Opinion
08-16-1900
KINMONTH v. WHITE et al. HANDLEY v. SAME. ASBURY PARK & OCEAN GROVE BANK v. SAME. PITTENGER v. SAME. NAVESINK NAT. BANK OF RED BANK v. SAME.
Samuel A. Patterson, for complainants Kinmonth and Handley. John F. Hawkins, for complainant banks. Frank P. McDermott, for complainant Pittenger. R. T. Stout and Wesley B. Stout, for defendants.
Actions by Hugh S. Kinrnonth, Honorine Handley, the Asbury Park & Ocean Grove Bank, William D. Pittenger, and the Navesink National Bank of Red Bank against Andrew J. White and others. Judgment for complainants.
Samuel A. Patterson, for complainants Kinmonth and Handley. John F. Hawkins, for complainant banks. Frank P. McDermott, for complainant Pittenger. R. T. Stout and Wesley B. Stout, for defendants.
PITNEY, V. C. The complainants are, severally, judgment creditors of the defendant Andrew J. White, and the common object of their several bills is to enforce the lien of their judgments upon four parcels of real estate situate near Asbury Park, in Monmouth county, which the judgment debtor owned on the 23d of March, 1898, and which between that date and the 6th of April, 1898, he conveyed away severally to four of the defendants, to wit Caroline White, Louis Franklyn White, and to Messrs. Hurley and Taylor. The recovery of the judgments and the issuing of executions and levies as alleged in the bills were admitted at the hearing; also, that the debts arose prior to the conveyances. For the conveyances to Messrs. Hurley and Taylor cash Was paid by those gentlemen to the judgment debtor, and cash was also paid by the defendant Caroline White for the conveyance to her; and a semblance of consideration was given for the conveyance to Louis Franklyn White, in the shape of certain real estate situate in the county of Sussex, conveyed by him to the judgment debtor.
The first question to be determined is as to the object and motive of Andrew, the judgment debtor, in making the conveyances. Did he make them for the purpose of putting the proceeds thereof beyond the reach of his creditors, and so defrauding them? If that be established, then, second, what knowledge or notice of that intention did the several grantees have, and what conscious aid, if any, did they give him in his scheme?
First, as to Andrew's intention. He was one of five brothers, who, with a sister, were the children of one Britton White, who owned valuable real estate in Neptune township, Monmouth county, and adjoining, but just outside, the corporate limits of the boroughs of Ocean Grove and Asbury Park. It faced a street called "South Main Street," at that point known as the "Bowery," which was part of the main turnpike road between Asbury Park and Belmar. Its course was westof south, and about parallel with the tracks of the railroad. Of this real estate Andrew at the time in question was the owner of a valuable portion, subject to incumbrances. He also lived with his wife in a house which he owned in a suburb called "Loch Arbour," to the north of Asbury Park, and separated from it by Deal Lake. He was an industrious and reasonably thriving man, and had considerable income from the real estate in Neptune township. But he was heavily involved as indorser for his brother Washington White, and his paper was held to a considerable extent by the several complainants. The judgments of the several complainants are based in part, at least, upon Andrew's indorsements for his brother Washington. On the 22d of Marcn, 1898, Washington committed suicide, and that fact became instantly known throughout Asbury Park and its suburbs; and the fact that Andrew was heavily involved for Washington also seemed to be well known. Andrew at once set about disposing of all his real estate. He says that he first consulted his counsel, Mr. Kennedy, of Asbury Park, but that he was ill and unable to attend to business, and recommended him to Mr. Charles Cook, a solicitor of Asbury Park, to whom he went. And he also at the same time, or shortly afterwards, consulted Messrs. R. T. & W. B. Stout, also solicitors of Asbury Park. In what followed he acted under the advice of those gentlemen. On the 24th of March he executed a mortgage to his brother Louis Franklyn White, who lived near Freehold, 20 miles away, to secure the sum of $2,000, as witnessed by a bond of the same date, on a lot, part of the Neptune township property, mentioned in the pleadings and proofs as "No. 4," facing on South Main street, and reaching to the railroad. This lot so mortgaged to Louis Franklyn White (called in the evidence Franklyn White) is 63 feet and 10 inches front, and 274 feet and 4 inches deep. It was already subject to a mortgage to the chancellor for $1,500. On the 26th of March he executed another mortgage to his mother, the defendant Caroline White, who lived in the country, 3 or 4 miles away, to secure the payment of $700, as witnessed by a bond of the same date. This covers a lot mentioned in the pleadings as No. 2, also fronting on South Main street, being 74 feet front, and 274 feet and 4 inches deep, subject to a previous mortgage of $2,500 to one Ward. These mortgages were both acknowledged on the 26th of March, and recorded on the 29th, no cash being paid at the time for either. On the 23d of March he executed a deed of his homestead in