Opinion
11-24-1809
NATIONAL STATE BANK OF ELIZABETH v. McCORMICK et al.
Edward Nugent and R. V. Lindabury, for complainant. Samuel Schleimer and Samuel Kaliseh, for defendants.
Bill by the National State Bank of Elizabeth against William J. McCormick and others to set aside an alleged fraudulent conveyance of real estate, and to subject it to a lien of complainant's judgment. Decree for complainant.
Edward Nugent and R. V. Lindabury, for complainant.
Samuel Schleimer and Samuel Kaliseh, for defendants.
REED, V. C. This bill is filed to set aside a deed as fraudulent in respect to the complainant. William J. McCormick was an indorser on a note discounted for the benefit of his brother by the National State Bank of Elizabeth, the complainant. He was also the owner of a half interest in a lot of land In Elizabeth. On October 11, 1898, after the death of his brother, but before the maturity of the note, McCormick sold his interest in this lot to Thomas F. Callaghan. Judgment was afterwards got by the bank against McCormick, and upon the return of the execution issued upon it, unsatisfied, this bill was filed to set aside the sale to Callaghan. The brother of William J. McCormick died insolvent. William J. McCormick was informed of this fact, and the bank requested him to give a mortgage to secure it for the unmatured paper of his deceased brother, upon which Mr. William J. McCormick was in-dorser. Instead of doing so, he, as already recited, on October 11th executed this deed for the only piece of real estate of which he was the owner. The expressed consideration in the deed was $5,000. If paid at all, this sum was paid by John Ryan, the father-in-law of Callaghan. The conveyance was to be a gift, they say, by Ryan to his son-in-law. The circumstances surrounding the payment of this sum are these: On October 11, 1898, John Ryan presented a 10-days note to the First National Bank of Elizabeth, for $5,000, and had it discounted. The money was drawn on Ryan's check, payable to Callaghan. This is the money which Ryan and Callaghan say was paid over to McCormick in the office of Lawyer Schleimer, in Elizabeth, at the time when the deed from McCormick to Callaghan was executed and delivered. On October 13th John Ryan brought $5,000 to the bank, with which he paid off the $5,000 note. The complainant insists that the last $5,000 was the first $5,000. that the money taken out was returned, and that the pretended tradition of the money from Callaghan to McCormick, if it occurred at all, was a juggle intended to give an air of veracity to what was in fact a fictitious transaction, Intended to put McCormick's property beyond the reach of any future judgment. I think that it is probable that the money was present at the time of the execution of the deed, and that it was passed from Callaghan to McCormick through the intervention of the lawyer. But the complainant insists that the same money came to the hands of Ryan, and was by him presented to the bank in payment of the $5,000 note. It is in evidence that, when the $5,000 was paid to Callaghan, it was in packages enveloped by bands. Mr. —thinks that, when the $5,000 was returned to Ryan, it was also enveloped in bands similar to those which bound the money first delivered by the bank to Callaghan. Mr. Schleimer, the lawyer, however, says that he counted the money at the time it was delivered to McCormick, and in doing so removed the bands which had been round the packages. The inference that the sum paid by Ryan was the same delivered to Callaghan is, however, rested mainly upon other circumstances. Both Ryan and Callaghan were well acquainted with McCormick. Both Ryan and McCormick were visitors at Callaghan's saloon, and the latter had a room in Callaghan's building. Ryan does not satisfactorilyaccount for his possession of a sum of $5,000 on the 13th of October, which he derived from any source other than this. His account is that he had about $5,500 in his safe at home; that he was keeping this amount in his safe because he was expecting to purchase two pieces of property belonging to a Mr. Morris; that he had requested his friend, Mr. Brophy, to see if the property could be bought from Morris; that, when he found that it could not be bought, he, on October 13th, took $5,000 of the $5,500 to the bank, and paid his note. Now, Mr. Brophy says that Ryan did ask him to ascertain if Morris would sell this property; that he did speak to Morris about the matter, he thinks twice, and on both occasions Morris refused to sell. The date when either of these interviews occurred, he is unable to fix. The aspect of the matter so far is this: Ryan wished to pay $5,000 for Callaghan. He says he had $5,500 in his safe. Instead of taking this money to make the payment, he gets a 10-day note discounted, to raise the amount, and