Opinion
10-27-1898
HAVENS v. SIBBALD.
Clarence Kelsey, for complainant. R. M. Hart, for defendant.
(Syllabus by the Court.)
Bill by Florence E. Havens against Robert A. Sibbald. Heard on bill, answer, and proofs. Decree for plaintiff.
Clarence Kelsey, for complainant.
R. M. Hart, for defendant.
PITNEY, V. C. This is a bill brought by several creditors of one Havens against the defendant, Robert A. Sibbald, as assignee of Havens, to set aside an assignment made by Havens to Sibbald for the benefit of his creditors, or, failing in that, to remove Sibbald from his office of assignee, on the ground of misconduct, and for an accounting by him in this court it was before the court on demurrer, as reported sub nom. Terhune v. Sibbald, 55 N. J. Eq. 236, 37 Atl. 454. After that decision, all of the complainants were disposed of and stricken from the record, except Mrs. Havens, the wife of the debtor. Answer was put in, and the case was brought to trial upon proofs taken in open court.
Complainant is a creditor by virtue of a promissory note made by her husband to her, dated on the 19th of March, 1896, providing for the payment of $140 in installments. That note was given as consideration for her joining her husband in a deed of conveyance to his sister, a Mrs. Groll, of two lots of land on Linden avenue, and also of a conveyance by him, about the same time, of some lots on Midland avenue (all In Park Ridge, Bergen county) to a lumber company to whom he was indebted. The deed to Mrs. Groll is dated the 11th, and acknowledged on the 19th, of March, and the consideration mentioned is $200. The ground upon which the complainant bases her bill was partially stated in the report above referred to. The assignment by Havens to defendant is dated the 21st of May, 1896, and recorded on the next day. The gravamen of the bill is that the assignment was a part of a scheme gotten up between the debtor and his assignee to so dispose of his property as to defraud his creditors, and that the assignee was, from the first, privy to the intention of the debtor, and has so acted and conducted himself as assignee as to forward that scheme, and has not acted in the interest of the creditors. A variety of facts and circumstances are adduced to support that view.
In the first place, the bill was filed by several creditors, and one charge is that the defendant set himself about inducing those creditors to withdraw their claims, by personal application and discouraging statements of the expense and liability for costs which they would incur if they proceeded, and, in one case, by actually paying the claim out of his own pocket; his object being, as is argued, to embarrass the present complainant, who is poor and illy able to prosecute the litigation alone. I think that charge is substantially sustained by the proofs. Solicitations of several of the original complainants were made by defendant in person. Motions were made to strike out the names of some of the complainants, on affidavits made by themselves, prepared by defendant's counsel; and in one instance one of those affidavits was shown to be untrue, and the claim of one complainant (a small one) was actually paid in full by the defendant.
It is further alleged that the assignee procured the chattels of the debtor, which consisted mainly of lumber in a lumber yard, to be appraised at a very low rate, and set off $200 out of it to the debtor, as his exemption, so that he got, among other things, $152 worth of lumber, as appraised, as a part of his exemption, when in point of fact the lumber was worth and actually sold for twice the amount of the appraisement, and that, as the debtor was not living with his wife, he had no family, and was not entitled to the exemption. When pressed at the hearing with this view of the matter, the defendant stated that a part of the money which the debtor obtained from the sale of the lumber was paid to his wife, the complainant No proof, however, was offered in support ofthis statement, which was not made upon personal knowledge. The low rate of appraisement was proven; but it did not appear that defendant was active in procuring it; nor, on the other hand, does it appear that he took any means to procure a higher appraisement in the interest of the creditors; nor does it appear whether the fact that Havens and his wife were living separately was modified by other facts which justified the setting forth to him of the exemption.
