Opinion
03-23-1896
WANDS v. TAYLOR et al.
Peter Backes, for complainant. J. U. Joyce, for defendant Murphy. W. D. Holt, for defendants H. C. and W. T. Taylor.
Bill by Fred. S. Wands, assignee, against John Taylor and others, to subject certain property to the payment of debts. Decree for plaintiff.
Peter Backes, for complainant.
J. U. Joyce, for defendant Murphy.
W. D. Holt, for defendants H. C. and W. T. Taylor.
BIRD, V. C. The bill in this case is filed by a creditor who has obtained a judgment for the purpose of enforcing that judgment against certain real estate and personal property which it is claimed belongs to the defendant, or is held in trust for him. The title to the real estate was in him at the time and subsequent to the creation of the debt, but had been conveyed by him to another before the recovery of the judgment; and it is now in the name of a company called the Taylor Provision Company, or in the name of his son, who is a member of that company. The personal assets which the complainant is in pursuit of are the stock of that company, and the surplus or profits thereof, all of which, it is insisted upon the part of the complainant, is held in trust for the defendant John Taylor, and that the Taylor Provision Company was established for the sole purpose of carrying on a business in its name, but for the use and benefit of John Taylor. John Taylorand one Brandt were in partnership, and became indebted in a great many thousand dollars over and above their ability to pay. On or about the 14th of August, 1888, they made an effort to settle with their creditors by paying them 25 per cent. of their claims. Whatever may have been the result of this as to many of their creditors, the complainant and others did not accept of it, and never derived any benefit therefrom, so that large claims remain outstanding. With the view of making this composition with other creditors effectual, considerable real and personal estate was turned over to Edward H. Murphy and to the Mechanics' National Bank. The former had no claims of his own against Taylor & Brandt, but the latter had very large claims against them. Murphy undoubtedly took the property that was transferred to him in trust for the creditors of Taylor & Brandt. What became of a great deal of the property so transferred has not been satisfactorily established in this case, and therefore I do not find it necessary to give it any further attention. As intimated, certain real estate has been particularly mentioned in the evidence, and the title thereof traced, and the formation of the Taylor Provision Company, the amount of stock, in whose name the stock was and is, the value of the stock, and the amount of the surplus, to which I will more fully direct attention.
It is proper to say that for some purpose or other, but precisely what I am unable to decide, immediately upon the failure of Taylor & Brandt, and in connection with, or directly following, the initiatory steps at a composition with their creditors, there was a company formed, called the John Taylor Company. This continued in existence for about one year, and was followed by the Taylor Provision Company. I am justified in expressing the conviction that both of these companies were formed with the hope and expectation of rescuing enough from the ruins of the Taylor & Brandt partnership to keep the said corporation alive, and to enable John Taylor to establish a business in the name of the said corporations. He was the head and front of both. The conception of the scheme was his. His experience and ability were essential to their formation and management, and were more to the Taylor Provision Company than the capital that was invested. Indeed, the capital, without his experience and ability, would have been absolutely unavailing to any purpose. The other persons interested were mere agents. Upon the considerations just expressed this case in a large degree depends. It would be quite otherwise if the conditions were reversed. Had his wife, Mrs. Taylor, and his sons, furnished all the capital, established the business, and employed John Taylor, the husband and father, as a clerk or agent, such conduct would not have been open to criticism. See Tresch v. Wirtz, 34 N. J. Eq. 124. But there is nothing whatever in this case to show any employment, or any other agreement or understanding between the parties. Mr. Taylor, in speaking of all of his real estate except his residence, says that it was conveyed to the Mechanics' Bank, through Murphy, for the purpose of discharging to the extent of its value the claim of the bank against the firm, and that this conveyance included the title to the property on Perrine street. The conveyance of this property, although by a deed, and not by way of mortgage, was unquestionably as security. There was no accounting at the time, and no credit was given, so far as appears, by the bank to John Taylor & Co. But afterwards, when the bank