Loos v. Wilkinson

• Decision Date: 02 October 1888
• Citation: 110 N.Y. 195,18 N.E. 99
• Parties: LOOS et al. v. WILKINSON et al.
• Court: New York Court of Appeals Court of Appeals

110 N.Y. 195

18 N.E. 99

LOOS et al.

v.WILKINSON et al.¹

Court of Appeals of New York.

October 2, 1888.

Appeal from supreme court, general term, Fourth department.

The plaintiffs, judgment creditors, with executions returned unsatisfied, of J. Foreman Wilkinson and Alfred Wilkinson, brokers in Syracuse, under the firm name of Wilkinson & Co., commenced this action to set aside, as made with intent to hinder, delay, and defraud their creditors, a deed of certain valuable real estate, dated May 5, 1884, executed by J. Foreman and Alfred to their brother John Wilkinson; a mortgage upon the same real estate, dated November 24, 1884, executed by John to Charles P. Crosby; and a general assignment, with preferences, for the benefit of their creditors, made by J. Foreman and Alfred to Charles E. Hubbell, dated December 9, 1884; and all recorded in the clerk's office of Onondaga county on the latter day. The action was put at issue, and brought to trial at a special term; and the court found the deed, mortgage, and assignment fraudulent, and gave judgment ordering them to be set aside, and for other relief. That judgment having been affirmed at the general term, certain of the defendants have appealed to this court.

FN2 On the subject of good faith and knowledge and note; Benson v. Maxwell, (Pa.) 14 Atl. Rep. 161, and note.

Louis Marshall, for appellants.

Frank H. Hiscock, for respondents.

EARL, J., ( after stating the facts as above.)

The court at special term found that the deed executed to John Wilkinson by his brothers, J. Foreman and Alfred, for a consideration named therein of $140,000, covered real estate worth $375,000, which was subject to two mortgages, amounting at the time to $93,600; that the deed was mostly voluntary, and without consideration, and was executed, delivered, and accepted when the grantors were insolvent, to the knowledge of all the parties thereto, and with the intent of each and all of them to hinder, delay, cheat, and defraud the plaintiffs, and the other creditors of the grantors; that the mortgage executed by John Wilkinson to Crosby was made with the same fraudulent intent, and was without any consideration; and that the assignment for the benefit of creditors was made by the assignors with the same intent, and for the like fraudulent purpose. The evidence upon the question of the fraud affecting the deed, mortgage, and assignment is intricate and voluminous. The findings of the trial judge in reference to it are minute and part cular, and his opinion delivered after the trial is a very full, able, and exhaustive discussion of the facts, and demonstrates that his findings have ample support in the evidence. The facts were again carefully reviewed in the opinion pronounced at the general term, and the two opinions render any further discussion of the evidence now unnecessary. It is sufficient for us now to say that we have carefully scrutinized the evidence in the light of the able arguments submitted to us, and we are unable to say that any material finding of the trial judge is unauthorized by sufficient evidence. Our attention may therefore now be confined solely to the rulings of the judge upon such questions of law as we deem of sufficient importance to require particular consideration.

The plaintiffs were not in a position to assail the deed and mortgage without also effectually assailing the assignment. So long as that had force and operation, the right to assail the deed and mortgage rested in the assignee under the act. Chapter 314, Laws 1858; Spring v. Short, 90 N. Y. 538;Crouse v. Frothingham, 97 N. Y. 113. Hence it was proper for the plaintiffs upon the trial to give any competent evidence which had a material bearing, as against any of the parties, to establish the fraud in either of the instruments. It is only by virtue of a valid assignment that an assignee is vested with the right, under the act of 1858, to assail fraudulent transfers of property by his assignor. If the assignment itself is for any reason fraudulent and void, it may be set aside, and then all power of the assignee under it ceases. An innocent assignee may not be permitted to act under a fraudulent assignment. The provision of law (3 Rev. St. 7th Ed. p. 2329) that every conveyance or assignment made with the intent to hinder, delay, or defraud creditors is void, is still in full force and operation, notwithstanding the act of 1858, and the various acts relating to voluntary assignments for the benefit of creditors. It may be that in a particular case an honest assignee may, under the acts referred to, undo all the fraudulent acts of the assignor preceding and attending the assignment, and the preparation of the schedules under it. Yet, if the assignment was made by the assignor with the fraudulent intent condemned by the statute, the assignment may be set aside at the suit of judgment creditors, and all powers of the assignee, however honest he may be, taken away. In assailing a voluntary assignment for the benefit of creditors, it is important only to establish the fraudulent intent of the assignor, (Starin v. Kelly, 88 N. Y. 418;) and when that has been established the assignment may be set aside, and creditors may then pursue their remedies and procure satisfaction of their judgments as if the assignment had not been made. The learned counsel for the appellants lays great stress upon the distinction between fraud upon the assignment and fraud in the assignment. While such a distinction doubtless exists, as a solvent of any questions involved in this case it is of no importance. When there is fraud in an assignment it may be assailed by creditors and set aside as fraudulent. When there is fraud upon an honest assignment by prior fraudulent transfers of his property by the assignor, or by a subsequent withholding of property from the assignee, or in the schedules required by law to be made, the remedy is with the assignee, who may avoid the fraudulent acts, and secure all the property of the assignor for administration under the assignment. Frauds upon the assignment, either by the assignor or assignee, do not necessarily avoid the assignment, but they may be considered in determining whether there was any fraud in the assignment, and frequently furnish very convincing, and sometimes conclusive, evidence upon that point.

After the execution of the deed to John Wilkinson by his brothers it was kept from record and carefully concealed from the public. All the property granted remained in the possession of the grantors, who collected and received and used the rents therefrom as they had before, until the execution of the assignment on the 9th day of December; and the property continued to be assessed to the grantors, and was insured by them in their names, and all this was done without any notice of the change in the title to the tenants, assessors, or underwriters. The plaintiffs were permitted, against the objection of the defendants, to prove the declarations of the grantors while they were thus in the possession of the property made to various depositors in their bank intermediate the execution of the deed and of the assignment, to the effect that they owned the property covered by the deed; and the claim is now made on behalf of the appellants that these declarations were improperly received as evidence. We are of opinion that they were proper evidence. They were competent against the persons making them, who were defending the action, and against whom it was incumbent upon the plaintiffs to establish the frauds which they alleged; and, being competent against them, they could not have been excluded by the court. Wright v. Nostrand, 94 N. Y. 31. But the declarations were competent generally against all the defendants. It was competent, as bearing upon the questions of fraud both in the deed and the assignment, to show that the deed was purposely kept from record and concealed from the public, and that it was not intended, as between the parties, as an operative conveyance. They were acts by which the concealment was in part effected. It was found in substance by the trial judge that it was part of the fraudulent scheme concocted by the three brothers, grantors and grantee, to keep the conveyance secret, that the grantors might receive credit and obtain deposits at their bank while their property was beyond the reach of their creditors, and these declarations were a portion of the means used to accomplish the fraud. Still further, it was competent for the plaintiffs to prove the continued and unchanged possession of the granted property by the grantors, and to show their declarations while in possession for the purpose of characterizing it. They are in the nature of res gestoe declarations, and on the...