Summary
In Hardy v. Skinner, 31 N.C. 191, it was admitted that the plaintiff "did not impute any actual fraud to the parties other than what appeared from the deed itself; but he insisted that the deed was, upon its face, fraudulent in law, no matter what the defendant might show, and that the court was bound so to pronounce.
Summary of this case from Booth v. CarstarphenOpinion
(December Term, 1848.)
Where A made a deed of trust to secure creditors, and it was stipulated in the deed that a sale should not take place for three years, and, in the meantime, the trustor should remain in possession of the property, consisting of lands, negroes, etc., and on the trial of a suit the creditor, impeaching the trust, admitted that there was no actual fraud, but contended that the deed on its face was fraudulent in law: Held, by the Court, that whether the deed was fraudulent or not was a matter for a jury, under all the circumstances, but that the court could not from what appeared on the face of the deed, say it was fraudulent in point of law, because there might be many circumstances in which such a deed would be good, and the creditor admitted that it was not fraudulent in fact.
APPEAL from the Superior Court of Law of CHOWAN, at Fall Term, 1848, Bailey, J., presiding.
Heath for plaintiff.
W. N. H. Smith for defendant.
The plaintiff claimed the premises under a purchase by his lessors in 1845, under two judgments and executions against William R. Skinner — one, at the instance of (192) Mather and Lecompte for $232.51, and the other at the instance of the lessors of the plaintiff for $1,388.66. The defendant also claimed the premises under a deed to him from William R. Skinner, made 26 April, 1841. It recites that the maker was indebted to James C. Skinner, the defendant, in different sums on three notes, due 1 July, 1837, 27 October, 1840, and 5 April, 1841, and amounting together to $5,142.92; and also that he was indebted upon two other notes for $337.53, each, to fall due 22 September, and 22 December, 1841, which the defendant had endorsed to other persons; and that he was indebted to six other persons, named in different sums, which fell due at several periods in 1837, 1839, 1840, and March and April, 1841, amounting in the whole to $1,990.38; all which debts, making the sum of $7,828.36, constituted the first class of debts secured by the deed. It further recites that the maker was indebted to thirteen other persons, named, in various sums, which fell due in 1839 and 1840, amounting to $3,440.35, whereof two were the debts to Mather and Lecompte and the lessors of the plaintiff, on which the sheriff sold the premises in dispute; which thirteen debts constitute the second class secured by the deed. It then conveys to the defendant 400 acres of land, whereon the maker then lived, 11 slaves, 4 horses, and small stocks of cattle, hogs and sheep, farming tools and household and kitchen furniture, upon the following trusts: That if, at the expiration of three years thereafter, any portion of the debts of the second class should remain unpaid, and the trustee should be required by such a part of the creditors of the second class as should represent the greater interest, he should sell at public sale on six months' credit as much of the property as would discharge the debts of the first class and interest; and that he should in like manner sell the remaining property, if any, and with the proceeds pay the debts of the second class, if sufficient, (193) or, if not, pro rata; and that if any of the creditors whose debts are mentioned in the deed and for which the defendant was bound should require payment of his or their debts before the expiration of three years, then the trustee might at any time sell as much of the property as would satisfy such debts; and, further, that all the property conveyed should be and remain in the possession of William Skinner until it should be required for sale, according to the terms of the deed; and the trustee should not be responsible for it while the possession should thus continue.
The defendant, in further support of the issue on his part, proposed to give evidence that the deed was made bona fide to secure the debts mentioned in it, and not to delay, hinder or defeat creditors. Thereupon the counsel for the plaintiff declared that he did not impute any actual fraud to the parties, other than what appeared from the deed itself; but he insisted that the deed was upon its face fraudulent in law, no matter what the defendant might show, and that the court was bound so to pronounce. It was then agreed that a verdict should be taken for the plaintiff, subject to be set aside and a nonsuit entered, if the court should be of opinion against the plaintiff upon the question whether the deed was to be deemed fraudulent upon its face, although the defendant might be able to show that there was no fraud in fact. The court subsequently set aside the verdict and ordered a nonsuit; and the plaintiff appealed.
