American Trust Co. v. Kaufman

• Decision Date: 22 November 1926
• Docket Number: 123
• Parties: American Trust Co. v. Kaufman, Appellant
• Court: Pennsylvania Supreme Court

135 A. 210

287 Pa. 461

American Trust Co. v. Kaufman, Appellant

No. 123

Supreme Court of Pennsylvania

November 22, 1926

Argued October 6, 1926

Appeal, No. 123, March T., 1926, by defendant, from decree of C. P. Allegheny Co., April T., 1923, No. 1526, on bill in equity, in case of American Trust Co. v. Sidonia S. Kaufman. Affirmed.

Bill to cancel fraudulent conveyance and fix lien on real estate. Before REID, J.

The opinion of the Supreme Court states the facts.

Decree for plaintiff. Defendant appealed.

Error assigned was, inter alia, decree, quoting record.

The decree of the court below is affirmed and the appeal is dismissed at the cost of appellant.

Wm Kaufman, with him Thos. F. Garrahan, for appellant. -- The court had no jurisdiction: North Penna. Coal Co. v Snowden, 42 Pa. 488; Kemmler v. McGovern, 238 Pa. 460; Am. Trust Co. v. Kaufman, 276 Pa. 35; Wallace v. Electric Co., 211 Pa. 473; Bird v. Sleppy, 265 Pa. 295.

There is not a scintilla of evidence of fraud against appellant, the grantee.

It is well settled both in Pennsylvania and in New York that when a husband is indebted to his wife, he may rightfully prefer her to his other creditors by either transferring property to her, or by confessing judgment in her favor, or otherwise: Benson & West v. Maxwell, 105 Pa. 274; Reehling v. Byers, 94 Pa. 316; Clark v. Douglas, 62 Pa. 408; Meckley's App., 102 Pa. 536; Lahr's App., 90 Pa. 507; Hawley v. Griffith, 187 Pa. 306; McPherran's Est., 212 Pa. 432.

Thereby the court below has attempted to impose personal obligations on appellant, and has ordered her property seized and sold to pay an obligation which she never owed. It is pure confiscation, and it is a deprivation of her property without due process of law, and is forbidden by the laws and Constitution of Pennsylvania, as well as by the laws and Constitution of the United States, particularly the 14th Amendment: Fry's Est., 270 Pa. 24; Sauders v. Racquet Club, 170 Pa. 265; Winch's App., 61 Pa. 424; Taylor's App., 93 Pa. 21; Hyde v. Baker, 212 Pa. 224; Kemmler v. McGovern, 238 Pa. 460.

Owen S. Cecil, with him William J. Barton, for appellee. -- Equity has jurisdiction and the bill was properly served: Fowler's App., 87 Pa. 449; Houseman v. Grossman, 177 Pa. 453; Chisholm v. Moore, 49 Pa.Super. 132; Handel v. Elleford, 258 Pa. 143; Phila. v. Kelly, 82 Pa.Super. 112.

As the wife's title was acquired for a nominal consideration, the conveyance was voluntary and presumptively fraudulent against creditors of the husband: Dalley's Est., 200 Pa. 140; Am. Trust Co. v. Kaufman, 276 Pa. 35; Smith's Est., 22 Lanc. L.R. 137; Chisholm v. Moore, 49 Pa.Super. 132.

No federal question is involved: Roller v. Holly, 176 U.S. 398; Arndt v. Griggs, 134 U.S. 316.

Before MOSCHZISKER, C.J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.

OPINION

MR. JUSTICE SIMPSON:

While heavily indebted to the American Trust Company (plaintiff below and appellee here) Gustave Kaufman, through an intermediary, conveyed to his wife (defendant and appellant) $30,000 worth of real estate, located in Allegheny County, Pennsylvania, for the expressed consideration of "$1.00 and other good and valuable considerations." Kaufman lived in New York; plaintiff sued him there and recovered a judgment for a portion of the indebtedness, and thereupon issued, in Allegheny County, a writ of foreign attachment against that property. We sustained the attachment (American Trust Co. v. Kaufman, 276 Pa. 35), but it was later dissolved because of his death. Plaintiff then filed the present bill in equity, averring that the conveyance to defendant was without consideration, and was made for the purpose of defrauding plaintiff, and prayed that the deed be cancelled, that defendant be restrained from disposing of or encumbering the property, that plaintiff's claim be declared a lien on it, and that a trustee be appointed to sell it, and apply the proceeds to payment of the debt. During all this time defendant also resided in New York, and could not be personally served with process, but, the real estate being here, the court below authorized service of the bill to be made on her, in the manner prescribed by the Act of April 6, 1859, P.L. 387; and it was so made.

