Moran v. Morgan

LEARNED HAND, District Judge (after stating the facts as above). [1, 2] - We are not disposed to disturb the finding of the trial judge upon the value of the assets. If anything, we think that he overestimated them. -We may take the cash at $225 and the agreed-value of the real estate at $4,533. The value of the accounts was certainly not over $4,800; that is, what could be collected upon them [721] less the cost of collection, which at $300 was most modérale. There remained only the horses, wagons, harness, and the like, which the District Judge put at $8,000. These assets Charles H. Morgan swore on April 25, 1916, to be worth less than $3,000, and the chattels other than the horses realized at auction only $2,000. Even though we were to accept the value placed upon the horses by Davis at $175 apiece, we should have but $4,550, and it would be necessary to place a value upon the wagons, harness, etc., at $6,000 in order to establish a solvency. This would be three times what they sold for at auction, 2years later, and that, too, at a sale which was described as a good one. Nor can we see any reason to differ, with the District Court’s treatment of the testimony of Davis and Ives. At best their estimates were no more than intelligent guesses upon a subject-matter which is not susceptible of accurate ascertainment. In such cases everything depends upon the appearance and general credibility of the witnesses, and we can see no reason why' he should accept their estimates at so much higher values than the bankrupts chose to put upon them in the assignment schedules which they made at a time when they had no motive to undervalue, and when, indeed, they must have been disposed to put the value as high as in conscience they could. .Besides, this deed was kept off record for two years and more, for reasons which were not explained. The business at the time of its execution had for long been obviously going off, and must have been known to be doomed from the general conditions controlling it. All these factors we treat as of consequence. Finally, unless there is some very positive reason, we do not think we should disturb the finding below in such a case as this. Our own conclusions were certainly not so good as those of the District Court, which had an opportunity to measure the witnesses that came before it. We therefore accept the finding of insolvency. We say this without any consideration of the effect of the payment to Downing to revive the debt. That payment was made in 1914, a year after the conveyance, and it is hard to see how it could affect the situation in 1913. Yet if we assume that it did not revive the debt, the difference- is only $2,500 in the outstanding indebtedness on October 1, 1913, which still remained $19,615.25. The finding of insolvency is not in our judgment affected by that question. The deed of Charles V. Morgan created an estate for life in Albert B. Morgan subject to condition subsequent with remainders over. We need not consider whether, in view of the habendum to “Charles H. Morgan or his heirs and assigns,” it created less than a fee in Charles H. Morgan. New York Real Property Law (Consol. Laws, c. 50) § 240 (1). In any case Charles H. Morgan had at least an estate for life, which came into possession when the livery business came to an end by the assignment for the benefit of creditors in April, 1916. Moreover, the remainder, whatever the quantum of the estate, was alienable and was .subject to the claims of creditors. As such it could be the subject of a fraudulent conveyance and such it was except for the trust. [722] [3] Thus in our judgment the case turns on the validity of the defense set up in the fourth article of the answer, which alleged a pa-rol trust made at the time of the delivery of the deed, that the property should in effect be held in trust for the wife and children of Charles H. Morgan, and that trust under the statutes of New York was void. Real Property Law, § 242; Hutchins v. Van Vechten, 140 N. Y. 115, 35 N. E. 446. But it is nevertheless well settled that such parol trusts, although within the statute of frauds, are valid to suppon a conveyance which would otherwise be in fraud of creditors. The doctrine originated in a ruling of Vice Chancellor Leach in Gardner v. Rowe, 2 Sim. & St. 346, which Lord Eldon affirmed in 5 Russell, 258, and his authority seems to have been sufficient to give the doctrine general currency in this country. Silvers v. Potter, 48 N. J. Eq. 539, 22 Atl. 584; Lauch v. De Socarras, 56 N. J. Eq. 538, 39 Atl. 370; Carver v. Todd, 48 N. J. Eq. 102, 21 Atl. 943, 27 Am. St. Rep. 466; Richmond v. Bloch, 36 Or. 590, 60 Pac. 385; Desmond v. Myers, 113 Mich. 437, 71 N. W. 877; Hays v. Reger, 102 Ind. 524, 1 N. E. 386; Davis v. Graves, 29 Barb. (N. Y.) 480; Dunn v. Whalen, 66 Hun, 634, 21 N. Y. Supp. 869 (G. T. 5th Dept.). Whatever may be thought of it on principle, we regard it as too well settled on authority to be disregarded, and, in so far as the case turns upon it, we feel constrained to hold that the fourth article of the defense, if proved, would be sufficient. The cause will therefore be remanded, with instructions to try the fourth article of the answer, and, if it be proved, to dismiss the bill, but, if-the defendant do not succeed in proving it, to reinstate the decree for the plaintiff, without further proof. Footnotes [1] (gSiFor other cases sec same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes