Wash. Nat. Bank v. Beattt

• Decision Date: 21 June 1910
• Citation: 77 N.J.E. 252,76 A. 442
• Parties: WASHINGTON NAT. BANK v. BEATTT et al.
• Court: New Jersey Supreme Court

76 A. 442

77 N.J.E. 252

WASHINGTON NAT. BANK

v. BEATTT et al.

Court of Errors and Appeals of New Jersey.

June 21, 1910.

(Syllabus by the Court.)

Appeal from Court of Chancery.

Bill by the Washington National Bank against David C. Beatty and another. Decree for defendants (72 Atl. 428), and complainant appeals. Affirmed.

Oscar Jeffery, for appellant.

Elmer King, for respondents.

DILL, J. This appeal from the Court of Chancery brings up for review a judgment dismissing the bill in a creditor's action to set aside a voluntary conveyance of real estate. The bill charges the transaction as being "in violation of the statute entitled 'An act for the prevention of frauds and perjuries, approved March 27th, 1874.'" Rev. St. 1874, p. 299. There is no element in the case, either by way of pleading or proof, that the complainant bank gave any credit to the defendant relying upon his ownership of the property in question. The answer, denying the material allegations of the bill, specifically raises the issue that the firm of commission merchants, hereinafter referred to, were not, at the time of the conveyance or subsequently, creditors of the defendant, within the purview of the statute.

The essential facts of the case are within a narrow scope. In 1894, David C. Beatty, a farmer, consigned certain farm produce to a firm of commission merchants in New York. They failed to remit the proceeds. Beatty, in his wrath, exposed to public view a card on which he had written "All fruit shippers beware of [naming the commission merchants]. They are damned frauds." Two days latter, the commission merchants wrote, threatening to sue him for $100,000 damages. This so alarmed the farmer that he put his property out of his hands transferring the farm which he owned and the mortgages he held on another farm to his son without consideration, and at once duly recorded the conveyances. The complainant offered no evidence to controvert Beatty's statement that the commission merchants were frauds in that they converted to their own use proceeds due him. The case shows affirmatively that the commission merchants never did more than to threaten Beatty and never proceeded, in any way, to establish the verity of their claim for damages, never sued him, and never obtained any judgment against him, but were content to let the matter stand in statu quo until the statute of limitations had intervened. Admittedly, Beatty made the transfer for the purpose of making himself judgment proof against these commission merchants, if they should sue him and if the judgment should go against him. There is no evidence of any other claims or debts against Beatty. The bank, which was not organized until five years after the conveyance by Beatty, obtained a judgment against him on an accommodation note 12 years after the transfer, and to collect this judgment it now seeks to set aside the deed. The vice chancellor below dismissed the bill, holding: First. That under the evidence the commission merchants whose threat to bring suit induced the transfers were, within the meaning of the statute of frauds, creditors at the time the transfers were made, and that the deeds were fraudulent as to them. Second. That a conveyance made for the purpose of defrauding a single existing creditor is not void as against subsequent, creditors, the incurring of the debts to whom was not within the contemplation of the debtor at the time when the conveyance was made.

We concur in the action of the vice chancellor in dismissing the bill, but not with his conclusions of law. Taking them in their inverse order, the first legal question is whether a creditor whose debt is contracted subsequent to the execution of a deed, which is fraudulent as against a single existing creditor, in order to have such deed set aside, must show not only that the deed was fraudulent as to such existing creditor, but also that it was made with intent to defraud such persons as should, subsequent to its date, become creditors of the grantor. The vice chancellor held to the affirmative of this proposition, relying to some extent upon the statement of Vice Chancellor Pitney in Gray v. Folwell, 57 N. J. Eq. 446, at page 456, 41 Atl. 869, and following the rule laid down by Vice Chancellor Van Fleet in Gardner v. Kleinke, 46 N. J. Eq. 90, 18 Atl. 457. In our judgment the rule laid down by Vice Chancellor Van Fleet in Gardner v. Kleinke, supra, and the holding of the vice chancellor in this case below, in accordance therewith, were erroneous.

The effect of the statute is to make a voluntary deed fraudulent as against existing creditors, without regard to the intention with which it was executed. It is fraudulent in law. This was settled in 1879 by this court in Haston v. Castner, 31 N. J. Eq. 697. The effect of a voluntary conveyance upon the rights of subsequent creditors was decided by us in 1889. Hagerman v. Buchanan, 45 N. J. Eq. 292, 17 Atl. 940, 14 Am. St....