Another and more serious specification of misconduct is that one Reddick was indebted to Havens, the insolvent debtor, and on the 20th of April, 1896, just one month before the assignment, he, with his wife, conveyed to Mrs. Groll, the sister of the debtor, in payment of his debt, four building lots situate on Colony avenue, in Park Ridge, where all these people lived; that the fact that they were so conveyed to Mrs. Groll in trust for the debtor was known to the assignee at the time of the assignment, and, if not, was made known to him shortly afterwards, and be was requested to proceed and procure the title to those lots for the benefit of the creditors, and has declined to do so; and, in point of fact, himself, as agent for Havens, after the assignment, to wit, May 27, 1896, negotiated a sale of them to one Preckman, for $650, a portion of which, to wit, $63, was paid, and the balance was ready to be paid or secured when the transaction was arrested by the ascertainment of the fact that Mrs. Groll was a married woman, and could not make the title without her husband, who was not at hand. Without going into the proven details of the transaction, I think this charge is fully sustained by the proofs.
The next specification of misconduct is this: As before stated, by deed dated March 11, 1896, asknowledged and delivered on March 19, 1896, Havens and his wife conveyed to his sister, Mrs. Groll, two lots, Nos. 6 and 7, on Linden avenue, in Park Ridge, in consideration of $200. No proof was made of any consideration having passed from Mrs. Groll to Mr. Havens, and all the indications are the other way. In the latter part of April, 1896, the complainant, Mrs. Havens, instituted proceedings against her husband for support, before a justice of the peace, and he was about to be arrested. The husband applied to the defendant, the assignee, to go on his bond when arrested; and the defendant consented to do so upon being secured. According to the defendant's story, Havens told defendant that his sister held the title to some lots which she would convey to him as security. These lots had been placed by Havens in defendant's hands as a real-estate agent for sale, and he had partly negotiated a sale of them, as shown by correspondence in evidence, not necessary to be set out in detail. He swears that at that time Havens was indebted to him in the sum of $119.02 for money previously advanced by him to Havens to pay a bill of lumber. He pretends to no other indebtedness at that time, and says that he told Mr. Havens that if the lots could be conveyed to him as security for this indebtedness, as well as for indemnity for going on his ball bond, he would accept a conveyance, and that he did so. The conveyance was made by deed dated April 28, 1896, acknowledged on the same day, and recorded on the 2d of May. At that time, as he says, Havens had entered into contracts for the erection of two houses on the premises, which contracts he assumed, and proceeded to finish the houses. Subsequently he entered Into a contract to sell one of them to a Mr. Beers. That contract is dated the 9th of May, but whether executed and delivered on that day does not appear; and on the 25th of May, four days after the assignment, he received from Beers $400 on account of it, and has since received all but a few dollars of the contract price.
The evidence of Beers and his wife, and the circumstances of the case, show quite clearly that the defendant knew that these lots were really the property of Havens. If, however, their evidence and the circumstances left any doubt on the subject, it is set at rest by a written statement prepared by the defendant, and handed up by him to the court while on the stand. By that statement the defendant attempted to show that he had made no profit by the transaction in connection with these lots, and that there was nothing due from him on account of it He made up an account in this wise: Credited himself first with the item of $119.02, which was due him, as he had sworn, for cash advanced before the conveyance to enable Mr. Havens to pay a bill for lumber which he owed. In the statement that Item is composed of three items, namely: December 6, 1895, $53.82; March 2, 1896, $31.20; and May 5, 1896, $34,—making a total of $119.02, showing, instead of a single item of $119.02, three items, and one of those occurring several days after the conveyance was made and recorded. Next he takes credit for the amount of money paid out for carpenter and mason work on the two houses, of $806.86, making a total of $925.88. Then, after an addition of these items, he adds this significant item: "Paid Mrs. Havens, 28 weeks' alimony, at $4, $112,"—which, with the other items, makes $1,037.88 as the total credit to which he is entitled against the premises so conveyed to him. Then he charges himself with $550, the price of the house and lot conveyed to Beers, and, deducting that, leaves a balance of $487.88 still due to him. He estimates the house and lot which he still retains at $450, and is willing to sell at that price, which will leave the transaction in debt to him $37.88. No proof was made that any alimony was ever paid to Mrs. Havens by the defendant or anybody else. In fact that item in the statement with which I am dealing passed unnoticed at the hearing. It appears that the proceedings instituted by thewife against her husband for support before the justice failed, a verdict having been rendered in his favor; and that she afterwards, May 26. 