PITNEY, V. C.
Bill by D. Leroy Dresser and others against Andrew J. Zabriskie and wife and others to subject to the lien of a judgment certain lands and personal property conveyed by defendant Zabriskie to his wife. Heard on pleadings and proofs.
The complainants are judgment creditors of the defendant Andrew J. Zabriskie, and the object of the bill is to subject to the lien of the judgment certain lands and personal property conveyed by Zabriskie to his wife, through an intermediary, in September, 1895. There are three conveyances of real estate and one of personal property. The consideration mentioned in one of the deeds is $3,500, and in the others it is nominal. At the time these conveyances were made, the husband was engaged in certain business transactions with the complainants, and, according to their showing, was considerably indebted to them. The transactions were brought to a close in March, 1896, and suit was brought by the complainants against Zabriskie, which resulted, after litigation, in a judgment for $18, 183.01. The answer sets up that the object of the conveyance was to secure Mrs. Zabriskie for the amount of a loan by her to her husband, made partly in 1891 and partly in 1892, amounting to $2,966.67. The proof is clear that at the time stated Mrs. Zabriskie received that amount of money from her brother, the executor of her father's estate, and indorsed the checks over to her husband, who received and appropriated them to his own use. He swears, and the evidence indicates, that he Used the greater part, if not the whole, of the money in buying and laying out into building lots the premises in question. Xo note or other memorandum in writing of the indebtedness was given by him to Mrs. Zabriskie, but both swear that it was understood that he owed her for the amount of that money, and was to pay her. He did, however, shortly afterwards make a will, in which he, in addition to a gift to his wife in lieu of dower, expressly provided that she should be paid the amount he had received from her, but without interest. The will speaks of the money which she had "given" him, and Mrs. Zabriskie knew that such a provision was made; but it is not clear that she knew that he had used the expression "given." He is a man of middle age, and had been in the mercantile business for many years, part of the time in Chicago, and returned to New Jersey about 1890, and then engaged in business in New York City, at first as a salesman. He appears to have been reasonably successful, earning a good salary, but lived generously, so that in July, 1895, and previous to the conveyance to his wife, he was obliged to mortgage his homestead for $3,500 to pay current bills for living expenses. His wife swears that this was the occasion of her asking him to secure her for the debt to her, and that it resulted in the conveyances which are attacked by the bill.
Otto Crouse, for complainants.
Cornelius Doremus, for defendants.
PITNEY, V. C. Counsel for the complainants contends, first, that the fact that no promissory note or written memorandum was made to the wife at or about the time of the advance of these moneys, together with the language used in the will by the husband, in which he speaks of the money as having been "given" to him by his wife, are sufficient to show that there was really no debt arising out of the transaction, and that the resuscitation of it as a debt to support the conveyance in question was an after-thought. But I am unable to adopt that view. The will was written by Mr. Zabriskie himself, without the aid of counsel, and it is not clear that he used the word "given" in any different sense from that of his wife having "handed" or "delivered" the money to him; and against the view that it was received as a gift is the fact that he did especially provide in his will for its payment to her, over and above the ordinary portion which he gave to her.
The counsel of complainants contends, in the second place, that, granting that there was a debt existing from the husband to the wife, yet that the circumstances prove that the conveyance was made for the purpose (participated in by both parties) of defrauding the complainants; and that on that ground it must be held to be void as against the complainants, upon the principle that, where a conveyance is actually contrived in fraud, the fact that consideration was paid does not relieve it of its fraudulent charac ter. The leading case in New Jersey on that subject, and one which well illustrates the principle, is Green v. Tantum, 19 N. J. Eq. 105, 21 N. J. Eq. 364. There the judgment debtor, having suffered a large verdict against him at the circuit, hastened, before judgment could be entered upon it, to assign several mortgages which he held upon real property in this state to his brother, who actually paid him the cash for them. The circumstances indicated strongly that the brother raised the cash for the purpose of enabling him to put the money in his pocket, and keep it from his creditor. Infact, the conversion by the debtor of fixed and tangible property subject to levy into cash, in anticipation of a judgment and execution against him, is an important and efficient step in a scheme to defraud his creditors, and, unless the cash is honestly applied to the payment of his debts, is of itself a strong indication of fraud. It is, however, more difficult to infer fraud from, a mere transfer of fixed property by a debtor to a creditor, either in satisfaction of, or by way of security for, the payment of his debt. The natural result of such an act is, not to enable the debtor to dispose of his property in fraud of his other creditors; and the right to prefer a creditor is still sacred in this state. And here it is to be observed that the natural effect of preferring one creditor is, so to speak, to defraud the others, and yet a conveyance made honestly for the purpose of preferring a creditor must be upheld. See, upon this topic, Wait, Fraud. Conv. § 201, especially what was said by Chief Justice Black in Covanhovan v. Hart, 21 Pa. St. 500. But fraud in such a case (conveyance by debtor to creditor) may be proven