Foster v. Townshend

6 Daly 136

• Court: New York Court of Common Pleas
• Decided: April 5, 1875
• Status: Published

Opinion

Charles P. Daly, Chief Justice.

Carey had been required,, by an order of the court, to pay alimony for the support of his wife and the maintenance of his children. Upon proof that he-was secretly disposing of his property, both he and his attorney were enjoined from making any sale or transfer of his real estate, and subsequently, upon Carey neglecting to pay alimony as ordered, an attachment was issued against him for contempt, and the plaintiff was appointed receiver to take possession of Carey’s real and personal property, and hold it until he should give security for the payment of the alimony.

This appointment was made in pursuance of the Revised Statutes, vol. 1, p. 148, § 60, which authorizes the court, in such a case, to sequester the husband’s personal estate, and the rents and profits of his real estate, to appoint a receiver and to cause such personal estate and the rents and profits of such real estate to be applied towards the allowance for the wife, and towards the maintenance of the children, from time to time, as shall seem just and reasonable.

This statutory provision is in effect the same power which courts of equity previously exercised in the sequestration of personal and real estate, to enforce the performance of their orders and decrees, and in the disposition of the questions raised in this case, it will be necessary, first, to understand what was the operation and effect of a sequestration of a defendant’s personal and real property in equity. It was a seizing and taking hold of the property, real or personal, or both, by sequestrators appointed by the court, and holding it until he performed the act directed to be done. It was in equity very nearly what the writ of leva/ri facias was at common law; the goods and chattels were taken into possession, and, with the permission of the court, might be sold, and the lands were seized and held, the rents and profits being collected by the sequestrators, and applied or allowed to accumulate, or were otherwise disposed of as the court might direct (Attorney-General v. Coventry, 2 P. Wm. 307; Bligh v. Darnley, 1 P. Wm. 621; Wharham v. Broughton, 1 Ves. Sr. 179,184; Desbrough v. Crumby, 1 Barn. 212; id. Bunb. 272; Whyte v. Wright, 3 Ves. 22; Mitchell v. Draper, 9 Ves. 208; White v. Geraerdt, 1 Edw. Ch. R. 336; 340, 341; Daniell’s Chancery Practice, 1254 to 1276 ; 2 Tidd’s Practice, 993, 1042, 9th Lond. ed.). In respect to the real estate, the right extended only to the possession; to the sequestering ■or receiving of the rents and profits ; to the making of leases, ■«fee., &c., the legal estate, in the language of Lord Chancellor Cowper, “ remaining, in every respect, as before ” (Attorney-General v. Coventry, 2 P. Wm. 307). Lord Hardwicke said, in Hyde v. Greenhill (1 Dick. 107), that a sequestration covered the personal estate and the rents and profits of the real estate, but not the land, showing that the court, under a sequestration, never assumed the power of disposing of the land, which further appears from Sutton v. Stone (1 Dick. 107), in which an application was made to sell a leasehold estate which had been sequestrated, and Lord Loughborough held that it could not be done. “ Who,” said he, “ is to make out the title ? ”

After the appointment of the receiver and the sequestration ■of Carey’s real and personal property for the enforcement of the order for alimony and maintenance, Carey, though forbidden by injunction to do so, and though in contempt for not obeying the order, made a conveyance of a lot of land which he had in this city, to one John Whyte, for $4,000, subject to a mortgage to one Azel Graham for $1,500, and Whyte, at the same time, executed a mortgage upon the lot to Carey, for the sum of $1,000 and interest; that being regarded as equivalent to the value of Carey’s wife’s right of dower in the land, which mortgage was made payable upon her death, or upon the release of her dower right, and Carey afterward assigned this mortgage to John Townshend, his lawyer, for the nominal consideration of one dollar, which assignment purports to have heen made to secure moneys advanced and to be advanced by Townshend to Carey, and for legal services rendered, and to be rendered, by him to Carey.

The judge, at the special term, has found that both the conveyance by Carey to Whyte, and the assignment of the mortgage by Carey to Townshend, were fraudulent. He finds that at the time of the conveyance by Carey to Whyte, that Whyte knew of the existence of the divorce suit, of the injunction forbidding Carey to make any conveyance of his property, and of the appointment of the receiver, and that the conveyance was made by Carey and accepted by Whyte, in order to defeat the right of the wife .to enforce the payment of her alimony out of the estate of her husband, and that the mortgage was made and assigned to Townshend, to hinder and defraud the wife in the enforcement of her equitable rights in the divorce suit, and was part of a plan or confederacy between Carey, Whyte and Townshend, for the purpose of secreting and disposing of the property of Carey, in fraud of the wife and of her rights.

