Franklin Nat. Bank v. Freile

• Citation: 173 A. 93
• Parties: FRANKLIN NAT. BANK et al. v. FREILE et al.
• Decision Date: 19 June 1934
• Court: New Jersey Court of Chancery

173 A. 93

FRANKLIN NAT. BANK et al.

v. FREILE et al.

Court of Chancery of New Jersey.

June 19, 1934.

Syllabus by the Court.

1. On a creditors' bill to set aside the transfer of property as fraudulent, the burden to prove consideration is on defendant and the proof must satisfy the court of the bona fides of the transaction.

2. Beside proof that the transfer was without fair consideration, the burden is on complainant to show that defendant was, or was thereby rendered, insolvent.

3. There is no tenancy by the entirety in husband and wife in personal property, but a joint tenancy in them, including right of survivorship, may be created by use of proper words.

4. When husband and wife are possessed of personal property as joint tenants, either may sever their unity of interest without consent of the other; but if there be no severance during the life of both, the survivor will take the whole.

5. When title to personal property is placed in husband and wife, without words which will create joint tenancy, they hold as tenants in common.

Suit by the Franklin National Bank and others against Margaret S. Freile, executrix, etc., and others.

Decision in accordance with opinion.

Lewis G. Hansen, of Jersey City, for complainant Franklin Nat. Bank.

Benjamin Heyman, of Jersey City, for complainant First Nat. Bank.

Friedman & Baker, of Hoboken, for defendants Margaret S. Freile and others.

FIELDER, Vice Chancellor.

The Morsemere Realty Company became a borrower on its promissory note for $7,000 from Franklin National Bank July 23, 1926, and continuously thereafter was a debtor to the bank, borrowing further sums from time to time, until on August 1, 1932, it owed the bank $55,000. James H. Freile was president of the Bealty Company and of the bank and was an endorser on the Bealty Company's notes. On the last-named date the Bealty Company gave its two demand notes to the bank, both indorsed by Freile and others, one for $18,000 and the other for $37,000. On February 2, 1933, after demand on the maker for payment and refusal, the bank protested the notes and gave due notice of protest to Freile. At that time the $18,000 note had been reduced to $15,500, so that a total of $52,500 was then due the bank.

December 15, 1932, First National Bank of Jersey City loaned Morsemere Realty Company $4,500 on its promissory note indorsed by Freile and others, payable March 15, 1933. Freile died February 8, 1933, and when this note fell due, notice of protest was sent to his last residence. In the absence of proof that the notary knew of Freile's death, this was proper notice of protest. 3 Comp. St. 1910, p. 3746, 98.

Freile left a will on which letters testamentary were issued to his wife, Margaret A. Freile, on an undisclosed date. She died July 17, 1933, and letters testamentary on her will were granted August 1, 1933 (according to the answer), to Margaret S. Freile, and on August 22, 1933 (according to the evidence), letters of administration with the will annexed were granted to said Margaret S. Freile on the estate of James H. Freile. Franklin National Bank and First National Bank filed verified proof of their claims either with Margaret A. Freile executrix, or with Margaret S. Freile, administratrix c. t. a. under the will of James H. Freile and thereafter received notice that their claims were allowed as valid against his estate. Thus the two creditors have a standing to file a creditors' bill to set aside transfers of property alleged to have been made by Freile in fraud of creditors. Haston v. Castner, 31 N. J. Eq. 697.

After Freile's death it was discovered that on April 18, 1932, Freile had assigned to his wife his interest in 55 shares of paid-up stock of Franklin Building & Loan Association of the par value of $11,000 and that a new certificate therefor had been issued in her name. The evidence does not disclose in what name this stock had been originally issued, but the bill charges, and the answer does not deny, that prior to Freile's assignment these shares were evidenced by four certificates issued between September 25, 1929, and June 3, 1930, all in the name of "James H. Freile and Margaret A. Freile, his wife," and in counsels' briefs the certificates are referred to as having been so issued.

It was further discovered that by two assignments dated September 30, 1932, Freile had assigned to his wife his interest in twelve mortgages which had been executed to him and his wife as mortgagees, for a total of $65,000. The earliest of the mortgages is dated March 11, 1914, and the latest is dated March 2, 1931.

The two banks join in this suit against Margaret S. Freile as administratrix c. t. a. of James H. Freile and as executrix under the will of Margaret A." Freile, to set aside said assignments of stock and mortgages on the ground that they were made without consideration and with intent to delay or hinder complainants in collecting their said debts and are fraudulent as to complainants.

Attempt was made to show that the assignments were given in discharge of an antecedent debt due from Freile to his wife. The burden to satisfy the court of the bona fides of the transaction is on the defendants (Severs v. Dodson, 53 N. J. Eq. 633, 34 A. 7, 51 Am. St. Rep. 641; Bysakowski v. Blauvelt, 115 N. J. Eq. 501, 171 A. 500), and they have not sustained it. I am of the opinion that the transfers of building and loan stock and of the mortgages were voluntary and without consideration. This fact, under the old Fraudulent Conveyance Act (2 Comp. St. 1910, p. 2618, § 12), would have been sufficient to make the transfers fraudulent in law, without regard to whether they were made with intent to hinder, delay, and defraud creditors (Washington National Bank v. Beatty, 77 N. J. Eq. 252, 76 A. 442, 140 Am. St. Rep. 555), but under the Uniform Fraudulent Conveyance Act (Cum. Supp. Comp. St. § 44—145) it must also appear that the transfer of those assets rendered Freile insolvent within the meaning of the act (Conway v. Raphel, 102 N. J. Eq. 531, 141 A. 804; Kearny Plumbing Supply Co. v. Gland, ...