or inferred from the circumstances. The circumstance usually relied upon to show fraud is that the conveyance is merely colorable, and the grantor still remains the actual beneficial owner, while the legal title stands in the creditor. A difficulty in applying this test to the case of a conveyance by the husband to the wife arises from the circumstance that the husband generally manages the wife's property, and naturally derives a personal benefit from it; so that no change in either management or apparent ownership usually attends the transfer of the legal title. In the present case, at the time the money was advanced by the wife to the husband and invested in this real-estate speculation, the husband was in prosperous circumstances, and the speculation promised to be profitable. In fact, it was reasonably profitable, and quite a large amount of money was derived from it prior to the conveyances in question. About that time he entered into business relations with the complainants, which did not prove successful, and he became largely indebted to them, and was obliged to mortgage his homestead heavily to pay his current expenses. In that state of affairs, feeling that it was possible, if not probable, that he would not be able to pay all his creditors, he felt it to be his duty—and, whether he felt it to be a duty or not, he felt disposed—to secure his wife, and conveyed this property to her for that purpose, as they both swear. The criticism made upon the transaction in itself is that it should have been put in the shape of a mortgage, instead of an absolute conveyance. But the character of the property was such as, in my judgment, to excuse the use of an absolute conveyance. The homestead was as I have said, heavily mortgaged, and there was in it little security for the wife. Her principal security was in the lots remaining unsold from the land purchased for speculative purposes, and that, property was producing no income, and her source of payment was the sale of lots exclusively. Now, it was much more convenient to have the title to the property in her name for the purpose of making conveyances than to have it in the shape of a mortgage, which would require, in order to satisfy purchasers, a special release to be inserted in every conveyance made. The reasons, however, for giving a deed instead of a mortgage were not inquired into at the hearing. There may have been no motive or reason given at the time except the bare advice of counsel. But then it is urged that the husband retained the management and control of the property. But here again such control and management were perfectly natural under the circumstances. His wife knew nothing about the business of selling building lots, and naturally left that to her husband. It was further urged that the fact that all the personal property, house furniture, horse and carriage, etc., of the debtor were also transferred, shows fraud. This is undoubtedly an indication of a desire to protect it from creditors. But the effect of it upon the whole case is, in this instance, much weakened by the small value of the chattels, which exceed very little, if any, the amount exempted from execution by statute, and by the fact that several articles were included in the bill of sale which belonged to the wife; and by the further fact that the transfer was made several months before suit was either brought or threatened.
The result of my study of the case is that I do not find any such indicia of fraud in it as will justify the court in declaring the transfer to have been fraudulent. I think the case is clearly distinguishable from those relied upon by the complainants. In Luers v. Brunjes, 34 N. J. Eq. 19, a debt more than 20 years old, about the existence of which originally there was some doubt, was revived for the purpose of defrauding creditors. Evidently the chancellor believed that, if there ever was a debt, it had been forgiven. Christie v. Bridgman, 51 N. J. Eq. 331, 25 Atl. 939, and 30 Atl. 429, was in reality much the same as Luers v. Brunjes. A debt more than 20 years old, barred by a discharge in bankruptcy, was revived to furnish a consideration for the conveyance there attacked. There were suspicious circumstances as to the actual existence of the debt, and, while the learned vice chancellor states his conclusion that the proofs sustained the existence of the debt, it is manifest that he felt that the wife's claim had no real merit, and was revived solely for the present emergency. In fact, the case might well have been put on the ground taken by Vice Chancellor Emery in the recent and somewhat similar case of Minzeshiemerv. Doolittle (N. J. Ch.) 39 Atl. 386, namely, that the debt had been paid or forgiven, and ceased to exist. The debt in the present instance is actual and recent, and the wife asked to have it secured. She knew that her husband was not earning a living, and was not prosperous; but the proofs fail to show that she knew, or ought to have known, that he was owing a large sum of money which he could not pay, and intended (if he did intend) to defraud his creditors. The case more nearly resembles Cole v. Lee's Ex'rs, 45 N. J. Eq. 779, at page 784, 18 Atl. 854, where an attack was made upon a mortgage given by the husband, through an intermediary, to his wife, to secure an old debt; and Brock v. Bank, 48 N. J. Eq. 615, 23 Atl. 269,—both cases in the court of appeals. I will advise a decree that Mrs. Zabriskie is entitled to a lien upon the premises conveyed for the sum of $2,966.67, with interest from the date of the conveyance, subject to a credit for the actual value at that time of such of the chattels conveyed as did not belong to her, and subject to an accounting for the proceeds of any sales of lots or of collections on account of the price of lots previously sold. She will be credited for taxes, expenses of sales, etc. I will not allow interest before the conveyance, because she, as a member of the family, had the benefit of the use of the money, and there is some evidence to indicate that she acquiesced in that part of her husband's will which forbade payment of interest on that sum.