Case v. . Phelps

Woodruff, J. In view of the clear and explicit language of sections 268 and 272 of the Code of Procedure, and the *167 repeated decisions of this court, in conformity with their requirement, many of which have been reported, it seems hardly necessary to say, that this' appeal brings to us, for consideration, questions of law only, and we must therein assume, that the facts are correctly found, and upon sufficient evidence. It is not stated, in the judgment of reversal, that the judgment below was reversed on questions of fact. (Crocker v. Crocker, 31 N. Y. 507; State of Michigan v. Phenix Bank, 33 id. 10; Peterson v. Rawson, 34 id. 370 ; Marco v. L. & L. Ins. Co., 35 id. 664; and several cases in which the point is incidentally mentioned, not yet reported.) We have no discretion; and, therefore, although the reason for reversing the judgment, assigned in the opinion of the Supreme Court, that the finding of the referee, that the deeds in question in this cause were voluntary and without consideration, is against the evidence, we are not at liberty to affirm the decision on that ground, however fully we might concur therein, if át liberty to examine the evidence upon that question. If this want of jurisdiction enables the plaintiff to avoid the effect of a proper order for a new trial, an order to which the defendants were justly entitled, and the avoidance of which may work injustice to them, it is not due to any defect in the law, but to the unfortunate omission to insert in the judgment of reversal (as the Code in such case permits) the ground of the judgment appealed from. Our statute (2 R. S. 137) declares, that a conveyance shall not be declared fraudulent and void, solely on the ground that it was not founded upon a valuable consideration. The same statute declares, that the question of fraudulent intent shall, in all cases, be a question of fact. The referee has, in this case, found, distinctly and affirmatively, that the conveyances in question, although without consideration, were made without any intent to defraud the creditors of the judgment debtor then existing. Under such a finding of fact, it would be difficult for a court of review, having jurisdiction to consider questions of *168 law only, to say that the conveyances in question were not, as to such existing creditors, perfectly fair and valid. And, if the referee had made a like finding in regard to contemplated future indebtedness and creditors in whose favor it might arise, then, however it might be competent for 'the Supreme Court to reverse it as against evidence, we, in reviewing a judgment of reversal, which was not placed upon the question of fact, would still be compelled' to say, that the finding is conclusive, and the conveyances valid, unless the other facts found showed a case of fraud in fact, which made the finding not only inconsistent, but erroneous in law. The referee here has not, in terms, declared, that, as a question of fact, he finds any fraud whatever; it does not appear by his findings, that, at the time of the conveyances, Phelps was not a man of wealth, and that, having respect only to his then condition and business, such provision for his wife and family (if provision for them was the sole object) would not be in all respects_ reasonable, fair and proper, leaving still in his hands an abundance, wherewith to pay all the debts which he owed, or contemplated as possible. Such a state of things, though not affirmatively found, might be presumed in support of what he did find, viz., that, although he owed seven hundred dollars, these conveyances were not made with intent to defraud his then existing creditors, and if not, then, as a question of law, the conveyances are valid as to them. How then stand the conveyances as to subequent creditors ? That a conveyance made for the purpose of hindering, delaying and defrauding future creditors is within the statute and void, caunot be .questioned. Such a conveyance, though the grantor be wholly free from debt at the time, is within the terms and intent of the statute. If the finding of the referee amounts to a finding to that effect, it is not vital to its support that it should be expressed in the terms of the statute. He has been careful in this case to confine his exoneration of Phelps from fraudulent intent to his purpose in regard *169 to existing creditors. As to subsequent creditors, he finds in other language what his actual purpose was. Without reciting the report at length, the facts found by the referee may be condensed into the following statement: On the 18th December, 1854, Elbridge Gr. Phelps, being the owner of land, and a hotel thereon of the value of $5,500, but mortgaged for $3,500, and being indebted otherwise to the amount of $700, voluntarily, without any consideration, conveyed the same, mediately, to his wife, without any intent to defraud his then existing creditors, but with a view to engaging in a new business, and to secure the property for the benefit of himself and family, in the event of losses occurring therein. The deed, by which he parts with the title, is not placed upon record, and he and his family continue to occupy the property without any change in the possession or apparent ownership. He thereupon borrowed money; the plaintiff, without knowledge of such conveyances, and believing him still to own the premises, became surety for the repayment. He engaged in such new business, and therein sustained losses, and became insolvent. The question thereupon arising, is this: Is the conclusion of the referee (declared by him to be a conclusion of law, from the foregoing facts), that such conveyance to the wife is fraudulent and void as against the plaintiff, erroneous % In other words, may a person about to engage in business which he believes may involve losses, with a view to entering upon such business, convey his property to his wife, voluntarily, without consideration, to secure it for the benefit of himself and family, in the event that such losses should occur % I cannot regard this question, as in substance, other than the inquiry, may a man, for the purpose of preventing his future creditors from collecting their demands out of his property then owned, and for the purpose of casting upon them the hazards of his success in the business in which he is about to engage, convey his property without consideration to his wife, in order to secure the benefit of it to himself and family, however disastrous such business may prove, and *170 Continue, in the possession, not even putting the deeds upon record, until after such subsequent indebtedness arises ? This, it will be seen, is not merely a question, whether a man may provide for his wife and family, and thereby protect them against the hazards of a business in which he is about to engage, but whether he may put aside property for the benefit of himself for such a purpose. For it is immaterial, that, if the property once became the lawful property of his-wife, it would not, under our present laws, be subject to his control. The legal efficacy of the arrangement, which he makes to secure to himself the benefit of the property which he puts aside, is not the test of the validity of the transaction as against his creditors; the inquiry is, whether the conveyance (whether the plan and scheme be unskillfully or skillfully devised) was made to defraud creditors. It seems to me, that the question above put can receive but one answer. The facts found constitute fraud, fraud in fact, in whatever terms it is expressed. They, in substance, are a finding, that, with intent to defraud creditors whom he expected to owe, and whom possible losses might render him unable to pay, he made the conveyance for the purpose of securing the property to himself and family, remaining in the possession of the property, and in the apparent ownership. This is fraud in fact; and none the less because the referee did not give it that designation in terms. (Stilman v. Ashdown, 2 Atk. 481; 2 Story’s Eq. Jur. § 356, and note; Taylor v. Jones, 2 Atk. 601; Parish v. Murphee, 13 How. [U. S.] 99 ; Black v. Nease, 37 Penn. 438; Savage v. Murphy, 8 Bosw. 97, and cases cited; Carpenter v. Roe, 10 N. Y. 227.) Upon the ground that the finding of the referee amounts to a finding that the conveyances were made fer the purpose of defrauding creditors, I think the order appealed from must be reversed, and the judgment entered on the report of the referee must be affirmed with costs. Ordered accordingly.