Opinion
04-06-1904
LE HERISSE v. HESS et al.
T. S. Henry, for complainant. Addison Ely, for defendants.
Bill to set aside a conveyance by Eugene Le Herisse against Constance Hess and another. Heard on bill, answer and cross-bill, replication, and proofs. Decree for complainant.
T. S. Henry, for complainant.
Addison Ely, for defendants.
EMERY, V. C. This is a Judgment creditors' bill filed to set aside as fraudulent a conveyance of lands made by the judgment debtor to her daughter. The joint answer of the grantor and grantee admits that the conveyance of the lands by the mother to the daughter was made for the purpose of preventing complainant from taking the same to pay his alleged claim, that the consideration for the conveyance was nominal, and that the judgment debtor, Mrs. Hess, still receives the rents and profits as before the conveyance. The conveyance is therefore fraudulent as against complainant, if he was a creditor when it was made, and the question raised by the answer and at the hearing is the existence or validity of the debt upon which complainant's judgment is founded.
From the whole evidence it appears that the claim upon which the Judgment was founded was a bond secured by mortgage (upon lands in the city of New York) for $1,000, given by defendant Mrs. Constance Hess (under her maiden name of Constance Bastien) to the complainant, dated January 18, 1895, payable January 1, 1900. A suit was brought in 1900 by complainant, against Mrs. Hess, to foreclose the mortgage in the Supreme Court of the state of New York, for the county of New York, and upon the sale of the premises under judgment in that suit a deficiency resulted. Complainant was the purchaser, and the property seems to have then been subject to taxes and assessment amounting together to $600. A deficiency judgment was finally entered in the New York court on November 21, 1900, in favor of complainant, and against Mrs. Hess, for $952.04. Suit was brought upon this judgment in the New Jersey Supreme Court in January, 1901, and final judgment by default was entered March 16, 1901, against Mrs. Hess. This judgment in New Jersey fixes, as against the debtor, the status of the complainant as a creditor of Mrs. Hess, and as such creditor complainant is entitled to reach property of the debtor conveyed to the daughter without consideration and for the purpose of escaping payment of the judgment, unless the grantee brings herself within the class of cases recognizing the right of a grantee to contest the validity of the debt of the grantor, notwithstanding the judgment against grantor. The burden of establishing such equity is on the grantee. In the present case the equity claimed is that the bond and mortgage were executed by the complainant, under the false representation by her New York attorney, one Lecompte,that they were papers of another character, and that she never received any money upon them. It is proved that complainant on December 21, 1894, gave to Lecompte the $1,000 to invest for him on mortgage, and subsequently (in May, 1895) received the bond and mortgage in question as the investment of his $1,000. Complainant received regularly the interest on the mortgage from Lecompte, on behalf of Mrs. Hess, as he supposed, up to July, 1897, when Lecompte absconded. Up to that time it does not appear that Mrs. Hess paid interest to Lecompte or any one else. In August, 1897, Mrs. Hess knew of the mortgage in complainant's hands, and disputed her liability on it. Pending this dispute, a proposition was made by a friend, acting on behalf of Lecompte, for an adjustment or compromise of all the claims against Lecompte, including those of complainant and Mrs. Hess. Another attorney, a Mr. Dupre, acted on behalf of Lecompte and his friend in this matter, and prepared an agreement for the creditors to sign. In the ascertainment of the amount for which complainant and Mrs. Hess were to be creditors of Lecompte under this agreement, Mrs. Hess signed as a creditor of $2,300, which included the $1,000 mortgage in question, and complainant for $1,500, a sum owing to him by Lecompte for other money put in his bands for investment, and excluding the mortgage of Mrs. Hess. In this settlement Mrs. Hess was to recognize the mortgage as due to complainant, and to claim against Lecompte for the amount. The settlement fell through by reason of the failure of some creditors to sign, but subsequently, and up to the time the mortgage became due (January, 1900), Mrs. Hess paid interest on the mortgage to complainant, without further questioning its validity. After the mortgage became due, efforts were made by Mrs. Hess to get complainant to take a deed for the property and pay her a sum ($200) in addition, but complainant refused, and began foreclosure proceedings. In these proceedings, after Lecompte had run away, and also in reference to the foreclosure, an attorney, Mr. Feuchtwanger, was consulted by Mrs. Hess, and on consultation with him she concluded not to put in any defense to the foreclosure suit, but to rely on the property selling for more than the mortgage. Her own language about this is as follows: "Mr. Dupre and he spoke about it [the foreclosure], and we [Feuchtwanger and I] went out, and I said, 'Ain't there any way to get out to protect that mortgage?' He said it would cost over $500 for all trouble, so of course I didn't have the money, and he didn't do nothing for ma He didn't go to court or nothing; only for the foreclosure he went to the sale. He told me that the lot would bring $1,600. Then he get the mortgage paid, and then I have $200 for me left." "When I received the foreclosure notice I told him [Feuchtwanger] to go to the sale; I told him, I suppose, that lot would bring $1,600." Mrs. Hess also says, in reference to the foreclosure: "I was so sick of that, so discouraged and downhearted, I didn't know what to do. I thought, let him take the lot, but I never thought the man was mean enough to come and chase me in New Jersey. He had my lot, which bring more than he spent."