keeps the $5,500 still in his safe. Now, this suggests several queries. Why did not he use the money in the safe, and wait until the owner of the properties he wished to buy, and who had refused to sell, should change his views, and then use his credit in the bank, if it ever became necessary to do so? Then, again, the note was payable in 10 days. Whence did he expect to get the money to pay the note in 10 days, if on October 11th he resolved to keep the $5,500 to await the possible change in the mind of Morris? Neither Ryan nor Brophy says that a decisive answer was to be made within that time, or within any particular time, or that any further or different reply was expected from Morris. Yet, according to Ryan's story, between October 11th and 13th he suddenly became convinced that he could not buy the property, and so used the money to pay the note, which had run but two days, and was yet unmatured. It is to be observed that while this money, of which a large part had been received as early as July, was kept in the safe, Ryan had an account running in the complainant's bank, situated within 200 feet or 300 feet from his residence and place of business. This bank account exhibits the fact that deposits were made quite often, and these deposits were of cash as well as of checks. On July 8th he deposited $1,200, and on July 13th he made another deposit of an additional $1,200. This remarkable conduct could have been made credible only by showing whence the $5,500 came. Instead of demonstrating that his receipts, not otherwise applied, permitted him to accumulate this fund, his explanation is a tissue of falsehoods. He first said that he got $1,850 from the Emigrants' Savings Bank, in New York; that among this money was a $1,000 bill; and that this bill was among the $5,000 which he paid to the bank on October 13th. He says that he drew $550 from the Seamen's Savings Bank. This was said in explaining the source of the $5,500 which he says was in his safe on October 13th. On cross-examination he refuses to say explicitly that this money was not deposited in the complainant's bank, and, when confronted by the bank books, it was demonstrated that he drew from the Seamen's Savings Bank on July 7th $1,200, and deposited in the First National Bank of Elizabeth on July 8th the same sum; that he drew from the same savings bank on July 13th $650, and from the Seamen's Savings Bank on July 13th $552.02, and on July 13th he deposited $1,200 in complainant's bank. It is demonstrated that these credits were used to make a loan to Michael Burns on a mortgage for $2,500 executed on July 12, 1898.
These facts show that Ryan was a careful investor, not likely to let his money lie idle. His deposits in the bank were not for accumulation, but for business, and only sufficiently large to make a respectable business appearance. The rest of his money was put out at interest, in interest-paying savings institutions, until a higher interest could be obtained for it from other investments. Instead of keeping his money in his safe, he was careful to keep it at interest; and, when the Burns loan was made, it is perfectly apparent that he only drew the money from the savings bank because he had no considerable amount of cash lying idle in his safe. Where, then, did he get the $5,500 between July 13th and October 13th? It is true that he says that he had investments amounting to $20,000, $17,000 of which were mortgages, and that he owned $35,000 worth of real estate, and that his business brings him in $4,000 a year, one-half of which is profit; but there is not the least attempt to show that in this interval any property was sold, or any mortgage was paid off. It is not pretended that his interest or rents or business receipts paid during that period would amount to any considerable part of $5,500. Now, the supreme importance of otherwise accounting for this possession of $5,000, which he paid to the bank, was perfectly apparent to his counsel. He was charged in the bill with repaying the same sum which Callaghan had received for the discounted note. He knew the necessity of making an explanation of the source of this fund. He began to do so by stating the withdrawal in July of $2,400 from the two savings banks. As we have seen, he entirely failed in this explanation, and he failed to make any other showing of receipts, because no such evidence was producible. In the face of this, the testimony of his wife, that she saw money in the safe, and that her husband told her he had $5,500 in the safe, and that she saw a large package, has very little force. I have no doubt that he kept money at most times in his safe, for the payment of small bills. Nor do I doubt that on special occasions he had large sums in hissafe for a night or two. He probably kept the $1,200, which he drew on