1896, filed a bill in chancery against her husband for support; and that the suit was defended and brought to hearing before Vice Chancellor Emery, who, June 15, 1896, ordered alimony pendente lite at $4 a week, and afterwards, on final hearing (November 27, 1896), advised a final decree, dated February 8, 1897, that Havens should pay his wife, the complainant, alimony at the rate of $5 a week for the support of herself and children. That there ever was a cent paid by anybody is not proven. But the significance of the item, whether paid or not, is that it shows clearly, as well, indeed, as does the item of $119.02 (to the retention of which it does not appear that Mrs. Groll ever consented), that the defendant treated the property as actually belonging to Mr. Havens. And if it was in reality Havens' property, because held in trust for him by his sister, then the defendant should have known that the title to it passed to him as assignee under the assignment, and became at once subject to a trust for the benefit of the general creditors of Havens. It follows that if he did, in fact, pay out of the proceeds $112 or any other sum of money to the complainant on account of alimony, it was payment in fraud of such creditors.
The next matter of misconduct charged against the defendant is in connection with the transfer of property to his brother-in-law, one Bernard. At the time of the assignment, the debtor, Havens, held the title to a plot of land composed of five lots, being 100 by 125 feet, on the corner of a street, on which was a dwelling house, in which he resided, and a barn. The property was subject to a mortgage of $500. He also held the contract title to several lots of land immediately across the street from his homestead dwelling, upon which his lumber yard and office were situate. The contract price for them was $500, and the amountdue was $282. These were appraised by the appraisers at $700 for the dwelling house and lots, $400 for the lumber-yard lots, and $45 for the office building. Shortly after the assignment, to wit, the 1st of July, defendant applied to the orphans' court of Bergen county for leave to sell the homestead for $225, subject to the mortgage, and the equity in the lumber-yard lots for $25. The orphans' court, upon his application, approved the sale; and he Immediately conveyed them to his brother-in-law Bernard, for that price, and shortly after moved into the house himself, and occupied it for some time. Later on, on the 13th of August, Bernard sold the same by the aid of defendant's negotiation to a Mr. Perry, for $1,000, subject to the mortgage, which was assumed by Perry, and by the deed was not counted as a part of the consideration money. On the face of the papers, Bernard, in about six weeks after he purchased from Sibbald, reconveyed the premises at a profit of about $775. It is alleged and proven by Mr. Perry that the real consideration was $1,000 in all, and that he paid Mr. Bernard only $500 over and above the mortgage, and that the language of the scrivener who prepared the deed does not truly state the transaction, and that the real profit of Mr. Bernard was $275, less a commission paid to Mr. Sibbald for negotiating the sale. This transaction, on its face, is suspicious, to say the least But if it stood alone, subject to the explanation which I will give in a moment, it might be overlooked. The explanation of the defendant is that the immediate occasion of the assignment by Havens was the recovery of a Judgment against him by one of his creditors; that the sheriff was pressing for the payment of his money; that the defendant found himself without means to prevent an immediate forced sale by the sheriff; that he applied for and obtained a stay for two weeks, but was refused any further time; that he could not negotiate a lump sale to advantage of the lumber on hand, and that he only obtained satisfactory prices by retailing it, which took considerable time; that he tried to sell as well the lumber as the homestead to various persons, and failed therein, applying, among others, to Mr. Perry, who subsequently bought it; and that finally, learning that his brother-in-law, who lived some miles away, had money to Invest, he offered him this property; and that he negotiated a sale, subject to the approval of the orphans' court; and that, when he applied to the court for approval of the sale, he explained to the judge all the circumstances, including the fact that Bernard was his brother-in-law.
