the holder of the note. The settled rule in this state is that, as to all existing creditors, voluntary conveyances are conclusively fraudulent, without regard to the existence of an actual intent to defraud. Severs v. Dodson held that the holder of such accommodation indorsement is not such a creditor, and the indorser is not a debtor. It, however, recognized the right of the holder of indorsed mercantile paper to show actual fraud in a conveyance by the indorser. At page 635, 53 N. J. Eq., and page 8, 34 Atl., the court says: "At the time in question they were not creditors of the donor. It is readily admitted that they were such in a sense that entitled them to the remedies provided in the act for the prevention of frauds and perjuries. They can, undoubtedly, set aside conveyances and transfers of property made to defeat their just claims. But at present we are not called upon to construe the statute itself, our present function being to construe the rule of evidence that this court has superinduced upon the statute. This discrimination has not always been made, and the omission has confused the subject. The act invalidates certain transfers of property infected with fraud. The rule now being considered relates to the proof of such fraud, declaring that the cotemporaneousness of the gift and the debt establishes it for certain purposes and to a definite extent. * * * When a man is in debt, especially if such debts be due, it is certainly not irrational to infer, if he give away his property, that the intention was to defeat such claims; but such deduction would seem to be most extravagant if, instead of a present indebtedness, he has incurred a mere liability as a warrantor of title, as a tort feasor, or as surety on an administrator's bond. If such responsibilities as these latter, which may, in the long run, be transformed into debts, should have the effect of invalidating voluntary settlements of property, then such settlements would be the most uncertain of legal transactions." And at page 639, 53 N. J. Eq., and page 9, 34 Atl.: "But the present case demands the application of a rule the most opposite of this. We are not now called upon to ascertain the meaning of statutory language in legislative policy, our entire province being to demarcate the rule of evidence promulgated by ourselves, that makes the existence of fraud in voluntary conveyances, under a certain condition, a mere inference of law, irrespective of the truth. The rule is one of the most rigorous character, having the operation of an estoppel, and is to be kept within the narrowest limits. It is, therefore, enough for this court to say that the contingent liability of an accommodation indorser, before dishonor, does not make him a debtor, so that the holder of the paper can invalidate a voluntary conveyance made by him when there was no actual fraud in the transaction." This view does not deprive the fact of the existence of a contingent liability on the part of the grantor of its ordinary and natural probative force, in connection with other facts and circumstances to show actual fraud, but simply of any conclusive effect in that respect. Hence, I conclude that the decision leaves the parties in the present case at liberty to allege and prove fraud on the one side, and to repel it on the other, and leave the contingent liability of the grantor to be considered as a fact in the case. Neither party was content at the hearing to rest the case upon the bare facts as above stated, but went into proof on the issue of fraud or no fraud.
The defendant Mrs. Dennis sets up a consideration for the conveyance in the shape (1) of services rendered by her to her father-in-law, who is quite aged, and has been somewhat helpless for many years, and (2) moneys loaned and advanced and clothing and food furnished by her to him. In reply to these the complainant contends that the amount of service claimed to have been renderedand moneys advanced by Mrs. Dennis has been inflated and exaggerated greatly beyond the truth, and, further, that the deed is open to attack for actual fraud in two respects: First, that it was made at a time when Charles Dennis, the maker of the notes, was placed by unexpected circumstances in a situation of great embarrassment, if not actual helplessness, in his financial affairs, and that the deed was made at his instance and request, in order to protect this property from his father's liability on these notes held by the complainant; and, in the next place, that there was a private and unwritten understanding between the grantor, Edwin Dennis, and his daughter-in-law Mrs. Dennis, the defendant, that he should have and retain an interest in the land, to wit, that he should be supported by his daughrer-in-law during his lifetime. I think these contentions of the complainant are sustained by the proofs. It is an admitted fact in the case that Mrs. Dennis did, as a part of the transaction connected with the conveyance, agree to support and take care of the old gentleman during his lifetime. The other allegations of the complainant, to wit, the inflation of the amount of the indebtedness of the old gentleman to her for services and moneys advanced, and the fact that the immediate occasion of the conveyance was the sudden embarrassment of Charles Dennis, the maker of the notes, I think appear clearly from a consideration of the evidence in the cause.