Loch Arbour to his mother, Caroline White, in consideration of $5,000. That deed was acknowledged on the 23d, and recorded on the 29th, of March. The property was subject to a mortgage of $2,000. On the 6th of April he executed a deed to Louis Franklyn White (the consideration expressed being "one dollar and other valuable considerations") for the lot called "No. 2," being 74 feet front, and 274 feet deep, on South Main street This was subject to a mortgage of $2,500 to Ward, and the mortgage of $700 to Caroline White. On the same day he conveyed to Hurbert Hurley, of Asbury Park, in consideration of $1,600, the lot known as "No. 3," situate on South Main street, 25 feet front and 255 feet deep. This lot was subject to a mortgage of $600 held by one Baird. And on the same day he conveyed to Nathan J. Taylor, of Asbury Park, in consideration of $5,000, the lot called "No. 4," being 63 feet and 10 inches front, and 274 feet and 4 inches deep, fronting on South Main street, which was already subject to a mortgage to Chancellor McGill of $1,500, and a recent mortgage to Louis Franklyn White of $2,000. For these conveyances he received cash as follows: From his mother, Caroline White, $3,000; from Hurbert Hurley, $1,000; and from Nathan J. Taylor, $1,500,—a total of $5,500. Now, of the disposition which he made of this $5,500 received by him in cash within a few-days, he gives no satisfactory account He says that he paid a few housekeeping and other debts, and gave a trifle to his son; but after a most thorough cross-examination, and being advised of the Improbability of his story, and urged to give a credible account of his disposition of it he utterly failed. He declared that none of it remained subject to his disposition. He admits that he was pressed by the creditors of his brother Washington. The mortgage to his mother was given, as is said, to secure a balance due on a note which she held of his for borrowed money; and the mortgage which he gave to his brother Franklyn was given to secure the amount due on three promissory notes which it is alleged his brother Franklyn held against him. The mother is an old, decrepit person, unaccustomed to business. But she had considerable means, and money in bank; and both the deed and mortgage were made and delivered to her without any previous conference or consultation with her, and a check for $4,000 procured from her, and the money drawn on it, and $1,000 handed to her son Eastman White, brother of Andrew, and $3,000 retained by Andrew, which, added to the mortgage of $2,000, made up the $5,000 consideration money. There is no evidence that any attempt was made by the judgment debtor to settle with the creditors who held his name as security for his brother Washington, and divide this money among them. His mother swears that no part of it was returned to her. It will be observed, in connection with the affair of his mother, that the natural mode of dealing with her, if he had intended in good faith to convey to her the house and lot where he lived, was to have taken out of the consideration money of $3,000, above the mortgage of $2,000, the amount of the note which she held against him, and to have received from her simply the balance due him. But, as we have seen, he gave her a mortgage on other property to secure the old note, and received from her incash the whole consideration money of the conveyance to her. The object of this was, manifestly, to dispose of as much as possible of his property, and get as much actual cash for it as possible. Then we have this remarkable story: That, having made the mortgage to his brother Franklyn, he conveyed to him on the Gth of April (the date of the conveyances to Hurley and Taylor) the lot No. 2, the most valuable of the three lots he owned on South Main street, and received from him in exchange two vacant building lots situate in Sussex county, nearly or quite 100 miles away, and adjoining Lake Hopatcong, which on the same day Mr. Cook, his counsel, had conveyed to Franklyn White. Neither Andrew nor his brother Franklyn had ever seen the Lake Hopatcong property, had never been in the neighborhood, and knew nothing about it, except what Mr. Cook assured them; but, on his assurance of the value of that property, which, by the by, is purely fanciful, and had been acquired by Cook in trade, he conveys to his brother Franklyn a valuable lot of rent-producing property in Asbury Park, and accepts from him a conveyance of these fancy lots in Sussex county, for which, as is said, Franklyn White out of his own money paid Mr. Cook $2,500. The result of the whole transaction, from Andrew White's standpoint, was that he denuded himself of all property in or about Asbury Park, had $5,500 cash in his pocket, and became the owner of two fancy building lots in the county of Sussex, the transfer of which to him was known only by his brother and his counsel, and was not likely to be ascertained by his creditors. Then, in this connection, it must be understood that a judgment was due against him, and was actually entered, in favor of one of the banks, on the 11th of April. Further, it appears that both Mr. Hurley and Mr. Taylor were sought after by Andrew White or his agents, and urged to buy the property which they did buy. Hurley and Taylor are business men in Asbury Park, and had the means with which to purchase, and each, seeing a bargain in the proposition, accepted it on the spot; and the conveyances were made and the money paid without any examination of the condition of the title,—all in one day. These circumstances, and others which appear in the case, and may be alluded to incidentally hereafter, convince me that the object of Andrew in making the conveyances was to defraud his creditors, and to give his property a shape in which he could enjoy it and defy them; and in this he seems to have succeeded, according to his own story, to the extent of nearly or quite $5,000.
