This is a civil action pursuant to the provisions of G. L. c. 237 to recover possession of two certain parcels of land, with the buildings thereon, situated on Prospect Hill Road in Stockbridge in the County of Berkshire (the premises). The plaintiff is the purchaser at a sheriff's sale of all the right, title and interest which the defendant Frank Rockman and Frank Rockman standing in the name of Irene Rockman (the other defendant) had in said premises. The sheriff's deed to the plaintiff (Exhibit No.5) was dated July 17, 1976 and recorded with Berkshire Middle District Deeds in Book 977, Page 765. The defendants' answer denied the allegations of the complaint as to fraudulent conveyances from Frank to Irene Rockman, but it did not attack the execution and sale on purely technical grounds.
The plaintiff's motion for summary judgment having been denied, the case was tried on June 27, 1977. At the trial a stenographer was appointed to record the testimony. Any exhibits introduced into evidence are incorporated herein for the purpose of any appeal.
The plaintiff called no witnesses but sought to introduce answers to interrogatories (Exhibit No.2) and extracts from the deposition in evidence over the defendants' objection. The interrogatories and extracts from the deposition were admitted de bene subject to the defendants' motion to strike. The defendant then moved, subject to his prior motion, that the complete deposition of the defendant Frank Rockman (Exhibit No.1) taken on September 7, 1976 be admitted, and this motion was allowed. The motion to strike was taken under advisement and now is denied. G. L. c. 231 § 89. Mass. R. Civ. P. 32 (a)(2). The defendant called as witnesses the plaintiff and the male defendant.
On all the evidence I find and rule as follows:
1. Genesco Inc. ("Genesco") acquired the assets of a company which the defendant Frank Rockman, one Arthur Lewson and a "Mr. Seltzer" [Note 1] were with. The consideration for this acquisition was the issuance to Rockman and Lewson of 6,000 shares each of the capital stock of Genesco which in turn were pledged to Genesco to secure a note made by Frank Rockman and Arthur Lewson to it. (Exhibit No. 6). The note, dated September 11, 1969, represented a loan made by Genesco to Rockman and Lewson in the amount of $288,935 with interest at the prime rate established from time to time by Morgan Guaranty Trust Company of New York. The note was due when part or all of the security for the note was sold or on September 11, 1972 subject to the makers' right to extend for a year under certain conditions.
2. Mr. Rockman was employed Genesco in 1969 as president of one of their companies at a salary of $60,000 per year. He 1eft its employ in February 1974.
3. By deed dated November 5, 1971 and recorded on November 8, 1971 with said Deeds in Book 917, Page 217, Frank Rockman and Irene Rockman acquired title as tenants by the entirety to the premises from Oronoque Inc. Mr. Rockman borrowed $40,000 from the Genesco Employees Credit Association to finance this purchase, and Mr. and Mrs. Rockman borrowed $20,000 from Lenox Savings Bank to improve the premises. The latter loan was secured by a mortgage on the premises, the former was not.
4. In November of 1971 the stock of Genesco traded at prices ranging from $26.75 per share to $31 per share. [Note 2] Genesco Inc. accordingly held as security for the promissory note to it in the principal amount of $288,935 plus interest of approximately $43,000 capital stock with a value which fluctuated from $321,000 to $372,000 at the time of the original Stockbridge purchase by the defendants.
5. By deed dated November 26, 1973 and recorded with said Deeds in Book 944, Page 936, Frank Rockman conveyed to his wife Irene his interest in the premises.
6. At the time of the conveyance from husband to wife Genesco Inc. had transferred an additional 4,000 shares of stock to both Rockman and Lewson (8,000 shares in all) which were pledged with the original 12,000 shares as security for the note. The principal amount due on the note was still $288,935. Interest then due was approximately $83,000. The stock pledged as security fluctuated in value during November 1973 from 5 1/2 to 7 3/8 per share so the pledged security was worth from $110,000 to $147,500 which was less than the amount of principal and interest due on the note.