The judge was fully warranted in finding upon the evidence, that the conveyance of the lot by Carey to Whyte, and the mortgage by Carey to Townshend were made with this intent. Whyte knew of the injunction and of the appointment of the receiver. He discussed both matters in the presence of the witness Henry W. Carey. lie was an intimate friend of Carey, and co-operated with him in getting Carey’s stock of goods removed from the latter’s store in this city to his, Whyte’s store, in Jersey City. Townshend was Carey’s lawyer in the divorce suit, and prepared both the deed and the mortgage. He admitted when examined, that he knew that Carey was enjoined by the court from transferring any of his property. He was asked why he allowed his client, under such circumstances, to make a conveyance of his property, and he answered that he considered that Carey had the legal right then to convey it if he chose to take the eJuPnces of the punishment that the court might inflict upon him for a disobedience of the injunction. He testified that he took the mortgage without any consideration whether it was right or wrong. That Carey, who was in want of money, solicited him to take it. That if it was illegal, he was sorry for it; but he supposed then and still supposed, that Carey had a right to dispose of his property and take the consequences. It further appeared that Carey assigned to Townshend the lease of his store in this city; that he gave Townshend’s wife a mortgage upon real estate which he had in Alleghany county, which mortgage Townshend foreclosed, and that Townshend brought a suit for the foreclosure of the mortgage assigned to him by Carey, which suit was still pending; so that it would seem that all Carey’s property was transferred to Townshend, Townshend’s wife, and to Whyte. These being the facts, there can be no reasonable doubt, upon the evidence, that the conveyance of this lot to Whyte and the mortgage upon it to Townshend, were made with the intent upon the part of Carey, Townshend and Whyte, of preventing the order for alimony and maintenance being enforced by the sequestration of this part of Carey’s real property.

The judge has found that the plaintiff, upon being appointed receiver, became vested with the real and personal estate of Carey in trust for securing the payment of the alimony, so far as the court had power to sequestrate his property for the satisfaction of the alimony, and that the plaintiff had the power to collect the rents, issues and profits of the premises, as far as might be necessary for the enforcement of the equitable rights of the wife.

This was not finding that the legal estate was in the plaintiff, as the appellants have argued; but simply that he became vested by his appointment, with the right to the immediate possession and as incident to it, the right to the rents and profits and the right to lease the property, with the permission of the court, that it might yield rents and profits to be applied to the payment of the alimony and the maintenance (Neale v. Bealing, 3 Swans. 304, note c; Haney v. Haney, 2 Ch. Rep. 49; Morris v. Elme, 1 Ves. Jr. 139; Id. 165; Jeremy’s Eq. Jurisp. 252, 253 ; Story’s Eq. Jurisp. 833, 833 a).

The plaintiff being in possession of the real estate by the sequestration of it, his possession could not be disturbed without the leave of the court; for his possession is the possession of the court (Angel v. Smith, 9 Ves. 336; Lord Pelham v. The Duchess of Newcastle, 3 Swans. 290 a; Sea Ins. Co. v. Stebhins, 8 Paige, 565; Story’s Eq. Jurisp. 833 a; Daniell’s Chancery Practice, 1267, 2d Eng. ed.). A fraudulent alienation of the property can have no effect upon a sequestration, and this applies even to a voluntary conveyance executed before the sequestration, for the purpose of defeating it (Coulson v. Gardiner, 2 Ch. Cas. 42; 3 Swans. 279, note a; Cook v. Cook, Com. R. 712; Marquis of Caermarthen v. Howson, 3 Swans. 301, note a; Withan v. Bland, Id. 277, note a; Bird v. Littledale, Id. 299, note a; Hamblin v. Ley, Id. 301, note a); and it is said that where the purchase is made after the decree, it will not affect the sequestration, although the purchaser had no notice of the decree (Squib v. Snelling, 2 Ch. Cas. 47; Cook v. Cook, Com. R. 713). It will not affect valid rights previously acquired, and even a conveyance to an innocent purchaser for value made afterward will be protected, and when any right or title is claimed adverse to the sequestration, the practice is for the claimant to come into the court and be examined pro interesse suo, and if it appear to the satisfaction of the court, that the claimant has a superior right or title, the sequestration will be discharged as against him (Att'y Gen'l v. Coventry, 1 P. Wm. 309, note 1; Wharam v. Broughton, 1 Ves. 180; Daniell’s Chancery Practice, 1269, 1270, 1271); and though it was formerly questioned (Kaye v. Cunningham, 5 Mad. 406), it appears now to be settled, that the party for whose benefit the sequestration has been ordered may require the party claiming an adverse right or title to come in and show cause why he should not be examined pro interesse suo (Johnes v. Cloughton, Jac. 573; Brookes v. Greathed, 1 J. & W. 178; Hamlyn v. Lee, Seton on Decrees, 413; Daniell’s Chancery Practice, 1270, 1271). But though the court will interpose to prevent any disturbance of its receiver or sequestrator in his possession under the order for a sequestration, it generally refuses to interfere against the legal title (Tyson v. Fairclough, 2 Sim. & S. 142 ; Jeremy’s Eq. Jurisp. 252); and when applied to, will either examine the title itself and discharge the sequestration as against it, or will leave the party claiming a right to the possession under a superior legal title to enforce his right at law (Angel v. Smith, 9 Ves. 335; Dixon v. Smith, 1 Swans. 451; Att'y Gen'l v. Coventry, 1 P. Wm. 306; Empringham v. Short, 3 Hare, 461; Gilb. For. Rom. 81).