The premises in question are situate about two or three miles from the village of Long Branch, and consist of an old and somewhat dilapidated dwelling house and barn, with six or seven acres of land, on which the old gentleman lived with his wife, and supported themselves by the produce of the land. The value of the land is differently estimated. For farming purposes it is worth very little now, but it has a considerable value for building purposes, by reason of its proximity to a summer resort village, and may be worth several thousand dollars. The wife of Edwin Dennis died about 10 years before the conveyance, and he continued to live upon the premises, renting out the laud and part of the house to a tenant for a few dollars per month, and living upon the rent and some assistance from his son Charles and daughter-in-law Mrs. Dennis. Previous to 1889, Mrs. Dennis had occupied and carried on a large boarding house in Long Branch, but in that year her husband purchased (and the family moved into) a storehouse and dwelling in Long Branch, and engaged in the shoe trade. The dwelling was a single front, the first floor being occupied by the store, and the floor above as a dwelling. They had several growing children,—two sons and two daughters,—who lived at home with their parents, and the boys swear that they paid board whenever they earned the money, generally in the summer time only, and in small amounts, from $3 to $5 a week. She had, at times, one or two additional lodgers, and some day boarders. The husband conducted the shoe store with moderate success. In 1879 the store and dwelling were mortgaged by Dennis for $1,200 to Jacob W. Morris, and another mortgage was given by him to the executors of Morris in August, 1893, for $1,000, making $2,200 in all. In 1888 he mortgaged the premises to a New York business corporation known as "James Chambers Limited," to secure advances of merchandise, and later on in the same year he mortgaged it for $1,000 to one Layton. In 1892 Chambers & Co. entered up a judgment by confession against Charles for $1,000. and in the same year a firm of Wallace, Elliott & Co. recovered a judgment against him for the sum of $418, and some cents, on confession. Wallace, Elliott & Co., in order to protect themselves, took an assignment from Chambers & Co. of its mortgage and judgment, and also of a chattel mortgage which was given upon the store goods by Dennis to Chambers to secure the same debt. So that Wallace, Elliott & Co. held three liens for their debt,—a mortgage on the land, a chattel mortgage, and two judgments and an execution. Charles Dennis, in December, 1893, had managed to pay Wallace, Elliott & Co.'s debt down to $1,100, and procured his brother, William A. Dennis, to advance the amount to them, and take an equitable assignment by a mere delivery of the several securities which Wallace. Elliott & Co. held. Charles went on in business from that time, seemingly without embarrassment, keeping down his interest, and keeping up a large stock of goods in his store, stated by his solicitor as a witness to be worth $1,500, and by his counsel in his argument to be worth at least $3,000, and by Charles in his testimony to be worth still more, when, in the month of August, 1895, the executors of Morris filed a bill in this court to foreclose their two mortgages; the money, as I suppose, being needed for the purposes of the estate, bringing in all these parties, except William A. Dennis, who, as we have seen, never had any written assignment of the mortgages and judgment. He came into the suit afterwards by petition. Before foreclosure commenced, Charles Dennis attempted to raise money by mortgage upon his house and lot, stated by his counsel to be worth $5,000 or $6,000, to pay these claims, and found himself embarrassed in so doing, because of difficulty in procuring discharges of record of these mortgages and judgments held by his brother, with the result that In January, 1890, his stock of goods was seized by his brother as chattel mortgagee and on execution, and held by the sheriff of the county, and the store itself was closed. About this time, as Edwin Dennis, the father, swears, Charles went to him (Edwin) and asked him to make a conveyance of the property to his wife, Sarah E.Dennis. She sent for the attorney, and gave instructions to draw the deed, but her husband took him out to his father's house to have it executed. Though the consideration mentioned was one dollar and other good and valuable considerations, Mrs. Dennis borrowed $100 of her son, and handed it to the attorney who attended to the matter, who handed it to Edwin Dennis at the time the deed was executed, and he handed the greater part of it back to Charles Dennis, who handed it to Mrs. Dennis. The deed was recorded at once, but no change of possession took place for several months. The old gentleman remained upon the premises precisely as he had done before, up to the fall of 1896. The notes held by the bank were renewed once or twice after the giving of the deed, Charles Dennis paying the discount as usual. In the fall of 1890 the old gentleman, then over 80 years of age, was brought into town, and went to live with the defendants, his son and daughter. The notes were permitted to go to protest, and suit was brought, and judgment recovered as before stated.
