Babcock v. . Eckler

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 625 In the examination of this case it is only necessary, in our opinion, to ascertain whether the conveyance of the Brockport property and the transfer of the stock and bond to Mrs. Eckler in November, 1855, were or not valid and effectual to vest the same absolutely in her. For if we come to the conclusion that she was then the legal owner of the property thus conveyed and transferred, it follows as a necessary consequence that she is also the legal owner of the Phelps farm, which was subsequently purchased with a portion of the proceeds of this property. There can be no question that, since the passage of the acts of 1848 and 1849, Mrs. Eckler was the absolute owner of the property inherited from her sister in 1850, the same as if she were afeme sole, and that, although her husband had reduced to possession the $2,000 received on the sale of land inherited *Page 626 from her father, a court of equity would protect her rights therein, and make a just and proper settlement thereof on her. If her statement of the agreement between her and her husband is to be regarded as evidence, then in addition to these sums she was entitled to receive, absolutely in her own right, one-half of all the property acquired by them during marriage, and the total amount thus transferred to her in November, 1855, does not greatly exceed the sums confessedly due to her, and such half thus acquired. The conveyance and transfer, therefore, made in 1855, cannot be said to be voluntary. They were made to satisfy, in part, a just and conceded debt due to Mrs. Eckler, and to vest in her her share of the acquired property during marriage. They were made by a solvent man, who did not then know he was indebted to the plaintiff at all, and it is found, as a matter of fact, that at that time he owed no other debt whatever. If he had supposed that he was indebted at all to the plaintiff, and then knew the exact amount of his share of the losses on the corn adventure, that sum was then only about $900, and he retained to himself property valued over $10,000. It is very difficult to perceive upon what basis the allegation of an intent to defraud the plaintiff by such conveyance and transfer can be predicated upon these facts. John Eckler was undeniably indebted to his wife in at least the sum of $3,500, and conceding he owed the plaintiffs in 1855 $900, he retained in his possession of his whole property more in proportion to pay that debt than he conveyed and transferred to her in satisfaction of what was due to her. From these circumstances, it is impossible to say that there could have been any intent, in fact, to defraud the plaintiff. Does the law impute such fraudulent intent from the sole fact of such indebtedness of Eckler, conceding that he then knew such indebtedness to exist? It certainly cannot be argued that he can have disposed of his estate with intent to defraud the plaintiff, his creditor, unless he knew or had reason to suppose that he was such creditor. This subject has received the most careful and elaborate discussion in this State, and the *Page 627 principles which have been settled should be adhered to. The leading case relied on to avoid a conveyance, transfer, or settlement purely voluntary, is that of Reade v. Livingston (3 Johns. Ch., 481). In that case the conveyance was to a trustee for the benefit of the grantor's wife, and was voluntary, without any consideration or any prior indebtedness to her. It was urged, to uphold it, that the husband previous to the marriage had made a parol promise to settle $30,000 on his wife. The Chancellor regarded it as a voluntary settlement, unconnected with any ante-nuptial agreement, and he states the question to be, whether such a voluntary settlement after marriage, by a party indebted at the time it is made, be not, as against such creditors, absolutely fraudulent and void, and he was of the opinion that that question could be most satisfactorily answered in the affirmative. Jackson v. Seward (5 Cow., 67) was an action of ejectment, and the defendant claimed under a deed from his father to him, made when the father was indebted to the plaintiff's lessor. The deed, on its face, was for the consideration of $10,000; but the true consideration was certain bonds of the defendant, one to a sister for $2,277.50; one to another sister for $2,175, both bearing even date with the deed, and payable six months after the death of his father; and a bond in the penalty of $10,000 to his father, of the same date, conditioned to pay him an annuity of $500 in half-yearly payments, on which were indorsed, in the father's handwriting, the payment of these annuities in April of the years 1819, '20, '21, '22, and the only question made was whether the deed to the son was fraudulent in law. The Supreme Court held that it was, and that the conveyance was voluntary, being a deed of gift by the grantor to his children, and so intended by him; and the ruling of Chancellor KENT, in Reade v.Livingston, is quoted with approbation, that, "if the party be indebted at the time of a voluntary settlement, it is presumed to be fraudulent in respect to such debts, and no circumstances will permit those debts to be affected by the settlement or repel the legal presumption of fraud." A writ of error was brought, *Page 628 and the case was heard in the Court of Errors, and is reported in 8 Cowen, 406. The judgment of the Supreme Court was reversed, only one Senator dissenting, and the following points, may be regarded as ruled by the court in that case: 1. That, to make a deed voluntary, it must be without any the least valuable consideration. 2. That the deed in that case was not voluntary. 