The judge further held that the plaintiff, as receiver, was entitled to ■ a decree adjudging the conveyance from • Carey h> Whyte, and the mortgage and the assignment of it to be void, and directed that they should be surrendered and canceled. This the court had no power to do. I am not aware that in any ease a court of equity has ever assumed to dispose of the real estate to enforce a compliance with its decree by a sequestration. The cases cited show that in England the court has never gone further than to take possession of the real estate, that the rents and profits might be applied under the decree; but whether any court of equity has or not, it is very clear that it cannot be done under our Revised Statutes in a case like, the present, the statute giving the right only to sequester the rents and profits. This in no way affects the legal title, or the transfer of it. It gives, by the sequestration, a right to the possession, and this being, as I understand, a vacant lot, the plaintiff, as receiver, has the constructive possession of it. The conveyance to Whyte in no way affected the plaintiff’s right to the possession. He could have applied to the court for liberty to lease the lot, that it might yield rents and profits, and if Whyte, or his grantees or heirs, assumed in any ■ way, by virtue of the conveyance, to interfere with or disturb the plaintiff’s right of possession, or any of the rights accompanying it, the court would interpose and enjoin him or them from doing so, and might proceed against them as for a contempt (Angel v. Smith, 9 Ves. 336). Though the conveyance was of no effect as against the sequestration, it was good and passed the legal title as between Carey and Whyte. Courts of equity order conveyances to be surrendered up and canceled as between the parties to them, where the conveyance has been obtained by a fraud practiced by the one party upon the other. But where the grantor and the grantee are co-operating parties in a fraud, the conveyance having been executed and delivered with the fraudulent intent of defeating third parties, such as creditors or others, of their just rights or remedies, the rule is otherwise. In such a case, and it is this case, the conveyance is good between the parties to it. The rule is thus stated by Story: “ Although voluntary conveyances are or may be void as to existing creditors, they are perfect and effectual as between the parties, and cannot be set aside by the grantor if he should become dissatisfied with the transaction. It is his own folly to have made such a conveyance. They are not only valid as to the grantor, but also as to his heirs, and all other persons claiming under him in privity of estate with notice of the fraud. A conveyance of this sort, it has been said with great truth and force, is void only as against creditors, and then only to the extent m which it may be necessary to deal with the conveyed estate for their satisfaction. To this extent, and to this only, it is treated as if it had not been made. To every other purpose it is good. Satisfy the creditors and the conveyance stands ” (Story’s Eq. Jurisp. § 371), and courts of equity moreover, where they do interfere and direct a conveyance or other instrument to be canceled, do so upon such terms as may be equitable and just, such as the party’s returning what he has received, or making adequate compensation where it is equitable, or where they relieve against usurious contracts, or instruments tainted by usury, by requiring the borrower to pay what is really due, for unless his complaint contains that offer it will be dismissed, and where both parties are in pari delicto, as in this conveyance by Carey to Whyte, they do not interfere, but leave both parties in the position in which they have voluntarily placed themselves (Story’s Eq. Jurisp. §§ 300 to 303, and 692 to 703). But a very different result is produced in this case, by directing the conveyance and the assignment to be delivered up and canceled. Eor all that appears, Whyte may have paid the full consideration of the property. It purports to have been conveyed for the sum of $4,000, subject to a mortgage of $1,500, and for all that appears, Whyte may have paid this amount less the $1,500 mortgage and the $1,000, the estimated value of the wife’s dower interest. Now what becomes of this payment ? Is the loss to he imposed upon the one wrong-doer and the other to have the benefit of it, especially where it is unnecessary ? for this conveyance may have been fraudulent as against creditors, and fraudulent as against the wife’s equitable rights in the action for the divorce, but as respects her, it could in no way affect her rights in that action ; for Whyte’s legatees, or the assignees of the mortgage made by him, can acquire no enjoyment of the property conveyed by Carey to Whyte, without coming into the court that ordered the sequestration, and obtaining, if entitled to it, the possession and enjoyment, by the authority and permission of the court (Angel v. Smith, 9 Ves. 336 ; Cook v. Cook, Com. 712). Nor does it affect the question that Carey was under injunction when the conveyance was made, and Whyte knew it. Carey is liable to punishment for disobeying the injunction, but that would not, as between Carey and Whyte, affect the validity of the transfer. It would not, as between them, make the conveyance illegal and void. The sequestration moreover, in certain cases, does not merely abate, but falls altogether when the defendant dies, the process being generally personal, and where the decree is, as in this case, for the payment of a personal demand which does not arise'out of covenants or some duty connected with the land, it can be revived only against the personal representatives, and not against the heir (Daniell’s Chan. Pr. p. 1274, and cases cited therein). It would, therefore, he a question in this case, whether it would not fall altogether as respects the land, by the death of the defendant, for, as Lord Hardwieke said, it does not cover the land, and it certainly would as to the alimony, by the death of the wife, or as to the maintenance, upon the children’s arriving at their majority, and the legal title being in the legatees of Whyte, they would then be entitled to the possession, and Townshend would then he entitled to foreclose his mortgage, for there would then be nothing to obstruct it.