7. Mrs. Rockman became employed in a part-time, three days per week, clerical position in 1971 or 1972. Some consideration also was given at this time to her starting a business in this Commonwealth. There were two greenhouses on the premises in Stockbridge, and the Rockmans contemplated Mrs. Rockman and their daughter moving there permanently to engage in a florist business. This never materialized.
8. Mr. and Mrs. Rockman have a joint checking account from which mortgage payments physically are made by Mrs. Rockman. Mr. Rockman's contributions to the account are the larger, he being the president of Vera Sportswear.
9. On March 1, 1976 the premises were attached in the amount of $400,000 by instrument recorded with said Deeds, Book 970, Page 505 (Exhibit No.3). The attachment was of the goods or estate of defendant "Frank Rockman standing in the name of Irene Rockman". A default judgment having been entered against Mr. Rockman on December 29, 1975 for $410,355.88 in damages and $44.40 costs, an execution issued against the "real estate of the said judgment debtor standing in the name of Irene Rockman, conveyed to her by deed recorded Berkshire Deeds, Middle District Registry of Pittsfield, Book 944, Page 936, etc." The sheriff levied on, seized and took the locus on March 12, 1976 (Exhibit No. 4) and proceeded to sell it to the plaintiff on June 18, 1976 for the sum of $25,000 (Exhibit No. 5). The sheriff's deed is dated July 17, 1976 and is recorded with said Deeds, Book 977, Page 765.
10. The plaintiff is an attorney who acted in a representative capacity in making the purchase.
11. No evidence was introduced as to the assets of Mr. Lewson at any time other than his ownership of the Genesco stock pledged as security for the note.
12. Mr. Rockman's assets at the time of the acquisition of the Stockbridge premises consisted of 6,000 shares of Genesco stock and his ownership with his wife of the locus. The stock was pledged to secure the 1969 note to Genesco and the home was mortgaged for $20,000. He also was indebted to the credit union for $40,000. Two years later Mr. Rockman owned four thousand additional shares of stock, but its market value had dropped. The savings bank mortgage on the house had increased. Mrs. Rockman assumed the mortgage in connection with the conveyance to her, but her husband still had some liability to the Bank and the Credit Union.
The plaintiff has attacked both the purchase of the premises in 1971 in the joint names of the defendants as tenants by the entirety and the 1973 conveyance by the husband to the wife as fraudulent conveyances within the meaning of G. L. c. 109A. On all the evidence I find and rule that the taking of title as tenants by the entirety when the premises were acquired in 1971 was not a fraudulent conveyance. The locus was purchased from a third party in an arms-length transaction. Both defendants were present during the negotiations. We have no evidence as to whether only one or both signed the purchase and sale agreement, if any. In any event it would have been usual Massachusetts conveyancing practice in 1971 for title to be taken in the names of husband and wife, as tenants by the entirety.
G. L. c. 109A § 1 defines a "Conveyance" as including:
"every payment of money, assignment, release, transfer, lease, mortgage or pledge of tangible or intangible property, and also the creation of any lien or incumbrance."
G. L. c. 109A § 2 defines insolvency. Paragraph 1 reads:
"(1) A person is insolvent within the meaning of this chapter when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured."
Section 4 of this Chapter on which the plaintiff relies provides as follows:
"§ 4. Conveyance, etc. without Fair Consideration Declared Fraudulent as to Creditors; by Insolvent Person.
Every conveyance made and-every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration. (1924, 147, § 1.)"
