
    Edward R. Lazarus, Appellant, v. Ray Rosenberg and Others, Respondents.
    
      Fraudulent conveyance—where an absolute deed is held to beamortgage, a judgment creditor should be adjudged to have a lien upon the premises subject to the mortgage.
    
    In an action brought by the plaintiff, a judgment creditor of the defendant Mrs. Rosenberg, to set aside as fraudulent and void a conveyance of real estate made by her to the defendant Harris, and subsequently conveyed by Harris to the defendant Mrs. Norton, it appeared that Mrs. Rosenberg, in order to secure Harris against liability as indorser upon a promissory note made by her, delivered to harris a warranty deed of her interest in the estate left by her deceased father. Upon the maturity of the note Harris was obliged to pay the same, and thereafter Mrs. Rosenberg paid Harris a portion of her indebtedness to him. Subsequently, Harris conveyed the real estate to the defendant Mrs. Norton, upon the latter's agreement to pay the balance of his claim, which amounted to §1,1001 The evidence tended to show that Harris transferred his claim against Mrs. Rosenberg to Mrs. Norton when he executed the conveyance.
    The court found that Harris received the deed in good faith as a security, and also that the defendant Norton succeeded to Harris’ interest in the premises, and that the deed to Mrs. Norton was a lien upon the premises to the extent of §1,100. It, however, dismissed the complaint on account of the failure of the plaintiff to tender the amount of the lien before commencing the action.
    
      Held, that this was error;
    That the court should have awarded judgment as follows: First. Dismissing the complaint upon the merits as against the defendant Harris. Second. Adjudging and decreeing that the deed from the defendant Rosenberg to the defendant Harris was intended as security, and is a mortgage, and that the deed from the defendant Harris to the defendant Norton was intended as and is an assignment of the claim of Harris for §1,100 and interest and of said mortgage, and that the same be permitted to stand as security for the payment by the defendant Rosenberg to the defendant Norton of the sum of §1,100 and interest thereon. Third. Adjudging and decreeing that the plaintiff’s judgment is a lien upon the premises described.in the complaint and in said deeds, subject to the lien of the defendant Norton as aforesaid. Fourth. That neither party, as against the other, recover costs of the trial.
    Appeal by the plaintiff, Edward R. Lazarus, from a judgment of the Supreme Court in favor of the defendants, entered in the office of .the clerk of the county of New York on the 13th day of August, 1901, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the complaint upon the merits.
    
      
      Charles G. F. Wahle, for the appellant.
    
      Benno Loewy, for the respondents.
   Laughlin, J.:

The plaintiff brings this action as a judgment creditor óf the defendant Ray Rosenberg, to set aside as fraudulent and void a conveyance of real estate made by her to the defendant Harris and subsequently conveyed by him to the defendant Norton, On the 12th day of April, 1897, the defendant Rosenbei-g was and for a long time prior thereto had been engaged in business. Her father, Fink Solomon, and the defendant Harris, who was her uncle, had for many years been accommodation indorsers of her negotiable paper, Harris being the second indorser. On that day a $3,000 note made by her and indorsed by them became due, A note in renewal thereof was signed by her and indorsed by her father, who was then seriously ill, and the defendant Harris was also requested to sign as an indorser. This he declined to do on account of the illness of Solomon, without security. ' Thereupon, upon the urgent solicitation of Solomon and upon an agreement in writing by the defendant Rosenberg to deed to him, as security for such indorsement, her interest in her father’s estate upon her coming into the inheritance, Hams indorsed the note. On the twenty-eighth day of the same month, Solomon having died in the meantime, the defendant Rosenberg, in compliance with her agreement, executed and delivered to Harris a warranty deed of her interest in the real estate left by her father. The consideration recited in this deed was one dollar, but the true consideration, as already stated, was shown upon the trial.

The action in which the plaintiff obtained judgment against Rosenberg was upon three promissory notes given in renewal of other notes received in payment for goods sold and delivered. That action was commenced on the 11th day of March, 1898, and judgment was recovered on the ninth day of May, the same year. When the note • which the defendant Harris last indorsed became due, he was obliged to pay the same.- Subsequently the defendant Rosenberg transferred to him certain’ notes' for the purpose of reimbursing him in this regard. He realized upon the sale of these notes the sum of $2,100, leaving the balance of her indebtedness, to him on account of this indoi’semónt and payment of the note, the sum of $1,100. The court has found that the deed fx-om Rosenberg to Harris was for the purpose of securing him on said indorsement, and was received by him in good faith. This finding is fairly sustained by the evidence.

The defendant Rosenberg filed objections to her father’s will and was contesting its probate. In these circumstances the defendant Harris did not wish to hold the legal title to the premises, and manifested a desire to transfer the same to any person upon the payment of the balance owing to him. At the suggestion of the defendant Rosenberg or her husband he thereafter and on the 9th day of April, 1898, transferred the premises to the defendant Norton, who was the sister-in-law of Mrs. Rosenberg, by a warranty deed. The consideration recited in the deed is one dollar, but it was shown upon the trial that the real consideration was her agreeing to pay the balance of this indebtedness as security for which she gave two promissory notes, each for $550, one due in six months and the other in twelve months from, the date of the transfer. The trial court found in effect that the defendant Norton succeeded to the interests of the defendant Harris in said premises and that the deed to her was a lien upon said premises to the extent of $1,100. The court, however, dismissed the complaint on account of the failure of the plaintiff to tender the amount of such lien before commencing this action.