From the evidence it is clear that Mrs. Hess concluded not to set up any defense in the foreclosure suit. Her answer alleges that her course in making no defense to the foreclosure was due to the advice of Mr. Dupre, who was complainant's friend, and of Mr. Murray, Le Herisse's attorney in the foreclosure suit, that she had no defense, and on the hearing it was claimed that both of these attorneys took advantage of her ignorance to prevent a defense. But this claim is not sustained by the evidence, nor is there any claim in the answer, or ground for contending on the evidence, that the complainant's attorney or Mr. Dupre were either of them responsible for the advice given by Mr. Feuchtwanger, her own attorney, upon which she seems to have acted. As to the complainant's own attitude, it appears that he took the mortgage originally in good faith, and, after receiving interest for two years upon what he supposed and might fairly claim was a settlement of the dispute between himself and Mrs. Hess in reference to the mortgage and an acknowledgment of its validity, directed the foreclosure, which, so far as he is concerned, appears to have taken the regular course. He is not chargeable with any fraud in procuring the decree for sale or the judgment for deficiency, and, so far as Mrs. Hess is concerned, the judgment in the New York suit is final on the questions now raised, because they are the very questions which could have been and should have been litigated in that suit, and the defenses or supposed defenses seem to have been deliberately abandoned or withheld, without any responsibility therefor on the part of complainant.
It is a question in my mind whether the defense now set up would have prevented a recovery on the mortgage in the original foreclosure action, Inasmuch as the complainant was clearly a bona fide holder of the mortgage, and the circumstances now appearing gave him what was certainly a fair claim to estop defendant from disputing its liability. But there can be no doubt that Mrs. Hess, under cover of the title of the grantee, who confessedly holds it only to protect the debtor's lands against the judgment, does not occupy a position which entitles her in equity to a second opportunity to contest complainant's judgment. I have examined the cases referred to by defendants' counsel, but they seem to be cases where the complainant was chargeable with fraud in procuring the judgment, or cases where equitable defenses existed which could not havebeen set up in the action at law. The case does not come within the rule, that where the claims upon which the judgment in another state is founded are void under the public policy of our laws, they are subject to retrial and re-examination at the instance of a third person not party to the suit, if the complainant seeks equitable relief against him. Nor does the case come within the principle of those decisions which hold that a court of equity, without inquiring into the validity of the claim upon which complainant's judgment is based, or even admitting its validity, will decline to give its aid when the claim to equitable relief is, under all the circumstances, so unconscionable or inequitable that complainant should be left to his legal remedies. Mlnzesheimer v. Doolittle (Err. & App. 1869) GO N. J. Eq. 397, 45 Atl. 611, and Sharp v. Stalker (V. Ch. Stevens, 1902) 63 N. J. Eq. 596, 52 Atl. 1120, are instances of the former class, and De Grauw v. Mechan (V. Ch. Green, 1891) 48 N. J. Eq. 219, 21 Atl. 193, and Brinkerhoff v. Ransom (Err. & App. 1898) 57 N. J. Eq. 312, 41 Atl. 725, are instances of the latter class.
The general rule is that a grantee of the judgment debtor cannot, in a suit brought to set aside a deed fraudulent against creditors, question the validity of the debt upon which the judgment against his grantor was founded. McCanless v. Smith (V. Ch. Pitney, 1893) 51 N. J. Eq. 505, 25 Atl. 211, and cases cited at page 519, 51 N. J. Eq., page 216, 25 Atl. The grantee not having brought herself within any of the exceptions to this general rule, it is applicable here, and the judgment must be held to be conclusive against the grantee as well as against the debtor. It will therefore be declared to be a lien on the premises, and the conveyance to the daughter set aside as fraudulent against complainant. The cross-bill filed to set aside the judgment will be dismissed. Before entry of decree, a special replication should be filed, pursuant to the leave reserved at the hearing.