Babirecki v. Virgil

• Decision Date: 19 January 1925
• Docket Number: No. 31.,31.
• Parties: BABIRECKI et al. v. VIRGIL et al.
• Court: New Jersey Supreme Court

127 A. 594

BABIRECKI et al.

v. VIRGIL et al.

No. 31.

Court of Errors and Appeals of New Jersey.

Jan. 19, 1925.

(Syllabus by the Court.)

Appeal from Court of Chancery.

Suit by Mary Babirecki, by Stephen Babirecki, her next friend, and another, against Andrew G. Virgil and others. From decree for defendants (124 A. 454), complainants appeal. Reversed and remanded.

John V. Laddey, of Newark, for appellants.

Frank B. Bozza, of Newark, for respondents.

KATZENBACH, J. This is an appeal from a final decree of the Court of Chancery dismissing the complainants' bill. The bill was filed to set aside, as fraudulent, a deed of conveyance for premises located in the city of Orange. The deed was made on May 5, 1921, by Frances Virgil and Louis Virgil, her husband, to Mamie Virgil, the wife of Andrew G. Virgil. Mamie Virgil and Frances Virgil had been the owners of the property as tenants in common. The effect of the deed in question was to vest the entire ownership of the property in Mamie Virgil. The bill of complaint alleges that on April 2,

1921, the complainants, Mary Babirecki, by her next friend, Stephen Babirecki, her father, and Stephen Babirecki, individually, commenced an action in the Essex county circuit court against Andrew G. Virgil, Frances Virgil and Louis Virgil, as partners, to recover damages for injuries sustained by Mary Babirecki, an infant 3 1/2 years of age, as the result of an accident alleged to have been due to the negligence of the defendants, and also, to recover the damages sustained by the father, Stephen Babirecki, as a result of the accident to his child. The accident occurred on January 28, 1921. The case was tried on February 10, 1922, and resulted in a verdict in favor of the child for $4,000, and a verdict for the father for $1,068, which was subsequently reduced to $568. Judgments were entered, and executions in. the usual form, tested on April 5, 1922, were issued and delivered to the sheriff of Essex county, who was unable to find any goods, chattels, or lands of the defendants upon which to levy. The executions were returned by the sheriff wholly unsatisfied. The personal property of the partnership had been mortgaged to one Rose Cursi at the time of the conveyance to Mamie Virgil of the interest of Frances Virgil in the real estate. The deed of conveyance to Mamie Virgil was a warranty deed. The consideration stated in the deed was $1 and other good and valuable consideration. It had affixed thereto revenue stamps to the amount of $1. The answer filed by the Virgils to the bill of complaint set up that the deed of May 5, 1921, was made in pursuance of an agreement in writing made between Frances Virgil and Mamie Virgil, dated August 16, 1917; that the deed by which Frances Virgil became seized of an undivided one-half interest in the premises was not supported by any consideration from Frances Virgil and was conditional upon the payment by Frances of $2,500 within 3 years; that should Frances fail to pay this sum she was to reconvey her interest in the property to Mamie Virgil. The agreement of August 16, 1917, was produced at the hearing. It was written upon a leaf taken from an old account book. It was apparently drawn by an unskilled person. It bore upon its face the evidence of being a homemade document. A photostat copy of it is embodied in the record. The purport of the agreement appears to be that if Frances Virgil does not pay to Mamie Virgil interest annually at 6 per cent. on $2,500 and make payment to her of $2,500 within 3 years, then Frances is to deed her interest in the premises situate on Hill and Commerce streets, Orange, to Mamie. Counsel for the complainants attempted to make a spirited attack upon this writing, especially as to the authenticity of its date, by cross-examination of the parties thereto as to why the agreement had been drawn at home, the date when drafted, the origin of the paper upon which it was written, the ink and pens used in its drafting, the consideration, and the facts and circumstances surrounding its execution. These questions were objected to and the objections sustained by the learned Vice Chancellor who heard the case. The result of these rulings was that the complainants were deprived of having embodied in the record the facts and circumstances surrounding the making and execution of the agreement. The correctness of these rulings is made a ground of appeal.

In the conclusions filed, by the Vice Chancellor he says:

"The suit was started in the Essex county circuit court on the 21st of April, 1921. The deed was on May 6, 1921, and the judgment recovered was on February 10. 1922. Therefore, when the suit was started there were no creditors in existence because the outcome of the suit was uncertain, and, under the cases, in the absence of fraud, a person, even if he be assumed to be in failing circumstances, may prefer a creditor unless the creditor unites with the one making the conveyance to defraud."

This is an erroneous statement of the law. The statute to protect creditors and others against conveyances made to defraud them has been held in numerous decisions in this state to extend its protection to those who have valid actions for damages for torts. The leading case upon this subject is that of the Washington National Bank v. Beatty, 77 N. J. Eq. 252, 76 A. 442, 140 Am. St. Rep. 555. This court in that case, speaking through the late Judge Dill, said:

"The rule, both in England [Twyne's Case, 3 Coke, 82], and in this state, is that the statute extends its protection to all persons having a valid cause of action arising from torts as well as from contracts. Boid v. Dean, 48 N. J. Eq. 193, 21 Atl. 618: Post v. Stiger, 29 N. J. Eq. 554; Scott v: Hartman, 26 N. J. Eq. 89; Thorp v. Leibrecht, 56 N. J. Eq. 499, 39 Atl. 361. Nevertheless, a tort claimant, to place himself in the position of a lawful creditor or person competent under the statute to set aside a voluntary conveyance, must reduce his claim to judgment, and thus establish a legal debt against the fraudulent grantor. When his claim has thus been liquidated and established as a lawful debt, he may attack a voluntary conveyance made after the liability arose and before suit was brought, to defeat his debt, on the theory that such judgment when once obtained relates back and establishes a debt as of the time when the...