A conveyance by an insolvent made with fraudulent intent and without consideration is void as to an existing creditor, and the question of knowledge of the fraud by the transferee is immaterial. Upon the facts, held that the court was warranted in finding defendant H was insolvent when he transferred property without consideration to defendant P, that he made the transfer with intent to place the property beyond the reach of his creditors and that the transfer was actually fraudulent and void as to the plaintiff, an existing creditor, irrespective of whether or not P had knowledge of the fraud. The court's action in setting aside the conveyance could also have been supported on the ground that there was constructive fraud, H having been insolvent at the time and P having paid no consideration for the transfer. The defendant's contention that the giving of the renewal notes sued on, constituted a new and independent contract dated subsequent to the transfer of the property, was without merit, for the debt had continued from before the transfer and the renewal notes were merely evidence thereof.
Argued October 9th, 1936
Decided November 6th, 1936.
ACTION to recover against the indorser upon promissory notes and to set aside an alleged fraudulent conveyance by him, brought to the Superior Court in New Haven County and tried to the court, Dickenson, J.; judgment for the plaintiff and appeal by the defendants. No error.
Per Curiam. Judgment in this case was entered for the plaintiff on January 10th, 1936. On January 23d, within the time allowed by the rules for an appeal, the defendants' attorney made a motion that the time to appeal be extended upon the ground that they were in Florida and it would take time to communicate with them concerning an appeal and that a copy of the record might be necessary. This motion was presented directly to the trial judge who, without notice to plaintiff's counsel, indorsed upon it an order extending the time to appeal until February 21st, 1936; and the motion was then filed with the clerk. This procedure departed from the provision in the rules which directs that such a motion be filed with the clerk, who is to forward a copy to opposing counsel. Practice Book, 367. Before the expiration of the extension granted, defendants' attorney notified plaintiff's counsel that he would ask a further extension, but no time was stated at which the motion would be made. Such a motion was presented to the trial judge on February 19th, the grounds stated being that a transcript of the evidence was necessary for the preparation of a draft finding and the court stenographer had informed counsel that she would not be able to furnish it for some days. The same procedure was followed as that taken when the first motion was made and, without notice to opposing counsel, the trial judge granted an extension of the time to appeal until March 19th. An appeal was duly taken on that day, the record fee being paid and a recognizance to prosecute taken at the same time. The plaintiff has filed a motion to dismiss the appeal upon the ground that the record fee was not paid nor the recognizance given within two weeks of notice of the rendition of the judgment, as provided in 335 of the rules. That section provides that, when an appeal is filed, the record fee shall be paid and a recognizance given, but that the court may extend the time "for paying such fee, or giving such security, or filing such appeal." Under this rule the court may grant an extension for either or both of the first two matters mentioned apart from an extension of the time to appeal; but if it does extend the time to appeal this carries with it an extension of time in which to pay the fee and give the security. If the time to appeal was properly extended in this case, the paying of the fee and the giving of the recognizance were in sufficient compliance with the rules. The plaintiff also filed a plea in abatement based upon the fact that, because the motions to extend were presented directly to the trial judge instead of being filed with the clerk, it was deprived of an opportunity to be heard upon them. Trial judges should undoubtedly insist upon adherence to the procedure provided in the rules; but the requirement that such motions shall be filed with the clerk is essentially directory and the plaintiff is correct in assuming that the presentation of the motions to the trial judge would not be ground of abatement except as such procedure resulted in wrongly depriving it of an opportunity to be heard. In MacDonald v. Newman, 112 Conn. 596, 598, 153 A. 296, we stated the applicable principle as follow: "Notice and hearing is not ordinarily necessary and failure to accord them can constitute error only where it amounts to an abuse of discretion." In the instant case the reasons for seeking the extension were in themselves such as would amply justify the action of the trial judge in granting further time and the plaintiff does not assert that they were not in fact true. That being so we cannot hold that the trial court abused its discretion. The motion to dismiss is denied and the plea in abatement overruled.
Nathan A. Resnik, for the appellants (defendants).
Charles M. Lyman, for the appellee (plaintiff).