The act of 3858, ch. 314, empowers a receiver for the benefit of creditors or others interested in the estate or property held by the receiver in trust, to disaffirm, treat as void, and resist all acts done, transfers or agreements made in fraud of the rights of any creditor, including themselves and others interested in the estate or property held in trust. Tinder this act, and indeed before it, by the authority of the cases I have cited, the plaintiff, as receiver, had the right to compel Townshend and the executors and legatees of Whyte to come into the court, that the conveyances, the mortgage and the assignment of it should be declared void and of no effect as against the sequestration ; but to order the conveyance to be surrendered up and canceled, is to declare that as between Carey and Whyte it is illegal and void, which was not necessary to protect and enforce the wife’s equitable rights, which, moreover, the court had no authority to do under this provision of the Bevised Statutes, and which, so far as I can ascertain, has never been done by courts of equity upon the sequestration of real estate for the enforcement of their decrees. If the conveyance of the legal estate was good as between Carey and Whyte, then the mortgage from Whyte to Carey was equally good, as well as the assignment of it to Townshend. The attempt of Townshend to foreclose the mortgage is quite another matter. That he cannot do without the permission of the court, by whom the order for the sequestration was made. Lord Eldon, in Anon. (6 Ves. 287), said that where there was a sequestration, no person would be permitted to bring an ejectment, or take any other proceeding, without the leave of the court, and that whoever did so rvould be guilty of a contempt; and again, in Angel v. Smith (9 Ves. 335), that it was a contempt of the court to disturb sequestrators ; that a party, even by an adverse title, could not claim in any other way than by coming to be examined pro inter esse suo ; that where the sequestrator is in possession under the process of the court, his possession cannot be disturbed without leave of the court; that his possession is the possession of the court; that the court will not permit itself to be made a suitor in a court of law, being itself competent to pass upon the rights of the claimant, and that were it otherwise it would be putting it in the power of the party against whom the sequestration was ordered, to harass the sequestrator, so as to make it impossible for the court to execute its duty, which is illustrated in the present case by the assignment by Carey, in violation of the injunction to his lawyer, Townshend, who knew of the injunction, and by the attempt of Townshend to get the property by the foreclosure of the mortgage for the non-payment of interest, or whatever advantages to him and detriment to the receiver might arise from the foreclosure of the mortgage and the sale of the property under the foreclosure.

In my opinion the decree should have gone no farther than to declare the conveyance void and of no effect as against the sequestration, and the plaintiff’s rights as an officer of the court under it, and the enjoining of Townshend from foreclosing the mortgage whilst the property was sequestrated for the enforcement of the order for the payment of the alimony, and for the maintenance of the children, and upon the appeal the decree in my opinion should be so modified.

Loew and- Joseph F. Daly, JJ., concurred.

Judgment modified accordingly.