This matter comes before the court upon depositions, answers to interrogatories and briefs filed with the court by the parties in lieu of the presentment of formal evidence.
On February 14, 1958 Joseph Paul Lentini and his wife Isabel M. Lentini (hereafter referred to as defendant grantors) purchased two parcels of real property from the plaintiffs. One parcel consisted of a lot improved by a dwelling; the other parcel, two vacant lots. The purchase price for the lot improved by a dwelling was $13,000 which was paid as follows: the defendant grantors made a $2,500 down-payment in cash on December 18, 1957 and upon settlement the Bloomfield Savings Bank advanced the balance secured by a first mortgage upon the premises. In payment for the two vacant lots the defendant grantors gave their promissory note dated February 14, 1958 in the sum of $4,500, payable to plaintiffs; a bond dated the same day obligating them to pay the same sum to the plaintiffs; and a mortgage on these two lots securing this amount. The plaintiffs still hold this mortgage and, although the note is in default, the mortgage has not been foreclosed.
The defendant grantors defaulted upon payment of the aforesaid note and the plaintiffs, instead of foreclosing the mortgage, instituted an action at law on the note in the Atlantic County Court on March 23, 1960. On April 6, 1960 the defendant grantors made a conveyance of the lot improved by a dwelling to Paul Henry Lentini (hereafter referred to as defendant grantee) for an expressed consideration of $1 and other good and valuable consideration. The defendant grantee is the brother and brother-in-law of the defendant grantors.
Judgment in favor of the plaintiffs against the defendant grantors was entered by default on April 27, 1960 upon the action instituted in the Atlantic County Court on the note. Then, on June 20, 1960, the plaintiffs, as judgment creditors of the defendant grantors, commenced this action in the Superior Court, Chancery Division, against both the
defendant grantors and grantee to have the conveyance of April 6, 1960 declared null and void as a fraudulent conveyance and the premises sold under a writ of execution. The defendants answered, alleging that the conveyance was made in full satisfaction of an antecedent debt owed by the defendant grantors to the defendant grantee. The defendants later amended their answer to include a counterclaim to restrain the plaintiffs from proceeding with this action until they have foreclosed their mortgage on the two lots and a deficiency accrues. The separate defenses that the plaintiffs have an adequate remedy at law and that this court lacks jurisdiction were also added by amendment.
Each of the defendants in his depositions and answers to interrogatories states that the defendant grantee advanced the defendant grantors $2,000 on December 18, 1957, which sum was used to make the down-payment upon the property transferred. The depositions further reveal that the defendant grantee, prior to this conveyance to him, had knowledge of the impending suit by the plaintiffs against the defendant grantors in the Atlantic County Court; that this conveyance, although in the form of a deed, was actually only security for the loan of December 18, 1957, despite that there was no provision for repayment; and that the defendant grantors are still living in the property and are continuing to pay all expenses necessary for its maintenance.
The plaintiffs in their pleadings have failed to state the specific provision, if any, of the Uniform Fraudulent Conveyance Act (R.S. 25:2-7 to 19) under which they are proceeding. However, in their brief the plaintiffs have made reference to both R.S. 25:2-13 and 25:2-10 as a basis for the relief sought.
R.S. 25:2-10 provides as follows:
"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."
The burden of proof of insolvency is upon the plaintiffs. The plaintiffs must, in order to prevail under R.S. 25:2-10, show that the defendant grantors were on the date of the conveyance, rendered insolvent. ...