The complaint is in three counts: the first, predicated on the defendant Harris' demand note of March 31st, 1927, to the plaintiff's order for $18,000; the second, on the Wuestfeldt Company's note of February 5th, 1934, for $2800 payable two months after date to the plaintiff's order and indorsed by Harris before delivery; and the third, on a similar note of March 15th, 1934, for $4500. It is further alleged in each count that on November 3d 1933, Harris, then insolvent, conveyed to his daughter, the defendant Peck, real estate in Branford owned by him, without consideration, and in fraud of creditors. The prayers for relief ask damages and that the conveyance be set aside. During the trial the plaintiff withdrew any claim for damages on the first count. The court rendered judgment for the plaintiff against both defendants declaring the deed void, and that it recover of the defendant Harris $4837.50 under the second count, and $3010 under the third count. The notes referred to in the second and third counts were the last renewals of a series of notes commencing in 1932, upon all of which Harris indorser, and all of which evidenced the same indebtedness to the plaintiff. The questions on this appeal relate solely to the trial court's conclusion that the conveyance was fraudulent.
By the claimed errors relied upon, confined to corrections sought in the finding and the overruling of their claims of law, the defendants question the propriety of the court's finding or concluding that: Harris was insolvent on November 3d 1933; he made this transfer with intent to place the property beyond the reach of his creditors; Peck knew or ought to have known of this intention; the transfer was actually fraudulent; it was constructively fraudulent; and by the plaintiff's acceptance of the two notes on which judgment was given, Harris' indebtedness existing prior thereto was not extinguished. The court was warranted upon the evidence in finding Harris insolvent on November 3d 1933. The defendants' claim that Harris' indebtedness of $40,000 secured by a mortgage on his State Street property was not a liability on that date, because the mortgagee subsequently foreclosed it June 28th, 1934, and failed to obtain a deficiency judgment, is patently without merit. It was properly included in the list of liabilities found, as was the property mortgaged to secure it in the assets, at a value of $23,000. Their claim that the second mortgage owned by Harris for $38,000 on a Whalley Avenue property, and his equity in the R. C. Harris Company, should have been found assets as of that date of $38,000 and $14,000 respectively, is unwarranted. While there was opinion evidence indicating these values, the court was not bound to accept it, and the subsequent foreclosing out of Harris' mortgage without his entering an appearance, and receivership of the company with assets insufficient to pay the general creditors, fully justified the court in refusing to find these to be assets of the value claimed, or of a value sufficient to cover the difference between the $78,869.90 total of those other assets whose values were expressly found, and the $107,444.09 total of liabilities.
The court's finding that Harris made this transfer with intent to place the property beyond the reach of his creditors is abundantly supported by the record. His insolvency, his shrinking bank balance, the suits being brought against him, the transfers without consideration of other properties to his daughter shortly before, his own remark concerning this transaction that he had to have a roof to cover his own head, and his failure to testify in the present action, are some of the significant facts in this connection. The warranted finding of fraudulent intent and insolvency of Harris, coupled with the undisputed fact that no consideration was paid by Peck for his transfer of the $5000 equity in the Branford property to her, renders the question of her knowledge of his fraud immaterial. Trumbull v. Hewitt, 62 Conn. 448, 451, 26 A. 350. A conveyance made under such circumstances is void as to an existing creditor such as the plaintiff was here. Pepe v. Santoro, 101 Conn. 694, 697, 127 A. 277. The court did not err in concluding that the transfer was actually fraudulent.
Had it been unwarranted in this conclusion, however, upon the other facts found its action in setting aside the conveyance could be supported on the ground that there was constructive fraud, Harris having been insolvent at the time, and Peck having paid no consideration for the transfer. Redfield v. Buck, 35 Conn. 328, 338; Paulk v. Cooke, 39 Conn. 566, 572; Quinnipiac Brewing Co. v. Fitzgibbons, 71 Conn. 80, 85, 40 A. 913; Fishel v. Motta, 76 Conn. 197, 198, 56 A. 558; Pepe v. Santoro, 101 Conn. 694, 697, 127 A. 277; Daly Brothers, Inc. v. Spallone, 114 Conn. 236, 241, 158 A. 237; Dombron v. Rogozinski, 120 Conn. 245, 247, 180 A. 453. The defendants' final contention, that the giving of the renewal notes sued on constituted a new and independent contract dated subsequent to the transfer of the property, is without merit, for the debt had continued from before the transfer and the renewal notes were merely evidence thereof. Bolles v. Chauncey, 8 Conn. 389, 391; Frink v. Branch, 16 Conn. 260, 275; Boswell v. Goodwin, 31 Conn. 74, 83; City National Bank v. Stoeckel, 103 Conn. 732, 741, 132 A. 20.