Opinion
12-02-1895
RICHEY v. CARPENTER et al. HULSIZER'S ADM'RS v. SAME.
Oscar Jeffrey, for complainants. Wm. H. Morrow, for infant defendants. I. W. Schultz, for trustee. Martin Wyckoff, per se.
(Syllabus by the Court.)
Bills by Daniel Richey and by the administrators of William H. Hulsizer against Charles R. Carpenter and others to set aside a conveyance. Judgment for complainants.
Oscar Jeffrey, for complainants.
Wm. H. Morrow, for infant defendants.
I. W. Schultz, for trustee. Martin Wyckoff, per se.
BIRD, V. C. These bills are filed to set aside a conveyance alleged to have been made for the purpose of defrauding the complainants, who are judgment creditors of Charles R. Carpenter, the grantor. The conveyance was not absolute or unqualified. It was declared therein that the grantee was to hold the property, both real and personal, in trust for the payment of certain debts of the grantor. Certain creditors of the grantor, not all of his creditors, only were provided for. Among these creditors so provided for were the children of the grantor. These children were beneficiaries under the last will of their grandmother. Under that will, her son, the father of said children, enjoyed the income of a large portion (over $32,000) of the estate for life, which at his death was given and bequeathed to said children. The son, the said grantor, was appointed one of the executors. There was another executor, who had died before the transaction complained of. Before the conveyance the father had wasted a large portion of the principal so given and bequeathed to his children at his death. There is one provision in the deed which I think invites criticism, and renders the transaction obnoxious in the eye of the law, viz. the provision which prohibits the trustee from selling any of the property conveyed to him without the consent in writing of the grantor. This unquestionably hinders and delays his creditors other than those who are provided for in the conveyance and accept its provisions. A debtor has an undoubted right to prefer one creditor or many over others. He has a right to make disposition of all his assets for that purpose. But if he attempts to do this he must pay them, or secure them in such a legitimate manner as not to embarrass or hinder other creditors in the prosecution of their claims against any of his estate that may not be required to satisfy the demands of these whom he has preferred. The conveyance in question emphatically provides for that delay which is certainly hostile to the interests of every active creditor. It gives to the grantee the right to appropriate the rents and profits of the estate conveyed to the payment of his own claim and the payment of the other persons named. When the value of the estate is considered, and the large amount of indebtedness, it is seen at a glance that it will take many years before the rents and profits will discharge the growing interest and reduce all the principal. This fact shows design, to say nothing about the prohibition upon the conveyance by the grantee without the consent in writing of the grantor. I think it cannot be successfully denied but that these are such substantial embarrassments as are contemplated in the statute when it speaks of conveyances that are designed to hinder and delay creditors. The creditors who are not favored in the conveyance can only reach any interest in the property by first removing these obstacles. It was an attempt to dispose of all the debtor's estate for the benefit of four creditors. None of these can claim the protection of the court except the children of the grantor, they being beneficiaries whose estate this conveyance was designed, among other things, to secure.
I think the conclusion here reached as to all the creditors except the said infant children is fully sustained by the cases of Owen v. Arvis, 26 N. J. Law, 22; Bank v. Sprague, 21 N. J. Eq. 530, decided in the court of errors and appeals; Knight v. Packer, 12 N. J. Eq. 214; Walker v. Hill's Ex'rs, 22 N. J. Eq. 513; De Witt v. Van Sickle, 29 N. J. Eq. 209; Bank v. Conklin, 51 N. J. Eq. 7, 26 Atl. 678. To my mind, if this conveyance can be upheld, then it is only necessary for a debtor to place all his property in the possession of one or more individuals, with directions to manage the estate according to their own skill or judgment, and out of the profits to pay only certain of his creditors, giving them their own time in which to raise the money and to make the payment, in order to render the statute of frauds of no account. The cases above cited show that the courts intend to thwart every such scheme, and to maintain the integrity of the statute. After a careful survey of the case of Muchmore v. Budd, 53 N. J. Law, 369, 22 Atl. 518, I am perfectly satisfied that the material points in this case upon which I rely for expressing the views which I have are so radically different from the facts in that case as to separate the one very decidedly from the other. Therefore I think that these bills were properly filed as to all of the defendants except the children of the grantor.