sold the property, it credited the account to John Taylor & Co. with the amount which the bank realized. It is therefore perfectly manifest that the equitable title to this property remained in John Taylor. The evidence leaves this free from any doubt. John Moses was the president of the bank. John Taylor said to Mr. Moses: "I wish you would try to sell this property, if you must. Try to sell them to some friend of mine. That would give me an opportunity to buy them back for a small commission or profit. I remember I used the words 'small commission.' I remember he said he would see about it. So when I went down in the evening I called at Mr. Van Cleef's office, at the Windsor Hotel. I was quite familiar with him; and Mr. Murphy was in there also, and Mr. Murphy said, sort of aside, he said, 'Senator, I saw Mr. Moses, and he said I persuaded Ben to buy these properties.' Q. That happened the same day? A. Yes, sir; about 7 or 8 o'clock in the evening. And I said: 'Ben, you have got a very cheap lot of property. You will get quite a revenue out of those every year over and above the interest and taxes. I hope if I ever get in position to purchase them, you will let me have them at a low price.' 'Oh,' he said, 'that will be all right,' and so it went on. I had no more interest in the properties until the Taylor Provision Company came into existence, and we had occasion to buy part of it first, and finally, in self-protection, bought the balance. Q. I see by the date of the conveyance that the bank conveyed December 21, 1888, to Van Cleef. That was only five months after. A. I said it was some months. Q. That is the time? A. Perhaps you are right. Q. After that conversation with Mr. Van Cleef you felt satisfied that those properties would go to you whenever you wanted them? A. Mr. Van Cleef was a very warm friend of mine, and I felt he would never dispose of them without giving me an opportunity to purchase them. I felt that way. There was no understanding that he should do so. In fact, I never dreamed of buying them until Mr. Murphy told me he had bought them. Q. That was before the conveyance was made to Mr. Van Cleef? A. I suppose the conveyance was made the next day. Q. This conversation with Mr. Van Cleef was before the conveyance from the bank to Mr. Van Cleef? A. I think not. My recollection is that Mr. Moses was at my office about two o'clock, and he went away, thinking I was very much vexed; and I think he went directly to Mr. Murphy, and told him; and I think Mr. Murphy, who was a particular friend of Mr. Van Cleef's, persuaded Mr. Van Cleef to buy them; and when I came down I heard about it, and I suppose the conveyance took place the next day. Q. Mr. Murphy was also a particular friend of yours at that time? A. Yes, he seemed to be." Mr. Taylor was asked about his confidence in Mr. Murphy when he conveyed his property to the latter, to which he answered, "I was acting under the advice of Mr. Moses." He then conveyed all his property to Murphy, for which Murphy gave him no consideration. He says he knew, when he made the transfer of the title to the lands in question, that the title would ultimately go to the bank. When asked through whom he negotiated for the purchase of the title to the real estate referred to, he said: "I went and talked to Mr. Van Cleef about it, and I also, I think, wrote to Mr. Murphy about it. I had the impression from certain things I had heard that Mr. Murphy really controlled the property. I received this impression some three or four years after Van Cleef had bought the property, from something I had heard; and Iconcluded that after all Mr. Murphy really controlled the property, and the fact that he was present whenever any money was paid really confirmed that impression. Q. Didn't he control them for you? A. No, sir. Q. Did he get Mr. Van Cleef to hold them for you? A. I do not know. I never heard. Mr. Murphy was very close-mouthed about all these transactions, and always told me to ask no questions, and put nothing down on paper, and write no letters, and all that sort of thing. Q. You didn't ask any questions? A. I am telling you about my impressions, and those impressions were confirmed by what a creditor told me that Mr. Murphy told him. Q. And you did, without asking any questions, secure this property again from Mr. Van Cleef? A. When the Taylor Provision Company got in position to buy property, and wanted it, I went to Mr. Van Cleef, and told him we would like to buy that vacant property, and to put a price on it, and it was agreed that $1,500 would be a fair price. I borrowed the money from Thomas H. Allen, and bought it, and borrowed some more money of him, and put a value on it." He says that when the title to the Perrine street property was made by Mr. Van Cleef to his son Harry Taylor, the latter was in California, and the deed was delivered to John Taylor, the father. He says, I had it [the deed] in my desk a long time."