The next question is how far the several defendant grantees have participated, in this fraud. And first as to Louis Franklyn White, as purchaser of lot No. 2. He was a well to do farmer, living on his own farm, 2 miles east of Freehold, and 20 miles from Asbury Park. As I have already observed, it appears that he made no demand for the mortgage of $2,000 that was given to him. Some time after the acknowledgment of that mortgage, which was the 26th of March, and probably on the 29th of March, the day that it was recorded, Mr. Cook, who had prepared all these mortgages, and also the deed to Mrs. Caroline White, went to Freehold with Andrew, and had an interview with Louis Franklyn. Mrs. White's check to Andrew for $4,000 for the Loch Arbour dwelling was dated the 23d of March, which is the date of his deed to her for his homestead, and was cashed, according to the bank stamp on its face, on the 31st of March, two days after the recording of the deed. The money was taken by Andrew into Mr. Cook's office, who counted it, and $1,000 of it was handed to Eastman White; leaving, as we have seen, $3,000 in Andrew's hands. Mr. Cook swears that the idea then struck him that he would like to get clear of his Hopatcong lots, and that he might get the cash for them from Andrew White; that he then suggested to Andrew that he would sell him those lots; that Andrew replied that he did not care to buy them himself, but perhaps his brother Franklyn would buy them. Whether anything had been said to Franklyn at the previous interview with him does not appear, but I think it is fairly inferable from the circumstances presently to be stated that something had been said to him about it, and Franklyn so swears. But, be that as it may, Mr. Cook swears that his first thought of using the present opportunity to get rid of his Lake Hopatcong lots occurred to him on the occasion of the counting of the money when drawn from the bank on the old lady's check, which was undoubtedly on the 31st of March. The result of that talk with Andrew was that Mr. Cook himself prepared two deeds,—one from himself and wife to Louis Franklyn White for the Sussex county lots, and the other from Louis Franklyn White and wife to Andrew J. White for the same lots. The first of these conveyances is all in the handwriting of Mr. Cook. The words "sixth" and "April" are also in his handwriting, but in fainter ink, and evidently not written at the same time as was the body of the instrument. The deed from Cook to Franklyn White was acknowledged by him and his wife before Mr. Stout on the 6th of April. The deed from Franklyn White and wife to Andrew, for the same lots, is in the handwriting of Cook, except the description, which is in typewriting. Here, again, the words "sixth" and "April" in the date, while in the handwriting of Cook, are in fainter ink than the balance, and written at a different time, and also the words "and Letitia, his [Franklyn's] wife," and the word "Freehold." Then, again, the consideration is written in this wise: "One dollar exchange of property, and other valuable consideration." The words "One dollar" and "other valuable consideration" are in, I think, different ink from the words "exchange of property." The fact that the description in the deed from Franklyn to Andrew White of the Sussexproperty is in typewriting shows that it was prepared in Cook's office, in Asbury Park, for there were no conveniences for typewriting where the deed was delivered; and the character of the ink in the deed shows that the date was written in after the deed was made. The deed from Andrew White and wife to Franklyn for the Main street property is on a blank different from that used by Mr. Cook, and undoubtedly came from the office of the Messrs. Stout, for it is acknowledged before Mr. Stout on the 6th of April. It had been prepared before that date, for the word "April" is written over an erasure, but the word "sixth" is in typewriting, as is all the rest of the parts usually in writing. For these reasons I conclude that all three deeds were prepared at Asbury Park, and some time prior to their date. With these three deeds (two of which were executed) Andrew and Mr. Cook on April 6th took the train for Freehold, and went to Franklyn's house. Cook went into the house. Andrew went to the farm buildings and met his brother, and after a talk with him, in Cook's absence, came into the house. Franklyn says that he asked his brother about these Hopatcong lots, and that his brother said that all he knew about them he learned from Cook, and that Cook said they were all right and valuable. Cook made the same representation to Franklyn