With regard to the advances made by Mrs. Dennis to the old gentleman, there is no doubt that, from the time of the death of his wife, or, at least, for 10 years before the conveyance was made, the old gentleman obtained the greater part of his living from his son and daughter, or one of them. He received the rent of the house and the income of the lands. He had, as they say, two suits of clothes a year, which Mrs. Dennis swears cost $12 or $14 apiece, but which the old gentleman swears cost $6 apiece. His shoes came from his son's store, undoubtedly. Mrs. Dennis swears that his clothing cost $150 a year, which appears extravagant, in view of the undisputed evidence in the cause. He got some money from time to time with which to buy food. He swears it came from his son and from his daughter-in-law; that he got money from both of them; and the trend of his evidence is that he got as much from his son as from his daughter-in-law. His daughter-in-law and her children swear that she furnished it all. She swears that she gave him $1, $2, and $3, a week. No account whatever was kept of it in any way, nor is there a single written entry or voucher produced. She swears that she paid a doctor's bill, amounting to a large sum, for attendance upon the old gentleman in one, and I think two, fits of sickness he had during this period; but no receipt for the doctor's bill is produced, nor is the physician himself, who is still living, called to substantiate it She swore most positively that she paid the taxes, but the proof of the collector is that her husband paid them. Mrs. Dennis and her children swear that she furnished him seven or eight tons of coal a year. He swears it was three or four; and I should think the smaller amount was ample to keep one fire going, if indeed, he had a fire separate from his tenant No account is produced from the books of the coal dealer of the amount furnished.
The statement by Mrs. Dennis of the sources from which she derived her money is not satisfactory. She, at one place in her evidence, inadvertently admitted that her husband furnished the family table. He certainly owned the house. The house did not afford room for many lodgers in addition to the members of the family. She had only one or two for a short time in the summer season. She claims, however, that she furnished meals to day boarders. She swears that she had saved up money from the proceeds of keeping boarders when she had a large boarding house, prior to 1889. She said she had $1,000 in a stocking leg laid away in her drawer, but no member of her family is produced to swear that this large sum of money was ever seen or heard of by anybody. And it is hardly necessary to repeat the remark which has been so often made by judges as to the dangerous character of such evidence. Notwithstanding her statements that she kept money in her pocket at all times, when this conveyance was about to be made, and it became necessary, as she supposed, to make some sort of a show of a consideration paid, she borrowed the money from one of her children for that purpose. During this whole period her husband was doing business on a scale and at a rate which would render it improbable that his wife would be willing to take her scanty earnings from boarding her husband and children to support his father when he could do it himself, or that he would permit his wife to do it. The judgment debtor's pecuniary situation at the time of his failure is important in this connection. His total indebtedness at the time his store was closed consisted, first, of his mortgage indebtedness, amounting to about $4,500 (and which his counsel swears was entirely paid by the sale of the house), and the complainant's four notes, amounting to less than $900, or less than $5,500 in all; and his assets consisted of the store and dwelling and stock of goods, which were worth from $7,000 to $8,000, if not forced on the market at a sacrifice. The amount of his accounts receivable for goods sold does not appear. I think that the statement that the wife, out of her savings, supported the old gentleman, and that the husband furnished nothing, is of itself highly improbable, and is met by contrary proof.
