Opinion
03-19-1895
MONTGOMERY v. BEECHER et al.
Peter Backes, for complainant. Wm. M Lanning and G. D. W. Vroom, for defendants.
Suit by John A. Montgomery, receiver, against Herbert W. Beecher and others, to declare certain conveyances void. Judgment for complainant.
Peter Backes, for complainant.
Wm. M Lanning and G. D. W. Vroom, for defendants.
BIRD, V. C. The bill in this case is filed by the receiver of the Barnegat Park Company, alleging in effect that certain conveyances either never had any actual existence as conveyances, or that they were fraudulent, and consequently should be declared void, and that the title which they purport to convey should be decreed to be in the said company. It is admitted by the complainant that certain instruments, which upon their face purport to convey the lands in question, had an existence, but it is alleged that such honest use was not made of them as to effectually pass title. It appears that the Barnegat Park Company was formed on the 7th day of August, 1889. In the fall of that year, according to the testimony of Edward S. Farrow, the principal manager, it became financially embarrassed, although it declared a dividend of 2 per cent. upon its capital stock of $200,000. In order to relieve itself of its embarrassment, he says, he advertised for persons to become Interested. The result of this advertising was communication from a man by the name of Forney, and through him negotiations were carried on which resulted in the sale of the premises in question,—one parcel to said Forney, and another parcel to a man by the name of Corbin. All of the negotiations were carried on through Forney, Corbin never having been seen by Farrow. As I understand him, Forney was once at Barnegat Park, but his exact location prior to the time of these negotiations he was not certain of, and since then he has only heard of either Forney or Corbin as being in Chicago and Seattle. Farrow says that on the 2d of December, 1889, two notes were made by him to the Barnegat Park Company, and indorsed by the Barnegat Park Company,— one for $1,500 and the other for $1,250 — each made payable in three months, of one of which the following is a copy: "Barnegat Park, N. J., Dec. 2nd, 1889. Three months
after date, for value received, I promise to pay to the order of the Barnegat Park Company fifteen hundred dollars, at the Commercial National Bank of New York, with interest from date at the rate of —%. $1,500.00. Due —. Edward S. Farrow, U. S. Army." And it is indorsed as follows: "The Barnegat Park Company, M. W. Conkling, President. Henry C. Corbin." I think that Farrow's testimony shows that at this time a deed was made and executed in the name of the company as grantor, and in the name of Corbin as grantee, which was afterwards destroyed. "Q. What became of that deed? A. Destroyed when the other was made. Q. To whom was that or those deeds made that you say were destroyed? A. One to Forney and one to Corbin. Q. Why did you think it necessary to make a new deed, as you previously explained these matured about the time of the maturity of the notes? Tell me what deed was destroyed. Specify the land. A. On the 38 lots in the boulevard of Barnegat Park. Q. Anywhere they might be available without designating that? A. Without designating that 38 lots." When this note matured, he says that the amount due thereupon was paid by Corbin, less 15 per cent. of its face value, and that then the deed in question was delivered and executed to him. A note in all respects the same was indorsed by the said Edward L. Forney, and when it became due, Farrow says, he paid the amount due thereon, less 15 per cent. of its face value, and that a few days thereafter the deed in question was made and delivered to him. At this time one Marcus W. Conkling was the president of the association. Farrow swears that he prepared these deeds himself for Corbin and Forney, and presented them to Conkling for his signature, and that Conkling then, as president, executed the deeds. Farrow says also that this transaction was submitted to the board of directors, and the plain Inference is, from his testimony, that Conkling was present. Conkling denies these statements in every particular. He swears that the first intimation that he ever had of this transaction was in the winter of 1801 and 1892,—several weeks, at least, after the appointment of the receiver. He says that during that winter season he and Farrow were stopping at the hotel called "The Pines." While there they occupied the same room, in which was an office desk, to which each had access. He swears that in that desk he discovered what purported to be deeds of conveyance by the company to Corbin and to Forney, and what purported to be two other deeds from Corbin and Forney, as grantors, with the names of the grantees in blank. These conveyances purport to convey the lands which are now claimed by the complainant in this suit. Conkling says that he made a note of the transaction because it particularly arrested his attention at that time.