Although this is a singular and extremely suspicious transaction, yet the Court thinks the plaintiff gave up his case by admitting that there was no fraud in fact, and that everything might be taken in favor of the deed which (194) could show that it was bona fide. The debts were all overdue at the date of the deed, except two small ones, for which the trustee was liable and which were to fall due in the course of that year, and as to which the trustee might sell property when the creditors might require. For the residue of the debts, however, there was to be no sale for three years; and after that there was to be a sale for the satisfaction of the first class of debts, not at the instance of the creditors to whom those debts were owing, but at that of the second class of creditors; and during all that time the deed stipulates that the debtor shall retain the possession. This is a very extraordinary provision, certainly; and it would seem that a jury, viewing it as men of common sense, and inferring further from the deed the probability that the maker was insolvent or greatly embarrassed, would hardly doubt upon the deed itself that it was an object of the deed to provide for the debtor. The Court has often held that when this is the purpose of a deed, or one of its purposes, it is fraudulent and void under the statute. Moore v. Collins, 14 N.C. 126; Harper v. Irwin, 23 N.C. 490; Cannon v. Peebles, 24 N.C. 449; s. c., 26 N.C. 204; Dewey v. Littlejohn, 37 N.C. 495. An unusual and unreasonable postponement of the sale, the debtor in the meanwhile taking the profits, affords very strong evidence of fraud, in that it denotes a part of the purpose to have been to secure a benefit to the insolvent debtor, whereas the purpose ought to have been to devote the whole of the property to the satisfaction of the debts. The counsel for the plaintiff contends that it is such strong evidence of mala fides as to be conclusive; that it is express fraud, and does not admit of explanation. The Court, however, cannot go that far, as it is quite conceivable that cases may exist in which such a provision as this would not be fraudulent. It would not, indeed, be sufficient that the debts mentioned were just; for it is a fraud not to apply the debtor's property to their satisfaction in a reasonable time, but reserve it for his use; and, certainly, a reservation for three years is startling and prima facie (195) for the debtor's benefit. If the party was insolvent, so that the jury should believe he was aware that the debts could not be paid but by a sale of the property, it is plain the stipulation for a possession for three years would be but a provision for so much longer enjoyment of the property by the debtor, and it would be clearly fraudulent. It is true that the land might be sold under execution as an equity of redemption. But the remedy derived therefrom by the creditor would be merely illusory in respect to the period of the possession to be enjoyed by the debtor, as in most cases it would take the three years for the creditor to reduce his debt to judgment, make a sale and bring an ejectment to trial. Besides, this deed complicates land, negroes and other chattels together, and in respect to the latter the creditors would have no means of enforcing a sale but the dilatory and expensive remedy in equity. When the debtor merely continues in possession by the sufferance of the trustee and creditors, it affords a presumption of fraud only as it tends to prove a secret trust for the debtor; and that is capable of being rebutted by evidence of the debtor's ability to pay his debts or the power of the creditors to require a sale at any time. But a stipulation in the deed for possession by the debtor, for a long time, is an express trust for him; which might lead to great abuses, if tolerated, and must be prima facie fraudulent, unless the period should be so short as to leave it indifferent whether it was for the convenience of the trustee or the benefit of the estate on the one hand, or, on the other, for the benefit of the debtor. But, notwithstanding these bad appearances, we think the intent is open to evidence, either direct or arising out of facts and circumstances; and it cannot be inferred absolutely, as a dry matter of law, by the court. There are several (196) reasons why it cannot be done, as is stated in the cases already referred to. Though it be probable, for example, that this deed conveyed all or nearly all of the maker's property, and that it was not of value sufficient to pay his debts; yet those facts do not appear upon the instrument itself, and therefore could not be assumed by the court, though they might be presumed by a jury. Now, if this person was not insolvent, but had other property amply sufficient to cover all his debts, and these creditors wished to keep their money at interest, and in consequence thereof the day was deferred at their instance and not that of the debtor, it could not be argued that the deed was void; for it would work no hindrance to other creditors who might go against the other property. Again, the defendant might have been able to show, for aught to be seen to the contrary, that in fact the debtor was bestowing his labor, and laying out money of his own or of the secured creditors in making improvements on the estate, which would greatly enhance its value and require the three years to complete. Or it might be that the debts mentioned in the deed, among which are the two for which the premises were sold, were all the maker owed, and that the deed was made in this form with the privity and full concurrence of all the creditors. In those or other similar cases, which may be supposed, it would be clear that there was no fraud. For in the one case the debtor was rather serving the creditors than himself, by remaining on the property; and in the other, one could not allege covin in a provision of which he himself was the author. Although, then, as far as the case proceeded at the trial, it might have authorized a verdict for the plaintiff, yet the transaction was susceptible of explanations, which might have repelled the suspicion of fraud and entitled the defendant to the verdict.
Therefore the judgment must be affirmed.
PER CURIAM. Judgment affirmed.
Cited: Young v. Booe, 33 N.C. 352; Hardy v. Simpson, 35 N.C. 139; Gilmer v. Earnhart, 46 N.C. 560; Grimsley v. Hooker, 56 N.C. 7; Starke v. Etheridge, 71 N.C. 247; Cheatham v. Hawkins, 76 N.C. 337; Bobbitt v. Rodwell, 105 N.C. 244; Helms v. Green, ib., 259; Booth v. Carstarphen, 107 N.C. 403; Stoneburner v. Jeffreys, 116 N.C. 85.
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