July 7th, in his safe, until he deposited it on July 8th. 1 think he kept the $5,000, which was drawn from the bank on his check to Callaghan, in his safe on the night of October 11th or October 12th, or on both nights. Any person getting a sight of the money on either occasion would have been a competent witness to swear that he saw money in large amounts, and, if he counted it, of a particular amount. From this failure to account for the possession of the $5,000, and the failure of Ryan's attempt to do so, I am satisfied that the story told by Pender, the detective, is substantially true. Pender was about Callaghan's saloon for days, and he says that McCormick had a room there, which is admitted. After referring to his daily reports to his employer, the Pinkerton Detective Agency, he gives an account of a conversation with McCormick, when he says that Callaghan was present. He says that McCormick dreaded supplementary proceedings under the prospective judgment, and was casting about for some way to account for the $5,000 consideration for the sale of this property. He says that various ways for accounting for this loss were discussed. He says that Ryan came there occasionally. It is in evidence that McCormick soon after disappeared, and his whereabouts have not been traced.
Now, that McCormick sold the property to avoid this judgment, I have no doubt whatever. That the circumstances raise a grave suspicion that Callaghan had notice of his purpose is, to my mind, obvious. This, in itself, would support a decree which, after fixing upon the property a liability for the payment of the $5,000, would subject the remaining interest in the property to the complainant's judgment. But I do not think that this is the limit of the complainant's right My view of the transaction is this: I think that the sale of the property was intended to stand. I do not believe that there was an understanding between McCormick and either Ryan or Callaghan to the effect that the latter should hold the title to the property for the former. The design was to transmute the real estate into money, which could be more readily concealed from McCormick's creditors. I believe that by some arrangement between McCormick and Ryan, and probably Callaghan, the $5,000 which may have been passed to McCormick on the day the deed was delivered was afterwards put into the hands of Ryan, he to retain it probably for McCormick's benefit, and that this was the money which Ryan brought to the bank to pay the note. I believe this was understood by the parties to be an arrangement entered into for the purpose of putting the money out of the reach of McCormick's creditors. This, in my judgment, taints the whole transaction. Even if Callaghan was not privy to the arrangement, the same result would follow. He paid nothing for the property. It was a gift to him, and if the transaction between McCormick and Ryan, who paid the consideration, was fraudulent, it is voidable. So much for the judgment debt.
Besides the judgment debt, for the collection of which the bill was filed, the complainant had the indorsement of the same defendant upon the note for $2,200, which matured November 18, 1898. The defendant having departed, a writ of attachment was issued, and this property inventoried. The claim of the complainant has been established by a judgment, and it has filed a petition to be admitted as a party representing this claim. I do not think that there can be a decree for the complainant in respect of the latter judgment in this suit. This suit is included within the sixth class of creditors' bills, as those classes are defined by Vice Chancellor Pitney in Iauch v. De Socarras, 56 N. J. Eq. 524-528, 39 Atl. 381. The bill is filed on behalf of the judgment creditor alone. The intervention of another creditor by petition against the protest of the defendant was disallowed in the case just mentioned. That the petition in the present suit is filed by the complainant itself, and not by another creditor, does not create a distinction between this and the former case. The principle upon which the decision went was that the defendant in this class of creditors' bills was entitled to his answer to a bill which charged that property had been conveyed in fraud of a creditor, in respect of a particular debt. It was expressly said that the petition was inadmissible, not because the complainant cannot include in one bill a charge that a conveyance was made in fraud of two or more judgments held by him, for this was left an open question. What was decided was that a conveyance could only be set aside by a bill, and not by a petition. The order permitting the filing of the petition in this case should be vacated. There should be a decree setting aside the conveyance to Callaghan, as to the judgment set out in the bill.