3. When a conveyance of land is upon any the least valuable consideration, the question whether it be fraudulent as to creditors belongs exclusively to the jury as a question of fact. 4. That a conveyance from a parent to a child, in consideration of love and affection, in other words voluntary, is not absolutely void even as to existing creditors, but the presumption that it is fraudulent may be repelled by circumstances; and this last proposition seems to be fully sustained after an elaborate review of all the English and American authorities on the point by ALLEN, Senator. In 1832, questions upon this conveyance and the gifts of the bonds to William Seward's children arose in the Court of Chancery, on a bill filed by Van Wyck to set them aside. The Vice-Chancellor held himself precluded, by the decision of the Court of Errors and the verdict of the jury in that case that there was no fraud in fact, from inquiring into the validity of the deed from William to his son; and he says, if it was an open question whether that deed was a voluntary conveyance and to be deemed constructively fraudulent, and whether the evidence in that case made out a case of actual and intentional fraud, he should have great difficulty in answering those questions affirmatively. But I think he distinctly affirms the rule of the Court of Errors, when, speaking of the gifts of the bonds by the father to his children, received from his son on the execution of the deed to him, he says, "If the donor is indebted at the time, such a thing may be prima facie evidence of fraud against a creditor, but this presumption may be repelled by proof or circumstances." The decree of the Vice-Chancellor was affirmed by the Chancellor (6 Paige, 62), not on the ground upon which the decision of the former was placed, that the judgment in the ejectment *Page 629 suit was a bar, but on the ground that there was no actual fraud in the case. The Chancellor says, "I presume it cannot be seriously urged, that when a parent makes an advancement to his child honestly and fairly, retaining in his own hands, at the same time, property sufficient to pay all his debts, such child will be bound to refund the advancement for the benefit of creditors, if it afterwards happens that the parent, either by misfortune or fraud, does not actually pay all his debts which existed at the time of the advancement." The decision of the Chancellor was affirmed by the Court of Errors (18 Wend., 375) — Senator MAISON, the only Senator giving an opinion voting with the majority of the court, stating that the case of Jackson v.Seward, decided in that court, destroyed the distinction which had been supposed to exist between fraud in law and fraud in fact, and that the principles there established ought to control the decision of the present case. But, by the provisions of the Revised Statutes, the question of fraudulent intent, in all cases, is to be deemed a question of fact and not of law, and it is declared that no conveyance or charge shall be adjudged fraudulent as against creditors or purchasers solely on the ground that it was not founded on a valuable consideration. (2 R.S., p. 137, § 4.) In Robinson v. Stewart (10 N.Y., 190), the grantor, at the time of the conveyance to his son, was hopelessly insolvent, and the facts disclosed authorized the court to declare the conveyance fraudulent as to creditors. I am unable to see anything in that case which adds strength to the positions taken on the part of the respondents. The case of Carpenter v. Roe (10 N.Y., 227), is, in fact, an authority for a reversal of the judgment in the present case. In that case, the conveyance procured by a husband to be made to his wife was confessedly voluntary and without consideration. The husband was at the time largely indebted, though in unembarrassed circumstances, and believed himself fully able to discharge all his debts and liabilities at maturity. Judge GARDINER, in delivering the opinion of the court, says, "It was sufficient that he was indebted, and that insolvency *Page 630 would be the inevitable or probable result of want of success in the business in which he was engaged. He could not, legally or honestly, in this manner provide for himself or family and cast upon his creditors the hazard of his speculation." Judge GARDINER cites with approbation the case of Hinds' Lessees v.Longworth (11 Wheat., 199), where the court held a voluntary deed not to be absolutely fraudulent. The court says, "If it can be shown that the grantor was in prosperous circumstances and unincumbered, and that the gift was a reasonable provision according to his state and condition in life, and leaving enough for the payment of the debts of the grantor, the presumptive evidence of fraud would be met and repelled." Applying these principles to the present case, I arrive at the conclusions, 1. That the conveyance sought to be set aside was not voluntary, but one founded on a good and valuable consideration, to wit, the indebtedness of the husband to the wife; 2. That, even if the conveyance was voluntary, it falls within the rule laid down in the case in 11 Wheaton, and which has been approved of by this court, that at the time it was made in November, 1855, the grantor was in prosperous and unembarrassed circumstances, the gift, under all the circumstances of indebtedness to the wife and the agreement to divide with her equally the earnings of their married life was a reasonable and proper provision for her and her children, the husband retaining for himself nearly an equal amount; and it being conceded, that enough and far more than enough was retained by him to pay off and discharge the debts which it was subsequently ascertained that he owed, or which at the time he might reasonably have supposed he owed. If fraud could therefore be presumed, the facts and circumstances sufficiently rebut it, and I can see no ground upon which the arrangement and conveyance made in November, 1855, can be impeached. Subsequent indebtedness cannot be invoked to make that fraudulent which was honest and free from impeachment at the time, especially in a case like the present, when the grantee has voluntarily appropriated the larger *Page 631 portion of the property conveyed to her, in payment and discharge of such subsequent debts, retaining only about the amount of the debt which is undeniably due to her. This court held, inRobinson v. Stewart, that it was lawful for the father to provide for the payment of the debt justly due from him to his son, and that, to the extent of that debt, he might lawfully be preferred. There could therefore be no objection, even if Mr. Eckler had been embarrassed and even insolvent in 1855, in his securing to his wife payment of the sums due to her, or in his transferring property adequate to secure its payment. He had a right to prefer her to his other creditors, if he saw fit so to do. But we think in this case the conveyance could be sustained, even although it had been voluntary and without any consideration, upon the authority of Hinds' Lessees v.Longworth (supra), and of Carpenter v. Roe, in this court. The order of the Supreme Court granting a new trial should be reversed, and the judgment of the special term should be affirmed, with costs.