A litigation arose in the foreclosure suit of Morris v. Dennis, as to whether William A. Dennis, as assignee of the chattel mortgage and judgment, and having a lien upon the store goods, should be also entitled to hold his place as mortgagee of the land, and some time was occupied by that litigation. It was finally determined that he was entitled to a place as mortgagee of the land. In the meantime the goods were held in storageby the sheriff, instead of being sold, as it would seem from the present point of view they might and should have been, and were still held at the time of the hearing of this cause, and are stated to be, and seem to be admitted to be, by reason of depreciation and decay due to age, of no value beyond enough to pay for storage. I think it is fairly inferable that, having committed the imprudence of putting a chattel mortgage on his stock, and a large mortgage for advances on his real estate, Charles Dennis' credit with wholesale dealers in New York was not of the best, and be was working under disadvantageous circumstances, and probably could not, and in fact did not, get credit outside of the persons who held the chattel mortgage. Still, the circumstance that he was able to reduce that indebtedness down to $1,100, and carry a large stock of goods, shows that he was, under the circumstances, reasonably prosperous, and, if permitted to wind up his affairs in the ordinary way, would have been solvent. We have seen that the old gentleman swore that he received money from both Charles and his daughter-in-law, and this statement, taken in connection with all the circumstances and natural probabilities of the case, leads me to the conclusion, notwithstanding the mass of affirmative evidence that the wife furnished him with all the money he used to buy food, that the whole or the greater part of that money came directly or indirectly from the son.
It is hardly necessary to say that, so far as the old gentleman was supported by his son Charles, the real debtor, the indebtedness, if there be one, from the father to the son for support, cannot, as against creditors of the father and son, be made use of as a consideration for the conveyance by the father to the son's wife. To support such a transaction would be to permit the sun to make a present to his wife, as against his creditors, of a debt due from his father. There is proof, however, that the old gentleman had all the time been promising to give this property to his daughter-in-law in payment for her kindness and attentions to him. But then the circumstances under which the conveyance was made, viz. the pending foreclosure suit on the Morris mortgage, and the seizure of his stock of goods and closing his store by his brother at that time, are such as to show that it was the result of a contrivance by the husband to protect the property from the effect of his father's indorsement of his paper. The father swears that, shortly before the transaction, the son came out to see him. and asked him to make the deed. It is true that the wife sent for the conveyancer, and that she directed the deed to be made; but the husband took the conveyancer out to the old gentleman's house, and himself superintended the making of the conveyance. And it is by no means clear that the old gentleman would have done it at that time unless the son had particularly requested it. He swears that he made the conveyance at the son's request, and denies Mrs. Dennis' statement that it was done at her cotemporaneous request. It seems to me that the fact that the conveyance was made at the request of the son, at a time when the son knew that his father was contingently liable as indorser for him in the bank, and that the son was in embarrassed, though not necessarily insolvent, circumstances, is a clear indication of fraud. It is not necessary, in a ease of this kind, to show that the grantor himself intended to defeat his creditors. He was manipulated by his son and daughter-in-law, and did what they desired, and had no thought of the consequence, except an undertaking on their part to take care of him as long as he lived. Whatever of fraud is found is that of the son, the real debtor, and the wife, who desired to secure this property, arid protect it from the contingent liability of the old gentleman's indorsement. The wife does, indeed, swear that she knew nothing of her husband's embarrassment, or of the fact that her father-in-law was indorser on his paper; but this statement is simply incredible, in face of the admitted facts of the case.
My conclusion upon the whole case is that this deed cannot stand against this judgment creditor as an absolute conveyance. At the same time, however, I think there is sufficient merit in the wife's claim, particularly with regard to her services in taking care of the old gentleman, to warrant the court in allowing it to stand as a mortgage for a reasonable sum. The difficulty in the case is to arrive at a just amount. We have seen that no account whatever was kept of moneys advanced, and substantially no vouchers are produced. The whole transaction is a family affair, and this increases the difficulty. Taking the case altogether, the best estimate I can make is the sum of $800, and I will advise a decree that the conveyance in question shall be deemed and held to be a mortgage for $800, as against the complainant, without interest up to the date of the decree. Two modes of enforcing this decree suggest themselves: One is that the premises be sold by a master to pay the complainant's claim, with interest and costs, subject to a mortgage in favor of Sarah E. Dennis for $800; or, second, that the premises be sold free of the mortgage, and the defendant Sarah E. Dennis be first paid out of the proceeds $800, with interest from the date of the decree,—in either case, the balance, if any, to go to Mrs. Dennis.