The difference in the statements of these principal witnesses is important, although, in my view of the case, not conclusive. Conkling was president of the company, and Farrow was secretary and treasurer. Farrow was upon the ground all the time, and had the entire control and management of the company. Conkllng's explanation of the existence of these deeds which purport to convey the title to Corbin and Forney is as follows: He says that he was in New York on business, and that at the request of Farrow he executed a number of deeds in blank, in order that Farrow might not be delayed in securing purchasers when they were ready to take title, and that he delivered these conveyances, so executed, to Farrow. This, it will be perceived, is in direct conflict with the statements of Farrow that he prepared these conveyances, and then submitted them to the board and to Conkling, and that Conkling then executed them. It is not an easy thing for me to come to the conclusion that, in a matter of so little interest as this now turns out to be to Conkling, he would deliberately commit perjury, especially when there are so many opportunities to contradict him, and so many witnesses to prove the fact. He appeared upon the witness stand, and I saw nothing to awaken suspicion that he was deliberately falsifying. I am inclined to take his statement as true. I cannot comprehend that a man of his business capacity and experience could have forgotten a transaction of this character. At the time of these negotiations with Corbin and Forney, the company had only made two conveyances, the consideration of which was $4,800, which, or the principal part of which, was secured by mortgages. The total cash realized at this time was only about $400. The whole number of lots conveyed to Corbin and Forney was 72. To say that under such circumstances—that is, in the very infancy of the enterprise, when it was just struggling for breath—a transaction of this nature should be brought before the board of directors, of which Conkling was president, and that he then, or at any other time, should be called upon to execute and deliver conveyances, and in so short a time become so utterly oblivious to the fact as to speak about it as he did under oath, is quite Incredible. The point of conflict between Farrow and Conkling does not extend beyond this. In other words, Farrow's statements may be true, as to other branches of the case, without necessarily leading the mind to the conclusion that Conkllng's statements with respect to the execution and delivery of these conveyances is false. When all the circumstances connected with this case—that is, the way in which these deeds were manipulated, taking both the statements of Farrow and Conkling, and the way in which the grantees, Corbin and Forney, were Introduced into the negotiations, and finally dismissed and lost sight of, and as tothem and the Introduction of Beecher at the Instance and under the guidance of Farrow —are considered, the impression has been very strongly fixed upon my mind that Corbin and Forney were men of straw, and used as Instruments by Farrow. When asked what the consideration for the Corbin deed was, Farrow says: "He paid the money over to me. The amount of the note that he discounted was $1,500, and he received about 15% bonus." He produced the note dated December 2, 1889. The conveyance is dated March 5, 1890. When asked to explain, he says: "The note matured three months after date. That brings it to March 2d, and three days of grace would make it March 5th, 1890; and that day the note was paid, and the conveyance was made to Mr. Forney in consideration of the money. The company at that time was short of funds, and it could not take care of the note." He says the company was short of money, and was getting it wherever it could, and that, when this note was made, Forney paid the cash, less 15 per cent., and the amount paid was placed to the credit of the Barnegat Park Company, on the books of Farrow & Conkling. The money is not traced further. And he says they paid Forney by conveying to him 38 lots named in the bill of complaint on the 5th day of March, when the note matured. He says the Corbin transaction was the same in all respects, but that the deed to him was executed on the 15th of March, 1890. There is nothing to show that the Barnegat Park Company kept any books of account of its own. From the testimony the inference is that the books of Farrow & Conkling were the only account books which exhibit any of the money transactions of the concern. Nothing has been presented, in the way of accounts, to show that the consideration spoken of ever passed to the company.