directly, and upon that representation alone Franklyn agreed to purchase them and give them for Andrew's lot No. 2, and produced 25 $100 bills (Cook is very clear and strong in his recollection that the money was paid in $100 bills, and there was ample opportunity for this circumstance to become fixed in his mind; for he swears that he kept that very money, without exchanging it, in his possession for several months before depositing it in bank), handed them to Cook, he and his wife executed the deed to Andrew, the deeds were all formally delivered, and Cook was intrusted with the two deeds of the Hopatcong property for record. The deed to Franklyn for the Asbury Park property was recorded on that day,— April 6th. The deeds for the Hopatcong property were recorded on the 21st of April.
The important questions arising on this transaction are: First, whether the money handed by Franklyn White to Cook was his own money; and, second, if it was, then whether he did not know that the object of the whole transaction was to put Andrew's property beyond the reach of his creditors. If the money handed over was not Franklyn's money, then he gave nothing for the property, and his title fails as against creditors. If it was his own money, and he knew that Andrew's object was to defraud his creditors, then his title also fails, for the reason that he aided and abetted Andrew in his unlawful purpose. With regard to the ownership of the money, Franklyn swears that it was money which he had accumulated in his house from time to time, running over a period of several years, on the sales of his produce and live stock. He is represented to be a keen, shrewd farmer and stock dealer, and what is called a "quick" trader, and to have accumulated considerable property; and the court, at the start, is asked to believe that he would deliberately invest $2,500 of his own money in two building lots or villa sites on the north and least-improved side of Lake Hapatcong, in Sussex county, without ever having seen them or having any information with regard to them, except what he derived from Mr. Cook, the owner of the lots. It seems to me that the transaction is entirely inconsistent with the character of the man, as depicted to the court. It is answered to this view that the real transaction, from Franklyn's standpoint, was that he was paying $2,500 for the Main street property, and that is true: but, as we shall see directly, this does not help him, but injures him, in his attitude on the second question involved, namely, his knowledge of Andrew's fraudulent intention. But, in the next place, as to the ownership of the money, it is very difficult to believe his story with regard to the origin of the money. He kept a bank ac count in Asbury Park, which showed that he was in the habit not only of depositing checks, but actual cash, covering the very period during which this money was said to be accumulating in his house. Now, why would he allow so much money to accumulate in his house without depositing it in his bank? But, in the third place, it seems quite impossible to believe that if he had accumulated as much as $2,500, the result of moneys received from time to time in many different payments from as many different persons, for the sale of his produce and stock, and in the ordinary business transactions of an active, energetic farmer, stock raiser, and dealer, it would all have been in just even $100 bills, as Mr. Cook is quite sure it was. A much more probable origin for the money is this: That, when Andrew drew the $4,000 on his mother's check from the Asbury Park Bank, it was paid to him in even $100 bills. We all know that country banks like those at Asbury Park keep upon their teller's table during business hours a moderate sum of money in various denominations, to suit the convenience of persons who shall present checks to be cashed; that it is unusual to have so large a check as $4,000 presented to be paid in cash, and that for such an emergency they have the bulk of their available cash funds packed away in large bundles of even denomination— $100 bills in one bundle, $500 bills (if they have any) in another bundle, $50 bills in another bundle. And the strong probability is that Mrs. White's $4,000 check was paid to Andrew mainly, if not altogether, in $100 bills, and that the whole scheme of the transfer of the South Main street lot to Franklyn, and the conveyance by Cook to Franklyn, and by Franklyn to Andrew, of the Hopatcong lots, was devised in Asbury Park between Cook, the Stouts, and Andrew White, and carried out in the manner stated, by Andrewsimply handing the money to Franklyn at the private interview which they had on April 6th at the farm buildings before the transaction was completed, and by Franklyn handing the same money to Cook. So that Franklyn White actually parted with nothing, but was the mere conduit of the title of the Hopatcong lots from Cook to Andrew, and obtained the title from Andrew for the South Main street property in Asbury Park without paying one cent for it. This I believe to be the real truth of the transaction. That Mr. Stout was privy to it seems clear enough from the fact that shortly afterwards Andrew gave him a mortgage on the Sussex county lots for $1,000 to secure him for legal services.