Much evidence was given as to the value of the property. The defendant swears that it had been in his hands for sale for Havens for some time, the price to be $1,500, with instructions that, if he could not get that, to take $1,200. Considering all the evidence and the description of the house, I think $1,200 to $1,500 was a fair price for it, and that the sale at $725 was a sacrifice. But I do not find it necessary, for present purposes, to decide definitely whether the circumstances are such that the defendant should account for the profit his brother-in-law made. I do not think the evidence before me is sufficient to determine that question. The circumstances are so complicated with the building of the houses on the Linden avenue property, and of the alleged use by Havens of some of the lumber after the assignment and before the appraisement, to put in those houses, and a variety of other matters which cropped out in the evidence, to which I have not deemed it necessary to advert in detail, that the problem is not an easy one to solve.
Upon the whole case,—considering the defendant's connection with Mr. Havens' transactions, his knowledge that the Reddick property and the Linden avenue property were held by Mrs. Groll in trust for Havens, hisdealings with both of those properties, the fact that he was told by me in open court, at or before the argument of the demurrer, that, upon the facts stated, it was his duty to proceed to file a bill to procure the title from Mrs. Groll of the Reddick property, the extraordinary means resorted to by him to smother this suit by inducing all of the complainants except Mrs. Havens to refrain from further prosecuting it,—I am led to the conclusion that he should be removed as trustee, and that a new trustee should be appointed in his place.
It is plain that a careful accounting must be had between the defendant and the creditors, and that such accounting can best be had in this court. It is also plain that he is quite an unfit person to prosecute a suit against Mrs. Groll for the benefit of creditors to recover the land the title to which rests in her. The power of this court to apply such a remedy rests upon its general jurisdiction over matters of trust, and its application in this instance is, I think, amply justified by what was decided in White v. Davis, 48 N. J. Eq. 22, 21 Atl. 187; Id., 49 N. J. Eq. 567, 25 Atl. 936; and what was said at page 27, 48 N. J. Eq., and page 189, 21 Atl.; and pages 568 and 569, 49 N. J. Eq., and page 937, 25 Atl.; and also by what was said in Kalmus v. Ballin, 52 N. J. Eq. 290, at page 294, and 28 Atl. 791, at page 792.
It is proper to say that an attack was made upon the character of some of the witnesses of the complainant, namely, Mr. Freckman and his wife. I think that the attack failed of itself; but I desire to say that the manner of those witnesses on the stand led me to the conclusion that they were truthful, or intended to be so; while the explanations of the defendant of some of the transactions were by no means satisfactory.
I shall therefore advise a decree that the defendant be removed as trustee, and that a new trustee be appointed. The decree will provide that the defendant convey to the new trustee in general terms all the property of the debtor remaining undisposed of, as the same was conveyed to him, and include specially what remains of the Linden avenue property, and that he turn over to the trustee so to be appointed the sum of $136, the amount which he stated on the stand was still in his hands after paying a dividend of 30 per cent. to the creditors. The decree will provide that the defendant do forthwith after the appointment and qualification of the new trustee furnish to him a full and complete account of all his dealings, both charges and discharges, with the estate of Havens, including therein the funds received from the sale of the Reddick property to Freckman and the Linden avenue property to Beers. When that account is rendered, it will be open to exceptions by the new trustee and the complainant, and any such exceptions can be dealt with according to the practice of the court. The Linden avenue property hi the hands of the new trustee, or its proceeds if sold by him, will stand as security to defendant for any amount which may be found due to him upon the accounting. The complainant is entitled to costs, but by whom or from what fund to be paid will be reserved until after the accounting, as well as the question of compensation and costs to the defendant.