Murphy v. Moore , 30 N.Y. Sup. Ct. 95 ( 1880 )

Learned, P. J.:

Assuming, for the present, that the conveyances from Moore to Werner, and that from Werner to Mrs. Moore, were fraudulent and void as against creditors, the important question is whether the mortgages, executed by Mrs. Moore to Mrs. Briggs and to Mrs.. Whiting, must fail.

. Mrs. Briggs and Mrs. Whiting were Iona fide creditors of Moore. •It does not distinctly appear, but it would seem that the greatest part of this indebtedness arose before the conveyance by Moore to Werner.. It is specially found by the court that, prior, to the execution of the mortgages to Mrs. Briggs and to Mrs. Whiting, these persons were ignorant of the pecuniary affairs and condition of •Moore, and of his ability or inability to pay his debts, and had no notice of the claims of the persons represented by the receiver, and also that they had no knowledge of the circumstances of, or the consideration for the conveyances by which Moore transferred the land to his wife ; and had no actual -knowledge or information of the intent of the conveyances, other than such as appeared from ■the conveyances themselves. Thus it appears that these mortgagees acted in good faith, and with no intent to defraud. . , , ■

It is undoubtedly true, as urged by the plaintiff, that, where a ■ conveyance has been made which is fraudulent against creditors, a purchaser from the fraudulent grantee, in order to resist the rights Of the grantor’s creditors, must have parted with value as a consideration for the conveyance to him. And therefore, if the fraudulent grantee, to secure a pre-existing debt of his own, and without any present consideration, mortgages the property, the mortgagee cannot defeat the rights of the creditors of the original grantor. The reason of this, is plain. The creditors of the fraudulent grantor ai*e entitled to have his property applied to their debts, in preference to one who has parted with nothing on the strength of the apparent title of the fraudulent grantee.

But the present question is entirely different. Here the fraudulent grantee, at the request of the fraudulent grantor, has applied the property to secure debts of the grantor himself. The act then amounts only to a preference given by the grantor to one of his creditors over another. In this there is nothing fraudulent. The fraud consists in his taking away from his creditors that which, should apply to their debts. But when his property is applied to any of his debts, there is no fraud in such application. The fraudulent grantee, in surrendering the property, and applying it to the . payment- of the grantor’s debts, was doing the very equity which -.•would have .been demanded-of her by the court. ■

■ Mrs. Briggs and Mrs. Whiting have legal mortgages on the property. The plaintiff claims that the mortgages are void as to the creditors of Moore. But Mrs. Moore and Mrs. Whiting, being themselves creditors of Moore, are just as equitably entitled to have their debts paid or secured, out of Moore’s property, as. are the persons whom the plaintiff represents. And Mrs. Moore and Mrs, Whiting, besides this equal equity, have the legal rights given by their mortgages. There is no reason, therefore, that they should he deprived of the rights which they have obtained. (Seymour v. Wilson, 19 N. Y., 417.) This doctrine, or one quite analogous, was recently held by this court in Pond v. Comstock (20 Hun, 492).

These views render it needless to examine the question, whether, the assignee of Moore was a necessary party.

■ The judgment must he reversed so far as it affects Mrs. Briggs and Mrs. Whiting, and it must be' adjudged that their mortgages are valid as against the plaintiff and those whom he represents ■; and Mrs. Briggs and Mrs. Whiting must recover against the plaintiff costs of the action and of this appeal.

Present — Learned, P. J., Boardman and Bocees, JJ.

Judgment reversed as to Mrs. Briggs and Mrs. Whiting, and judgment for them against plaintiff, with costs; form of judgment to be settled before Learned, P. J.