But supposing, now, that Franklyn White did pay the $2,500 to Cook for the Hopatcong lots, and then convey them to Andrew in exchange for his Asbury Park lot; was he not cognteant of the whole scheme and its object, namely, to put Andrew's property beyond the reach of his creditors? I am entirely satisfied that he was. It is idle for him to deny that he knew of the situation,—that his brother committed suicide; that Andrew was largely indebted on his account; that he had made a mortgage on one of the Asbury Park lots to him to secure $2,000: It seems to me that the whole scheme was so transparent that he must be chargeable with knowledge of its object. Then he must have known that his brother had no use for these Hopatcong lots, was entirely unacquainted in that section of the state, and could have no proper idea of their value. In his evidence he places himself in the position of a bona fide purchaser of these lots, and not that of a mere indifferent conduit of the title. But if the other be his true position, and the money was his own money, and in effect paid for the Main street property, then he is chargeable with knowledge of and participation in the peculiar features of the transaction. Why was not the consideration money in the deed from Andrew to Franklyn for the Main street property stated to be $2,500? And why was the conveyance of the Hopatcong lots made to him (Franklyn), and from him to Andrew? Why was he made a conduit of the title of those lots from Cook to his brother? These questions arise naturally out of these unusual features, and they must have pointed out to him the real object in view, namely, to help Andrew baffle his creditors, and acquire and hold this Sussex county property without their knowledge. In this connection it is to be observed that the other "valuable consideration" written as the consideration in the deed from Andrew to Louis Franklyn, consisting of a conveyance by Franklyn to Andrew of the Hopatcong lots, was never disclosed to the complainants until it came out in the evidence on the trial. The bills each call for an answer on that subject. The bills of Kinmonth, Handley, and Pittenger ask "for or upon what consideration, and to whom, when, and by whom, the same was paid." The answer of Franklyn White to the Kinmonth and Handley bills was, "avers the fact to be that the consideration was one dollar and other valuable consideration, which consideration was one dollar and the mortgage incumbrance thereon [amounting to $3,200], and the exchanged property." No statement is made of what the "exchanged property" consisted. The answer of Franklyn White in the Pittenger case is the same, with the addition in another clause of it that there were present at different times "the said Andrew J. White, this defendant, and his agent and counsel," without naming the agent and counsel. The bills of the Asbury Park & Ocean Grove Bank and the Navesink National Bank ask, "For and upon what considerations, and, if so, to whom, when, and by whom, the same was paid, and who was present when the said conveyances were made, and when said considerations were paid, and who suggested or procured the same to be made." Franklyn White's answer thereto states that the consideration was $1 and the assumption of two mortgages and the exchange of property valued at $2,500, and that there were present at different times Andrew J. White, the defendant, and his agent and counsel. Looking at the deed from Andrew and wife to Franklyn, we find it simply says, "This conveyance is made subject to two mortgages thereon, together with the accumulation of interest, aggregating about the sum of $3,300." No words of assumption are found in it. Air the answers in the cause were prepared and filed by Messrs. R. T. and W. B. Stout, or one of them, and nowhere is there any hint of the conveyance of the Hopatcong lots, or Mr. Cook's connection with the matter. For these reasons, I conclude that Franklyn's title to the Main street lot must yield to the lien of the complainants' judgments.
