Hart, Schaffner & Marx v. Koch

• Decision Date: 25 January 1933
• Docket Number: 69-1932
• Parties: Hart, Schaffner & Marx v. Koch, Appellant
• Court: Pennsylvania Superior Court

164 A. 369

107 Pa.Super. 528

Hart, Schaffner & Marx v. Koch, Appellant

No. 69-1932

Superior Court of Pennsylvania

January 25, 1933

Argued November 15, 1932

Appeal by defendant from decree of C. P., Mercer County, April T. 1927, No. 4, Sitting in Equity, in the case of Hart Schaffner & Marx, a corporation, v. Fannie Koch.

Bill in equity to set aside a conveyance of real estate. Before McLaughry, P. J.

The facts are stated in the opinion of the Superior Court.

The court annulled the conveyance. Defendant appealed.

Error assigned, among others, was the decree of the court.

Affirmed.

Thomas H. Armstrong, for appellant.

Louis J. Wiesen, and with him Roy Neville, for appellee.

Before Trexler, P. J., Keller, Gawthrop, Cunningham, Baldrige, Stadtfeld and Parker, JJ.

OPINION

Baldrige, J.

This bill in equity was filed to annul the conveyance of two properties from a husband to his wife, without fair consideration, for the purpose of defrauding creditors, at a time when the property remaining in grantor's hands was insufficient to pay his debts. The chancellor found for the plaintiff, and his findings of fact and conclusions of law were sustained by the court sitting in banc. Our duty is to determine whether there was sufficient competent evidence to support the decree entered.

P. J. Koch, through an intermediary, on July 17, 1923, conveyed to his wife, for the consideration of $ 2, a piece of land that he acquired from Mary Lee et al., by deed, dated April 5, 1919, located in the city of Sharon, Mercer County, and known as lots 3 and 18 in the Charles S. Flowers "Woodrow Court" Plan of Lots, and property acquired from the Farrell Realty Company on April 6, 1921, located on the southwest corner of Haywood Street and Lee Avenue, in the borough of Farrell, Mercer County.

The defendant's answer alleges that she had originally purchased the real estate so conveyed with her own funds, and that the placing of the legal title in her husband was due to error, accident and mistake. She complains, in her first assignment of error, of the finding that P. J. Koch was insolvent at the time he transferred the property.

The Uniform Fraudulent Conveyance Act of May 21, 1921, P. L. 1045, No. 379, § 1 (39 PS § 351), provides that a "creditor" is a person having any claim, whether absolute, fixed or contingent. Under § 2 (39 PS § 352), a person is insolvent when the present, fair, salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured. Section 4 (39 PS § 354) provides that every conveyance is fraudulent as to creditors, if the conveyance is made without a fair consideration. Under § 7 (39 PS § 357), every conveyance made with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.

P. J. Koch was engaged in the plumbing business, and was the owner of the legal title to the property in Farrell, which was devoted to business purposes. He guaranteed, by writing, the payment of indebtedness, incurred by Strizzi and Wise, tenants, to certain whole-sale creditors. During 1923, these tenants became delinquent in substantial amounts in their accounts and they subsequently went into bankruptcy. The court below found that the conveyance was made without fair consideration, and that the grantor was solvent on July 17, 1923, the date of the conveyance to his wife, and that he was indebted as follows:

"Colonial Trust Company

$ 1440.80

B. Kuppenheimer & Co.

1200.00

Michaels, Stern & Co.

1074.11

Hart, Schaffner & Marx

701.17

B. Kuppenheimer & Co. paid in Oct. 1923

1300.00

Michaels, Stern & Co. afterwards paid by

Strizzi & Wise

231.83

Total

$ 5947.91"

The appellant contends that the indebtedness on the date of the conveyance amounted to but $ 4,253.39, as $ 1,300 of the amount of indebtedness found by the court was voluntarily paid by Koch in October, and that $ 231.83 was collected by Michaels, Stern & Company from the bankrupt estate of the tenants. These payments did not reduce his "probable liability" or "contingent indebtedness," as of July 17, 1923, which is the date that governs us in determining the question of his financial status.

Nor does the allegation, that included in the indebtedness are some items, which are comparatively small, representing purchases made after July 17, 1923, when Koch had notified the creditors of Strizzi and Wise that he desired to cancel his contract of guaranty, affect the situation, as judgments were obtained by these creditors for the amounts found due by the court; and they are conclusive.

The appellant takes the position that Koch was solvent at the time he made the conveyance, as the aggregate amount of his property, at a fair value, was sufficient to pay his creditors: Cherry v. Union National Bank, 87 Pa.Super. 114. There was evidence that before July 17, 1923, Koch had sold his business for $ 4,200, which, after paying an indebtedness of $ 900, left him $ 3,300; but there was no proof showing what he did with the money, or that it was available to pay his debts when the transfer was made. The appellant testified that her husband collected, on his book accounts, $ 5,000 after July 17, 1923. The court accepted her statements, and found that the uncollected accounts were worth an additional $ 500. There was testimony upon the part of the appellant that Koch had an equitable interest in what is known as the Ullom property, which was worth $ 1,000. This interest was subsequently sold at an orphans' court sale for $ 100, which the court found was the value of Koch's interest therein, making his total assets $ 5,600. This amount was insufficient to pay the entire amount of the creditors' claims.

The appellant further contends that the land, when purchased, was unimproved; that the buildings were constructed by her with her individual funds; that, therefore, the consideration was sufficient, and the conveyance was made to her as a creditor in good faith, regardless of the alleged insolvency: Peoples Savings & Dime Bank & Trust Co., v. Scott et al., 303 Pa. 294, 154 A. 489.

The court found on sufficient evidence that the appellant did not have an individual estate during her entire marital life of more than $ 1,300. The business block in the borough of Farrell cost between $ 30,000 and $ 31,000. The written contract for its construction was made by her husband and it was he alone who executed the leases and collected the rents, which were deposited in the bank in his individual account. He paid no rent for the portion of the building he occupied and generally exercised exclusive ownership over the property. The appellant stated that she obtained the money to pay for the erection of the building through the sale of another property, from which she derived $ 25,000, which was deposited in the joint account of her husband and herself. Her recollection was defective as it was shown that the account was in the name of her husband alone. There was ample testimony to support the court's findings that it was not the wife's money that purchased the land or paid for the improvements.

The appellant complains of the...