The testimony of Mr. Van Cleef shows very clearly, without much reading between the lines, what the interest of Mr. Taylor was, and also the understanding of all the parties as to the nature of Mr. Van Cleef's holding. He was acquainted with both Edward H. Murphy and John Taylor, and they were both his friends. On being asked through whom these properties were conveyed to him, he said he heard of them through one or two of the directors of the bank and Mr. Murphy. He says it was talked about that he might buy them at a reasonable price. He says that he considered that he bought them at a reasonable price. He bought them on knowledge that he obtained from Mr. Murphy. He thought they were cheap properties. Paid part in cash, and gave note for the balance of it, which note was indorsed by Edward H. Murphy; but could not say whether he gave a note for the whole amount or not. Mr. Van Cleef says he remembers an interview with Mr. Taylor about these properties, and probably more than one. He said that they were cheap properties, and that he would like to redeem them, and probably said that he wanted me (Van Cleef) to hold them. He says this was before he received the deed, but had bargained for it. He says that Taylor did not ask him to keep the lots for him, and he did not feel under obligations to do so. But he says he did keep them, and he did reconvey them, as Taylor requested him to do. 'The first conveyance he made at the instance of Mr. Taylor was to the Taylor Provision Company, in April, 1891, and the Front street property in March, 1892; and the conveyance of the balance was in August, 1893. The last-named conveyance was by quitclaim deed simply. Whether the two former conveyances were by instruments of the same character I cannot say, as they are not before me. Mr. Van Cleef says that he supposes the payments which he made upon the note from time to time as it fell due were made out of the rents that he received for the property. He could not say whether he ever made any payments on said note out of any other moneys than that which arose from said rents. Mr. Van Cleef says that Taylor talked with him about the conveyance of the lot which was conveyed in April, 1891, but is not clear whether he conveyed it to the provision company at his request or not. He says that he does not think that the Front street lot was conveyed to Harry Taylor at the request of the latter; but it will be remembered that Mr. Taylor himself says that when that conveyance was made his son Harry was in California, and that he took the deed, and kept it in his desk for a long time. He says that he presumes that Mr. Murphy requested him to make that conveyance to Harry, or that Mr. Taylor did; he really cannot say.
The Taylor Provision Company was organized September 4, 1889. John Taylor's wife was the principal stockholder. He says the capital stock was nominally $50,000, and that only $2,910 were actually paid in, and that that was paid in principally by his wife. John Taylor had taken out a policy of insurance; and at the time of his marriage, about the year 1800, assigned it to his wife. This policy was for $5,000. Mrs Taylor consented to sell this policy, and realized about $2,400 for it. His two sons had a policy of $5,000, and there had been only two or three payments of premiums upon their policies, and Mr. Taylor says, "We realized $2,910, and that was the capital stock of the Taylor Provision Company." He says, "I paid nothing for my share." The insurance policies of the boys, he says, brought them $200 apiece or more. "But they simply took a share with me, and my wife took 47 shares, for which she gave her duebill, which we still have in the safe, for the difference between her insurance check and the amount of stock that was issued to her. She died shortly after that." Mr. Taylor was president, treasurer, and general manager of this company. He said: "I am at the head of the business. I might say I have chief control. We consult, of course, about the conduct of the business. The boys rather look to me to lead off."