I assume in the plaintiff's favor that the election to take title the property being acquired (as opposed to property already owned and thereafter transferred) in the names of Doth husband and wife is a "conveyance" within the meaning of section 1. I further assume that the execution pursuant to which the plaintiff purchased the premises was intended to reach the 1971 transaction and not only that in 1973. Even with these favorable assumptions there are two fatal flaws in the plaintiff's case. No aspect of the 1971 purchase rendered Mr. Rockman insolvent as defined in section 2. He then was obligated to Genesco in the approximate amount of $332,000 for which the creditor held security during the month of November of at least $321,000. The obligation to the creditor was shared by Mr. Lewson so even if the male defendant should be required to pay the entire sum, he was entitled to contribution from his co-maker under Massachusetts law. Quintin v. Magnant, 285 Mass. 450 (1934). The very wording of paragraph (1) of section 2 as to "probable liability" indicates the imprecise nature of insolvency in this context. See Kerrigan v. Fortunato, 304 Mass. 617 (1939). In addition, the purchase of the Stockbridge premises, if it appreciated in value as appeared likely, would increase the debtor's assets, if anything or at a minimum maintain the status quo. The plaintiff's assets were not diluted by the acquisition, but the contrary seems to have been the result. Finally, Mrs. Rockman did furnish consideration for this method of holding title. She joined with her husband in executing the note and mortgage to Lenox Savings Bank. She was jointly liable with him to the mortgagee, MacNeil v. MacNeil, 312 Mass. 183 (1942). Coupled with love and affection (see Newton Mortgage Co. v. Nissen, 280 Mass. 267 ) there was sufficient consideration to avoid annulling the 1971 election.
The conveyance by Mr. Rockman to his wife in 1973 stands on a different footing. In the two year interval the price of Genesco shares in the stock market plummeted. Accordingly the collateral held by the payee was substantially less than the amounts due on the note. Even if Rockman's right of contribution against Lewson is considered, Rockman obviously had insufficient assets to pay Genesco even one-half of the principal amount of the note and of the interest. The assumption of the mortgage by Mrs. Rockman hardly serves as fair consideration since she was already obligated to the mortgagee. While undoubtedly some of the wife's funds may have been used for this purpose, most of the moneys in the joint account admittedly came from the husband. As was said in Mullins v. Riopel, 322 Mass. 256 (1948) at pages 259-260:
"A voluntary conveyance from a husband to his wife is not per se fraudulent for he may still possess property ample to satisfy the claims of his creditors, and, if he does, the latter cannot complain for none of their rights has been impaired. Fraud is never presumed, and creditors attacking a conveyance as fraudulent as to them have the burden of establishing fraud. Jaquith v. Massachusetts Baptist Convention, 172 Mass. 439 , 446. MacNeil v. MacNeil, 312 Mass. 183 , 186. But one deeply in debt, who by a voluntary conveyance puts all his property out of the reach of his creditors, is presumed to intend the natural consequence of such a transfer which is to hinder, delay or defraud his creditors, even if he had no such actual intent and even if the voluntary grantee was ignorant of the insolvency of the grantor or of any presumed or actual intent of his to prevent his creditors from applying the property to the payment of their claims. It follows that this transfer of the $1,775 was fraudulent as to Riopel's creditors. G. L. (Ter. Ed.) c. 109A, § 4. Gray v. Chase, 184 Mass. 444 . Smith v. Clark, 242 Mass. 1 . Dorr v. Tracy, 248 Mass. 201 , 205. Toy v. Green 319 Mass. 354 , 361."
On all the evidence I find and rule that the conveyance by Mr. Rockman to his wife in November of 1973 was fraudulent as to Genesco, G. L. c. 109A § 4 and Mr. Rockman's interest therein subject to attachment and execution despite the conveyance pursuant to the provisions of § 9 (1)(b) of said chapter.
It is well established in Massachusetts that where husband and wife hold property as tenants by the entirety, it can be reached by his creditors. It may be taken on execution, and the purchaser at the sale on execution may maintain a writ of entry against him for possession and title. Raptes v. Pappas, 259 Mass. 37 (1927). If the wife survives the husband, however, such possession and title fails, and the estate vests in the surviving wife absolutely with a right to possession. If she does not survive her husband, then the purchaser's title is absolute. The execution by the sheriff and the sale pursuant thereto effectively conveyed Mr. Rockman's interest in the premises subject to prior encumbrances and Mrs. Rockman's interest delineated above. Title now is held by the plaintiff for the joint lives of the defendants with the remainder in fee to the plaintiff in the event that Frank Rockman shall survive his wife and if he does not, then the remainder to Irene Rockman.
[Note 1] "Mr. Seltzer" received 8,000 shares, but he does not figure further in these financial transactions.
[Note 2] Mr. Rockman testified that at this time a "buy-back" agreement was in effect with Genesco at a price of $50 per share. No documentary evidence evidencing this contract was introduced.