Lawrence Bros. v. Heylman

Houghton, J.: The plaintiff is a judgment creditor of defendant Henry B. Heylman, and brings this action after return of execution to set aside a conveyance of real property made by him to his mother, appellant Harriet A. Heylman, or in the alternative to have, the deed from him to her declared to be a mortgage only. While plaintiff’s original action was pending against him, and shortly before entry of judgment thereon, defendant Henry conveyed to appellant Harriet, who resided with him, real property which the trial court found to be of the value of $40,000, upon which there were incumbrances, including back taxes and mechanics’ liens amounting to $8,420.46, and which constituted all the property, real or personal, that he owned subject to execution, for the expressed consideration of $4,000, the deed not being recorded until some months after its date. Defendant Henry answered but did not appear upon the trial. Appellant Harriet appeared, but was not sworn and produced no [850] witnesses. On the trial the plaintiff read the testimony of Henry ■ •given upon supplementary proceedings, and gave' the substance of his testimony in another action,, in. both of which lie detailed -the transaction which resulted in his conveyance t<> his mother, and from Which it appeared that no present consideration passed at the execution'of the deed, but that it was given for a past indebtedness claimed to be at least $5,000, which his mother had frequently importuned him to pay. ■ Proof of the value of the premises was made by showing that the city had taken about one-half for the purpose of widening an ' avenue, and made an award of $22,597 therefor, shortly after the • conveyance, . ' Independent proof was made that Henry, a lawyer, acted as agent for his mother in certain, matters including, the premises in question. The trial court found that the transfer was for a grossly inadequate consideration, and although absolute in form was not intended to be an absolute conveyance, but only as security for whatever indebtedness might be owing from Henry to appellant, and that the value of the premises above the incumbrances was greatly in excess .of such indebtedness, and that as to such excess the conveyance was made with intent to hinder, delay and defraud the plaintiff. ¡ ■ ■ From the judgment in conformity with this finding Harriet appeals, alleging that there is no proof that she was a party to,any fraud, or that the conveyance was not intended to be an absolute one,, or 'that any case was made against her which, called for explanation on her parti We think the plaintiff made a prima facie case of fraud against . the grantor, Henry. ' His declarations .were, of course, competent against, himself. Courts will scrutinize With care business transactions' between parent and child. (First Nat. Bank v. Miller, 163 N. Y. 167.) Inadequacy of price, when .great, is a badge of fraud. (Sandman v. Seaman, 84 Hun, 337; affd., 156 N. Y. 668; Briggs v. Mitchell, 60 Barb. 288.) A voluntary conveyance by one indebted at the'time is presumptively fraudulent. (Smith v. Reid, 134 N. Y. 569.) Fraud,'as. well as the fact of. notice: or knowledge, need not be established.'by direct evidence, but may be inferred from .circumstances. (Parker v. Conner, 93 N. Y. 119.) One is presumed [851] to have intended the natural and inevitable consequences of his acts, and when those acts point to an intent to defraud creditors, it is the duty of the court to find in accordance with the presumption. (Coleman v. Burr, 93 N. Y. 17, 31; Smith v. Reid, supra, 576.) The plaintiff having made aprima facie case of fraudulent intent on the part of appellant’s grantor, it was incumbent upon her, in order to relieve herself from the presumption of fraud on her part, to prove that she was a purchaser in good faith for a valuable consideration. Where a deed is executed with intent on the part of the grantor to defraud his creditors, a presumption arises that such intent was shared by the grantee, and it is incumbent upon the grantee to show that she was not only a purchaser for value and in good faith, but that she had no knowledge of facts which put her upon inquiry as to the grantor’s intent. (Gilmour v. Colcord, 96 App. Div. 358; Bailey v. Fransioli, 101 id. 140.) The appellant makes no point upon the argument that the declarations of her grantor were improperly received even as against herself, nor could she wéll do so in view of the character of the objection which she made to the reception of such evidence. The objection was not on the ground that the declarations were hearsay as against her, but only upon the ground that they were incompetent because not properly sworn to or authenticated. This objection was not well taken, and she not only neglected to raise the. point that they were hearsay as against her, but she afterwards introduced in her oAvn behalf all this evidence which she had previously objected to. It is said, however, that even if the declarations, are properly in the case they have no probative force as against her.- If they proved fraud on the part of the grantor, as we think they legitimately did, and if the burden of explanation was thereby cast upon her, it is of no moment whether they are of probative force against her or not. hi or do we think there was any error in the proof as to the value of the premises. Even if it cannot be inferred that the other half of the premises not taken in the condemnation proceedings Avere as valuable as the half which was taken, still there was a gross inadequacy of- consideration, even if the $4,000 mentioned in the deed was actually due the appellant. It is also urged that the court could not declare the conveyance to be a mortgage, but must set it aside absolutely or let it stand as a [852] valid .conveyance. . “ ‘ It is an established doctrine that a court of equity will. treat a- deed, absolute in form, as a mortgage when it is executed as security for a loan of money. That court looks beyond the terms of the instrument to the real transaction.’ ” (Mooney v. Byrne, 163 N. Y. 86, 92.) The court might have set aside.the" deed entirely. That it gave to the appellant a 'judgment more 'favorable than she was entitled to is not a cause of complaint on her part. .. Where one party submits to a judgment the other cannot be •heard .to insist that it shall be set aside because it.is unjust to. the one recovering it. (Rockefeller v. Lamora, 106 App. Div. 345.) Our conclusion is that the evidence was sufficient to sustain the findings of the court, and that the judgment must be affirmed, with costs. O’Brien, P. J., "and Clarke, J., concurred; Ingraham and McLaughlin, JJ., dissented. . .