Anderson v. Blood

• Decision Date: 23 March 1897
• Citation: 152 N.Y. 285,46 N.E. 493
• Parties: ANDERSON v. BLOOD et al.
• Court: New York Court of Appeals Court of Appeals

152 N.Y. 285

46 N.E. 493

ANDERSON

v.BLOOD et al.

Court of Appeals of New York.

March 23, 1897.

Appeal from supreme court, general term, First department.

Action by Horace Anderson, as substituted trustee under the will of Ramon Martinez Hernandez, against Isabell M. Blood and others, to set aside a conveyance for fraud. Judgment for plaintiff at special term was reversed by the general term (33 N. Y. Supp. 233), and plaintiff appeals. Affirmed.

This action was brought to set aside certain conveyances of the property known as ‘No. 11 East Twenty-Ninth Street,’ in the city of New York, as having been fraudulently made. The defendant John R. M. Hernz, as executor and trustee under the will of one Hernandez, on the 29th day of November, 1887, exposed the premises in question for sale, at public auction, and they were struck down to one Waddell at the price of $32,500. The defendant Melhado was the real purchaser, and Waddell had merely acted for him in the bidding. On the next day after this sale, they were advertised for private sale through one Sloan, a read-estate agent. Blood, a brother-in-law of the defendant Mrs. Isabell Blood, saw the advertisement, and directed the latter's attention to its language, which offered a sale ‘at a bargain to a quick bidder.’ Negotiations were commenced with Sloan, which resulted in a contract, on January 6, 1888, between the defendants Melhado and Blood, for the sale of the premises to the latter for the sum of $40,000. Melhado had procured a loan of $30,000 to be made to him upon the property by one Moller, and it was a part of the contract of sale that Mrs. Blood should assume the mortgage and the expense of the examination of the title upon the loan; Mr. Wandell acting as Moller's lawyer in making that examination. According to the requirement of the contract of sale, Mrs. Blood, upon its execution, paid, on account of the purchase money, the sum of $3,250. Prior to the execution of the contract, Mrs. Blood knew nothing about the title, nor about Hernz, the executor and trustee, or Melhado. Mrs. Blood employed Mr. Loben thal as her attorney for the transaction; but the arrangement was that she might rely upon the examination of the title, when made by Mr. Wandell. Upon the date fixed for the closing of the purchase, on January 24, 1888, the defendants Mrs. Blood, Melhado, and Hernz, with Wandell, Lobenthal, and Mrs. Blood's brother-in-law, met at the office of Mr. Wandell. The property had been sold subject to a lease made by Hernz, the trustee, to Melhado, which had nearly two years and a half to run, at a rental of $210 per month. Melhado agreed to cancel the lease upon the sale to Mrs. Blood, but desired to retain possession of the premises until May 1st. This Mrs. Blood refused to assent to. The closing of the purchase, which Melhado had made through Waddell at the auction sale, had been adjourned until the date for the closing of Mrs. Blood's purchase, on January 24th. Upon that occasion, a deed from Hernz, as executor and trustee, was delivered to Melhado, and Melhado delivered a deed to Mrs. Blood. At the same time there was delivered the mortgage for $30,000, made by Melhado to Moller. Mrs. Blood completed the transaction of purchase at that time by paying $6,750 in cash, and by assuming the mortgage for $30,000. This, with the amount paid upon the execution of the contract of sale, made up the whole consideration of $40,000. At the same time, Hernz received from Melhado the sum of $32,500, for which the premises had been struck down at the auction sale. Mr. Wandell approved of the title, and so assured Mrs. Blood, who paid his bill. After holding the title for about a year, Mrs. Blood conveyed the premises to her daughter, Miss Fogg, who is now the defendant Mrs. Koss, for the expressed consideration of love and affection, and subject to the mortgage, the payment of which Miss Fogg assumed. In the transaction which resulted in Mrs. Blood's agreement to purchase the property, she was represented by her brother-in-law, Mr. Blood, in so far as the negotiations for the contract of sale were concerned, by Mr. Wandell in the examination of the title, and generally by Mr. Lobenthal, the lawyer especially employed by her to look after her interests. Except upon the occasion of executing the contract of sale and purchase, and upon the occasion of the closing of the title, Mrs. Blood had no communication nor relations with any of the parties to the transaction. It is conceded that the proceedings prior to and upon the sale of the premises at public auction were legally and fairly conducted. Some three months or more before the auction sale, the executor Hernz had been charged personally with a deficiency of over $27,000, in proceedings for an accounting as to the estate in his hands. In 1893 he was removed as trustee, and the plaintiff was appointed, under a decree of the surrogate's court, trustee in his place. There was evidence upon the trial bearing upon the question of the market value of the property, from which it appears that, at the price of $40,000, Mrs. Blood though she was getting a good bargain. The evidence also shows that the relations between Melhado and Hernz were of an intimate character, and had subsisted for several years. They occupied adjoining offices, and were in more or less close business relations. Melhado was living upon the premises, and the lease had been made by the trustee Hernz to Melhado's wife, under her maiden name. It also appeared that the 10 per cent. required to be paid by the purchaser of the property at the auction sale was not in fact paid at the time, and that the auctioneer held Melhado's check representing the 10 per cent., until, upon the execution of Melhado's contract of sale to Mrs. Blood, the former received the deposit made on account of Mrs. Blood's purchase. The trial court decided in favor of the plaintiff, who entered judgment accordingly. On appeal to the general term of the supreme court, in the First department, the judgment of the special term was reversed, upon questions of fact and upon questions of law, and a new trial was ordered. The plaintiff then appealed to this court, giving the usual stipulation for judgment absolute in the event of an affirmance.

Martin and Vann, JJ., dissenting.

VENDOR AND PURCHASER-BONA FIDE PURCHASER-FRAUDULENT PURCHASE BY VENDOR-NOTICE.

1. A purchaser of real estate for a valuable consideration will be protected in his title in the absence of actual notice of fraud in the purchase of the property by the vendor, unless he has knowledge of facts which should, in reason, put him on inquiry.

VENDOR AND PURCHASER-BONA FIDE PURCHASER-FRAUDULENT PURCHASE BY VENDOR-NOTICE.

2. Defendant purchased certain real estate to which her attention was called by an advertisement. At the time of the closing of the sale, it came to her knowledge that the vendor had recently purchased the property at a public sale made by the trustee of an estate, at a price materially smaller than was paid by her, and that the purchase money had not been paid, the payment being completed from the proceeds of the resale, and the trustee, who was present, making conveyance at the same time. The attorney who examined the title for defendant found the trustee's sale to have been regular in all respects, and a company made a large loan to her vendor on the property at the same time, subject to which she purchased. Held, that neither defendant nor her attorney was chargeable with notice of collusion between her vendor and the trustee (who were both strangers to her) to defraud the estate which was the former owner, the price paid the trustee not being so...