But, to proceed, what comes after is both as interesting and as enigmatical as what has gone before. Farrow says that he promised Forney and Corbin to find a purchaser for them. With this, all Interest upon their part seems to have ceased. Farrow says that he negotiated the transaction with Beecher, and that Beecher was to give Corbin and Forney $3,000 for the lots named in the bill, and that he delivered the deeds therefor to Beecher. It would be supposed, Farrow having undertaken this, that he would be able to account, as was his duty, being an agent, for the entire consideration; but he can only account for $700, which was paid by check on the 4th day of May, 1892. This was more than seven months after the appointment of the receiver, and a year and ten months after the date of the deed to Beemer. He was asked if he knew personally about the payment of the $3,000 by Beecher: "A. Yes, sir; I received the final payment from Mr. Beecher. He gave me a check, I think, for halt, and then the balance in two payments,—six months or a year, I think; the last check being in full, dated May 4, 1892." He is then asked by his counsel if he has any knowledge of the payment of the other $2,300, and he answered, "No, sir; I have not." On cross examination he was asked: "What did he pay? A. He paid them some cash at the time, and, as far as I know, gave them some notes for the balance. Q. How much of that cash did he give Mr. Forney? A. I can't tell you." Nor was there any proof from any source whatever that this amount of the alleged consideration was ever paid.
There has been an answer put in in the name of all the defendants,—Farrow, Beecher, Forney, and Corbin,—but the latter three have been in no other sense represented, neither of them having been sworn or examined. Nor has any reason been shown why they have not been. True, a party claiming an interest in an estate may establish it without subjecting himself to an examination; but it may well be conceived that circumstances may be presented of such a character as to awaken the gravest suspicion of the honesty of a transaction, when the best testimony is not produced. I cannot but infer that Forney and Corbin had no personal Interest in this suit at its commencement, or at the present time, and that consequently, if they ever had the interest which is claimed for them, they would have been quite disinterested witnesses, and their testimony would have been of the utmost service to the court. But the interest of Mr. Beecher in the cause, if what is claimed in his behalf be meritorious, is so great as, in my mind, to excite more than surprise that his testimony has not been presented. This is especially so when it is considered that he has joined, or been made to join, in the answer with the other defendants. Why his testimony should not be produced has not been explained. His interest in these lots has been directly challenged and denied. Indeed, he is charged with assisting in an effort to perpetrate a fraud upon the Barnegat Park Company. Farrow, the man with whom it is said he carried on these transactions, acknowledges himself unable to give the details of the transaction for said lots. Without dwelling upon this, I cannot but infer that Mr. Beecher abandons the defense, or finds himself wholly unable to sustain it. In the answer, fraud is denied, so far as Beecher is concerned, and the only allegation in support of his claim to the title is that he paid a good and valuable consideration for the premises. I cannot but conclude that these deeds were never beyond the control of Farrow. He was asked who put those deeds upon record. He answered: "I do not know. I might have sent them up for record. Q. When were they recorded? A. When it was learned. I believe, that the transaction was attacked,—sometime In 1892, I believe." Notwithstanding the above, he says that Corbin and Forney had possession of their deeds, but this in no wise limits the conviction that he had the control of them at will. And this seems to be equally true of the deeds purporting to convey the title to Beecher.
In the above statements and expressions or conclusions, I have been controlled by the views outlined in the bill of complaint. But there is another view to be taken of the case, when the testimony is carefully considered, which, to my mind, is more satisfactory, and quite in harmony with the condition in which the Barnegat Park Company found itself, and also with the testimony in the cause. This transaction should be regarded as nothing more nor less than a loan of money upon the part of Forney and Corbin, and an execution of these instruments, and a delivery to them or for them, as security for such loan. It is perfectly evident that they did not purchase, and that it never was their Intention to purchase. It is equally evident that the company did not negotiate with them for a sale, but for a loan. Had the transaction been one of bargain and sale, it would have been complete in the first instance. On the 2d day of December, 1889, when the notes were delivered, the exact consideration for the properties would have been agreed upon. The conveyance of title would have been accepted, and that would have been the end of it. Had it been such sale, there would have been no discount or percentage of large amount. There would have been no promise upon the part of Farrow to procure some one else to relieve Forney and Corbin. A simple statement of facts, and a review of what is above stated, must lead every person at all acquainted with legal methods to the conclusion that to denominate the transaction as an absolute conveyance is a gross misnomer. The testimony of Farrow establishes this view of the case beyond controversy. I therefore conclude that these conveyances were offered as a pledge, that the interests of the pledgees have been satisfied, and that Beecher holds the title for the Barnegat Park Company. He will be required to execute a conveyance to the complainant, as receiver, or to such other person as may hereafter be named by the court, to be held in trust by him for the creditors of said company.