It is insisted upon behalf of the infants that, since the grantor was in possession of large funds as trustee for them, and to which they would be entitled at his death, and as the conveyance was expressly made to secure them such funds, the rule above laid down with respect to other creditors does not apply. In support of this view, Bank v. Cummins, 38 N. J. Eq. 192, is cited (same case on appeal, 39 N. J. Eq. 577). That case shows that such conveyances may be good in part and bad in part. In that case an executor was directed to invest a sum of money for the benefit of legatees after the death of a tenant for life. Such executor was the owner of a tract of land, which he conveyed to his son in violation of the provisions of the statute of frauds, taking back from his son a mortgage to secure the payment of the amount of such legacies. While the conveyance in that case was declared to be fraudulent as to other creditors, the mortgage given to secure the moneys so held in trust was upheld, and to that extent the conveyance was allowed to stand. This case was affirmed in the court of errors and appeals. The case of Johns v. Narris, 27 N. J. Eq. 485, supports the view that a transaction may be good in part and bad in part. There are only two features of the case in hand which are in any respect different from the case of Bank v. Cummins, supra. One is the presence of a clause prohibiting a sale without the consent of the grantor, and the other is the absence of a reconveyance by way of mortgage from the grantee to the grantor to secure the trust moneys.
First is the absence of such reconveyance by way of mortgage fatal to the claim of these beneficiaries? The giving and acceptance of the mortgage in the case of Bank v. Cummins was simply a declaration of the trust, together with the giving of the security for its payment. That act perfected the lien, and fastened the money upon the land. The giving and acceptance of the deed declaring that the amount due these infants shall be paid out of the rents, profits, and proceeds of the sale thereof is not only an acknowledgment of the trust, but a declaration that it was made and received as a security for its payment it would not have been more complete, nor would the rights of the infants have been a whit more definitely fixed, had a mortgage been given, than they now are. The conveyance was made and accepted for the purposes indicated. Samuel accepted the title, and undertook the performance of the trust, and the cestuis que trustent can enforce the obligation arising therefrom. To this extent the case is so exactly like that of Bank v. Cummins, that the latter must control.
But does the prohibition against the trustees selling without the consent of the grantor render this conveyance ineffectual as to the beneficiaries? In other words, was such a title or interest in the premises given to the trustee for the infants that a court of equity can enforce it in their behalf? It does not admit of debate but that whatever interests in this respect were given to the trustee these infants are entitled to. To that extent the court can unquestionably go. In such case, the interests of the infant cestuis que trustent having been fixed, is the effort of the grantor, who was trustee for such infants, to place a rider upon the conveyance which none could remove but himself, anything more than a mere phantom in contemplation of equitable interests and rights? In other words, in reality has the trustee, who now holds the title, anything tangible or available as an asset, which this court can lay hold of, and convert into money? In my judgment, he has. The trustee, at the instance of these cestuis que trustent, can be required to enforce the trust, and Charles, the grantor, compelled to do that which would be reasonable; that is, to join in a conveyance of the fee of this property in case a sale should be ordered. Every presumption is that he would, in a reasonable time or manner, consent in writing to the conversion of this property into money; and that time is when the interests of all parties would be best subserved by a conversion. But it is the duty of this court, on behalf of and in the interests of these infants, to interfere, and determine this question of reasonableness. Without the least embarrassment, the court can accomplish this. It would be absurd for a court of equity to allow the title to stand in the name of a trustee, who avowedly accepted the trust for the purpose of protecting these infants, because it is claimed that it cannot brush away the limitations so put upon the trust by the debtor. The trustee, the father of these children, having acknowledged the possession of trust funds, and having made a conveyance in which he effectually creates a lien to the extent of such trust funds, a court of equity will have no difficulty in enforcing the trust.
But the fact that the amount due the infants is declared to be a lien under this conveyance does not make it necessary to dismiss the complainants' bill as to said infants. But further and other steps will be necessary to be taken in order to realize the value of this property to the infants. Such steps ought to be taken in their behalf. As the case now stands, they have only a lien, without proper proceedings to enforce it. The judgment creditors who have filed these bills and been sustained in that may proceed to sell, but they can only sell such interestsas the judgment debtor has in the property, subject to the liens of these infants. Since their judgments were obtained subsequent to the creation of the lien of the infants, they cannot, by their judgments, make an effectual sale of the entire fee. This can only be accomplished by the filing of a cross bill in behalf of the infants. This will enable them the more effectually to sustain their defense, to enforce their lien, and to convey by the aid of the court an absolute estate in fee simple. That the highest and best interests of all concerned, and especially of the infants, may be wrought in this suit, I feel it my duty to advise this course. I trust that Mr. Davis, recently appointed the trustee for the infants, will take prompt measures to accomplish what has been indicated.