In this we think the learned trial justice erred. The conveyance to Harris having been valid as security for his liability as indorser, he could transfer his title or interest; and his grantee, regardless of any notice of knowledge or fraud on her part, could hold the conveyance to the extent of the consideration with which she parted, not exceeding the amount of her grantor’s lien. (1 Perry Trusts [5th ed.], § 222; Popfinger v. Yutte, 102 N. Y. 38; Cook v. Kraft, 41 How. Pr. 279 ; Meltzer v. Doll, 91 N. Y. 365 ; Hamilton National Bank v. Halsted, 134 id. 520; Loos v. Wilkinson, 113 id. 485.) It does not appear that the note which Harris took up as indorser was formally transferred by him to Mrs. Norton, but his cause of action against Mrs. Rosenberg was not on the note but in assumpsit (Griffith v. Reed, 21 Wend. 502; Wright v. Garlinghouse, 26 N. Y. 539), and the fair inference from his evidence is that he parted with his claim against Mrs. Rosenberg and transferred the indebtedness with the security to Mrs. Norton, and no claim is made to the contrary. The case is, therefore, distinguishable from Merritt v. Bartholick (36 N. Y. 44), where it was held that the assignment of a lien, without the assignment of the debt for which a personal liability existed, ■was a nullity. While a mortgage may be given to secure an indebtedness without or in lieu of any personal liability on the part of the debtor (Real Prop. Law [Laws of 1896, chap. 547,], § 214; Spencer v. Spencer, 95 N. Y. 353; Mack v. Austin, Id. 513), yet in this casé there was a personal liability on the part of Mrs. Rosenberg to Harris which we think he has transferred to Mrs. Norton, and from which Mrs. Rosenberg has not yet been discharged, although she may be discharged from it if she shall ultimately obtain a discharge in the bankruptcy proceedings now pending against her. This, however, is quite immaterial to the plaintiff. It is not claimed that Harris has done anything to discharge his lien upon the premises, except to- execute the deed to Mrs. Norton; and if that be ineffectual on' account of a failure to transfer the debt, then the lien as. well as the debt is left with Harris as before. The fact that Harris in ¡his answer" states that he claims no lien upon the premises since his transfer to Mrs. Norton would not estop him from asserting the lien upon which the record remains undischarged, provided the transfer to Mrs. Norton is .a nullity so that the notes she gave would not be enforcible for want of consideration.

These conveyances were on their face absolute. Upon proof interposed under the answers the court has found that they were a mortgage and assignment of mortgage and has fixed the amount of the lien for which the assignment is held by Mrs. Norton, but .by the dismissal of the complaint the plaintiff is left in no.better position than before. He maybe obliged to litigate anew this question as to whether the title of Mrs. Norton is absolute or only held as security for $1,100. On these facts the court should have finally' determined by the decision and judgment the interest of Mrs. .Norton in the premises, and should have declared the legal title thereto in the judgment debtor and that the mortgage be permitted to stand as security so that the plaintiff would be at liberty to sell the property on his execution, subject to the mortgage interest of Mrs. Norton (Chautauque County Bank v. Risley, 19 N. Y. 369 ; Bryer v. Foerster, 14 App. Div. 315; Harris v. Osnowitz, 35 id. 594; National Union Bank v. Riger, 38 id. 123; Clift v. Moses,, 75 Hun, 517; affd., 151 N. Y. 628; Baldwin v. June, 68 Hnn, 284), which is the usual practice where there are no special facts requiring the appointment of a receiver and a sale by him, with directions to apply the proceeds in payment of the mortgage before paying the judgment.

The material facts having been found, we deem this a proper case for the reversal of the judgment and the granting of the appropriate judgment on the facts as found in the decision upon which the judgment was entered. Inasmuch as the security was taken, not in the form of a mortgage, but in the form of a deed, and since the defendant Norton by her answer claimed full title, the defendants should not have been awarded costs. The record does not show the facts essential to enable us to determine whether the plaintiff should have recovered costs of the trial against the defendant Norton, but manifestly he should not have had costs against the defendant Harris.

The judgment is, therefore, reversed, and upon the facts as found in the decision upon which the judgment from which the appeal is taken was based, judgment is awarded as follows: First-. Dismissing the complaint upon the merits as against the defendant Harris. Second. Adjudging and decreeing that the deed from the defendant Rosenberg to the defendant Harris was intended as security, and is a mortgage, and that the deed from the defendant Harris to the defendant Norton was intended as and is an assignment of the claim of Harris for $1,100 and interest and of said mortgage, and that the same be permitted to stand as security for the payment by the defendant Rosenberg to the defendant Norton of the sum of $1,100. and interest thereon from the 9th day of April, 1898. Thvi'd. Adjudging and decreeing that the plaintiff’s judgment is a lien upon the premises described in the complaint and in said deeds, subject to the lien of the defendant Norton as aforesaid. Fourth.. That neither party as against- the other recover costs of the trial.

The appellant, however, after the facts were all disclosed upon the trial, was not awarded the judgment to which he was entitled, and he should, therefore, recover of the respondents the costs of the appeal..

Van Brunt, P. J., O’Brien, Ingraham and Hatch, JJ., concurred.

Judgment reversed and judgment ordered as directed in opinion, with costs to appellant.  