The next defendant into whose status I will inquire is the mother, Caroline White. She undoubtedly was a passive instrument in the hands of her son. The mortgage and deed to her were made without her knowledge, and were put on record before she paid any money whatever. She merely did what her son asked her to do. She has permitted him to live in the house ever since, free of rent, although in her answer she admits that she has received the rents and profits. But she did part with her money, and I am unable to find evidence upon which to charge her with any participation in her son's fraudulent intent. Still, under the circumstances, I think that under the rule as laid down in Withrow v. Warner, 56 N. J. Eq. 795, 35 Atl. 1057, 40 Atl. 721, the complainants must be allowed the privilege of redeeming this property. Much evidence was given as to the value of it. I doubt if it is worth very much more than the amount that was paid for it; but whatever margin there is in it belongs, in equity, as it seems to me, to the creditors, and not to Mrs. White. The conveyance was not the result of a business contract, out of which arises what is called the right of a bargaineeto the benefit of his contract. It was, as we have seen, an unsolicited conveyance from son to mother, for the purpose on his part of putting it in a shape in which it could not be reached by his creditors, and accepted and paid for by her at his request, all unwittingly, and for no purpose of her own. It seems to me that in such a case all she is entitled to is to be made whole, and that the same rule applies in that case as in the case of a bona fide purchaser for value without notice when the remedy to the bona fide purchaser is held to be indemnity merely.
The cases of Taylor and Hurley stand on a little different footing, but I think the result in their cases must be the same. They evidently had heard and had notice of the situation of Andrew's financial affairs. They deny actual knowledge, but admit notice. They were called upon to purchase. The price was put so low in each case as to make the purchase a good bargain. In so much haste were Andrew and his advisers in dealing with Taylor that they took his note on time, without interest, on the 6th of April, when the deed was executed, and tried to get it discounted. Failing in that, they called upon Taylor on the 8th of April, and he, with great complacency, and without deducting any discount from his note, gave them his check for the amount, which was paid on that day. The same is true of Hurley. Much time was occupied in presenting evidence as to the value of the several pieces of property here in question. The three that have a frontage on South Main street extend to the line of the railroad, and have a sufficient depth to accommodate a certain class of business in their rears in connection with the railroad. They are all occupied by shops, factories, coal yards, etc. They are held under long leases. The lessees have made their own improvements. The valuations put' upon them by experts are from $100 to $150 a front foot. The price paid by Taylor for his lot was about $80 a front foot, and by Hurley for his about $65. I think both of these were, from any point of view, good bargains for the purchasers, and were so considered by them at the time of the purchase. I will not go into a consideration of the evidence in detail, but content myself with saying that I think there was a considerable margin in each of those purchases. In both cases the amount of the face of the mortgages on the properties was deducted. Each of the purchasers was obliged afterwards to pay arrears of interest, etc., but never made any demand upon Andrew for the repayment of it, although they had his warranty deeds for the consideration money. The transactions in both cases were hurried through, as before remarked, without any search being made of the title. There are no circumstances in the case to support anything like an estoppel in favor of these purchasers. They have not changed their position in any wise or in any respect so as to render it inequitable on the part of the creditors to attack them. The creditors have acted with due promptness. The first Judgment was recovered on the 11th of April, 1898. The first bill was filed on the 9th of May, 1898, and process was served on Hurley and Taylor on the 11th of May, 1898. The other bills followed as fast as judgments could be recovered. The purchasers will lose nothing but the benefit of their contracts, and that, under the circumstances of these cases, I think they are not entitled to retain, as against the complainants, under the familiar rule whose latest expression is found in Withrow v. Warner, 56 N. J. Eq. 795, 35 Atl. 1057, 40 Atl. 721.
The attack made on the mortgages was not pressed at the hearing.
Provision will be made in the decree that the defendants account for the rents and profits, and they will receive credit for" the amounts paid, with interest, and for taxes, insurance, and proper repairs, if any Mrs. White, having voluntarily permitted her son to occupy the Loch Arbour house and lot without rent after bill filed, must account for a reasonable rent. The complainants are entitled to costs.