Defendant appeared de bene esse, and challenged the right of the court below to authorize service upon her under the Act of 1859; and also denied its jurisdiction, as a court of equity, of the cause of action alleged in the bill. These objections being overruled, she appealed to this court, but the appeal was quashed, because the order objected to was interlocutory: American Trust Co. v. Kaufman, 279 Pa. 230. Defendant then filed her answer, and the case was tried and adjudicated in due course, resulting in a decree for plaintiff, from which the present appeal is taken.

The Act of 1859 was properly utilized for the purpose of serving defendant. The land being located within the jurisdiction of the court below, but defendant, who claimed to own it, being a nonresident, the statute says she may be served with process, in the way specified, in order that she may defend the action, if she sees fit so to do. The bill did not seek to have her held individually liable to pay the amount due plaintiff, but only that the land should be decreed to be liable for it. The claim being thus limited, the service upon defendant could properly be made in the way it was done: Coleman's App., 75 Pa. 441; Arndt v. Griggs, 134 U.S. 316; Roller v. Holly, 176 U.S. 398. It is quite possible that when defendant filed her answer and contested the case on its merits, she waived the right to contest the authority of the court to hear and determine the cause: Byers v. Byers, 208 Pa. 23. We need not pursue this matter, however, since the decree did not hold her personally liable for the debt. True, she was made responsible for the costs which accrued in her defense in the court below; and this was right. One who conducts a losing cause de bene esse, is just as much liable for the costs thereby caused, as he would be if it was defended generally, and as he would be to the costs on an unsuccessful appeal prosecuted de bene esse.

If the husband was alive, much could be said in support of the contention that equity has no jurisdiction because plaintiff has an adequate remedy at law, by the recovery of a judgment against Kaufman, a sale of the property as his, and an action of ejectment against her. But it has long been held that the death of the alleged fraudulent grantor, opens the door to equity, under its general jurisdictional head in cases of fraud: Appeal of Fowler, 87 Pa. 449; Houseman v. Grossman, 177 Pa. 453; Handel v. Elleford, 258 Pa. 143. What has been said obviates the necessity of considering the effect of section 9 of the Uniform Fraudulent Conveyance Act of May 21, 1921, P.L. 1045, 1047, which expressly states that a creditor whom it was intended to defraud, may "have the conveyance set aside . . . to the extent necessary to satisfy his claim," which, of course, could only be done by a proceeding in equity; or of our decision in Sauber v. Nouskajian et ux., 286 Pa. 449, 455, in regard to that statute. We should perhaps add, however, in order to avoid future misinterpretation, that the Act of 1921 was not called to our attention when Brackin v. Welton Engineering Co., 283 Pa. 91, was before us, and was not considered by us; hence that decision does not militate against the constitutionality of the statute.

Equally unavailing is appellant's claim that plaintiff cannot succeed because it did not proceed under the Act of June 7, 1919, P.L. 412, 413, to sue Gustave Kaufman's personal reresentatives within a year after his death, and then or later bring his "surviving spouse and heirs and the devisee, alienee or owner of the land" on the record, after which, if judgment was duly obtained, the land could be sold at sheriff's sale. Perhaps it would be sufficient to say that that statute has no relation to cases where real estate has been fraudulently conveyed by a debtor, since it was not "real estate of such decedent" when he died, and his "surviving spouse" not being among those who were intended to be defrauded by the conveyance, has no standing to object to the action of the creditor who was. Beyond that, however, this suit was indexed as a lis pendens in the manner provided by the Act of June 15, 1871, P.L. 387; and so, also, within a year after Kaufman's death, a sci. fa. was issued, in a suit brought by plaintiff against him in his lifetime, warning his administrator to become a party defendant, or to show cause why he should not be so made. This sci. fa. was also duly entered in the judgment index, and operated to retain the lien of plaintiff's claim.

Nor is appellant any happier in her contention that plaintiff cannot recover because of article IV, section 2, of the Constitution of the United States, and the 14th amendment thereto. Her claim upon this point is that "the court below has attempted to impose personal obligations upon appellant, and has ordered her property seized and sold to pay an obligation she never owed . . . and it is a deprivation of her property without due process of law." But, as we have already shown, no personal obligation has been imposed on defendant, except for the costs for which she was rightfully held liable; the service upon her was properly made; and, as between her and plaintiff, the property never was hers.

A few of the assignments of error relate to the evidence, and they may be considered in two groups. In the first it is alleged that a fatal defect appears, since there was no proof of fraud on the part of defendant personally. Where an adequate consideration has been paid for a conveyance, of course...