Mrs. Taylor died in March, 1890. About two months before this time she assigned and transferred 23 shares of her stock to each of her sons. The remaining share she retained in her own name. All this was done at the instance of her husband. There is nothing in this case to show any arrangement, agreement, or understanding between these partiesas to what accounting, if any, there should be, nor as to what compensation, if any, either should have, nor as to what should be done with the profits. John Taylor paid premiums on the policy due to his wife. One of these premiums is paid after the creation of the debt of the complainants. That payment was $175. It is perfectly clear that the Taylor Provision Company was conceived, organized, and put into operation by John Taylor. There can be no doubt but that his wife and his sons parted with the policies of insurance named at his instance. He says that he told his wife she had better assign her share of stock to her sons, which she did, with the exception of one share. She assigned to each 23 shares, and this was done before the concern had been in operation six months. It does not appear that the sons had anything whatever to do with this assignment of stock. When the whole testimony comes to be reviewed, it will be very manifest that too much force or significance cannot be given to the statements of Mr. Taylor that he was president, treasurer, manager, head and front of the Taylor Provision Company. In other words, it would have had no existence, and could have had no continuing prosperity, without his skill, energy, and judgment. These things being so, has he such an interest in the $30,000 of surplus as can be reached in equity by his creditors? I think there can be no doubt but that his creditors are entitled to relief against this fund. In Quidorfs Adm'r v. Pergeaux, 18 N. J. Eq. 472, the court said: "While a husband may, as against his creditors, allow his wife to have for her separate use the earnings of herself and of the labor of their minor children, he may not give to her, to be invested in her own name, the proceeds of his own business, skill, and labor. Else it would follow that any married man who becomes embarrassed could transfer his business to his wife, and continue it himself in her name, with all his skill and ability: and, if she only took, or seemed to take, some part in the transaction of it, might invest the proceeds of his labor and management in the name of his wife, and set his creditors at defiance. The law was intended to protect the property and earnings of a married woman, and not the property or earnings of a husband against his creditors; and when, as in this case, they mix up the earnings of the wife with those of the husband, so that they cannot be separated, the husband cannot make a clear, distinct gift of his own earnings to his wife, and they remain, as at common law, his property." Page 480. In the case of Bank v. Sprague, 20 N. J. Eq. 13, 24, the court said: "The fact that Sprague devoted his time to rebuilding, fitting up, and keeping this hotel, and in a measure abandoned all 'other business for it, shows that it was intended as his business, not hers [his wife's], and that it was in her name to prevent his creditors from reaching it." While on other points this case was reversed (21 N. J. Eq. 530), on the point just referred to it was not.
These resolutions of the court do not in any wise interfere with the right of a married woman to employ her husband as her agent in the management of any separate business which she sees fit to carry on in her own name, to the same extent as she might employ any other person. Nor do they imply that a married man who is involved in debt must necessarily labor, if he labors at all, in the interests of his creditors. There can be no pretense that the business of the Taylor Provision Company was that of the wife and her sons. It was carried on, it is true, in the name of the Taylor Provision Company; but that was only a cover of so shadowy a nature as to be dissipated the very moment it is inspected. Mrs. Taylor had no part, lot, or interest in it, except as the dictation of her husband might result to her comfort or advantage. It was at his instance that she sold her insurance policy, and likewise that she transferred 23 shares of her 47 shares of stock to each one of her sons. In my judgment, the real estate above named, the title to which was conveyed by Mr. Van Cleef to the Taylor Provision Company and to Harry Taylor, is subject to the judgment of the complainant; said judgment, however, being subject to all bona fide liens or incumbrances. Subject to the right of bona fide creditors of the Taylor Provision Company, the assets of said company are liable for the payment of the $175 which John Taylor paid as premium upon the insurance policy held by his wife, to the extent of her pretended interest in said assets. The one share of stock which was retained by Mrs. Taylor is also subject to the lien of the judgment in favor of the complainants; this being so since John Taylor, under the law, is her next of kin; because of which it follows that his creditors are entitled to claim the same right or interest therein that the law gives to him; nor will his negligence to claim the same prevent them from the pursuit of their rights. So, likewise, is the $30,000 surplus, or whatever such surplus may really be, subject to the lien of the complainant's judgment, so far as said surplus is represented by 48 shares of the stock, 1 of which was and is in the name of John Taylor, 47 of which were originally in the name of his wife, 1 of which is still in her name, although by law, as just observed, it belongs to John Taylor, and 23 of which are now in the name of each of his sons, as above stated. As stated, the bona fide creditors of the Taylor Provision Company have the first lien upon these assets. The view of the case which has led me to these conclusions necessarily deprives Mrs. Taylor during her lifetime, and her sons since her death, of any interest upon the fund belonging to her and which was used by the company. In the first place, there was nothing to show that it was a loan; and, in the second place, it is on every hand manifest that the household of Mr. Taylor was suppliedout of the profits of this business. Of course the personal assets must be applied before the real. I will advise a decree in accordance with these views, with costs.