Supreme Court of North CarolinaAug 1, 1850
33 N.C. 347 (N.C. 1850)

August Term, 1850.

When a deed of trust for the payment of debts conveys a cotton factory, etc., and in the deed are provisions that the maker of the deed shall retain possession for eleven months, and during that time his family may be supported out of the proceeds of the factory: Held, that these provisions did not make the deed fraudulent in law, upon its face; but as the provisions might have been for the benefit of the creditors, as well as of the debtor, the question of fraudulent intent was one upon which the jury must decide under all the circumstances.

APPEAL from the Superior Court of Law of DAVIE, at Spring Term, 1850, Dick, J., presiding.

(350) Osborne for plaintiff.

J. G. Bynum and Avery for defendant.

This action is trover for a parcel of blacksmith's tools, (348) and the plea "not guilty." The plaintiff claims under a deed of trust made to him by Thomas McNeily, on 2 February, 1849, and registered the same day. The deed conveyed to the plaintiff a piece of ground near Mocksville, containing sixteen acres, known as the factory lot, on which are situated the cotton-factory building and other outbuildings, together with the steam engine, grist-mill, three wool-carding machines, and all the cotton machinery, consisting of four cotton cards, pickers, drawing frames, two speeders, one card grinder, four frames containing 504 spindles, four reels, one banding machine, one yarn press and all the battins, one turning lathe with all its tools, and a variety of other tools, all the raw cotton on hand, and all the factory wood on hand; also a lot adjoining, containing one acre; also another lot, on which there is a blacksmith's shop, with all the smith's tools, and one new wagon partly ironed; one house and lot, wherein McNeily resided, and his storehouse and lot, and all his household and kitchen furniture and library, and three horses and another wagon and gear, four head of cattle, all his corn, wheat, oats, hay and fodder, and four slaves; and the deed further assigned to the plaintiff all debts owing to McNeily by bond, note account or otherwise, and all other property whatsoever, whether real or personal, to which the grantor was in anywise entitled: upon trust that the whole or such parts of the property as should remain undisposed of on 1 January, 1850, should, after due notice, be sold by Young at public auction to the highest bidder upon a limited credit, and that, in the meanwhile, any part of the property might be sold at private sale, should a reasonable price be offered; and that, until such public sale, McNeily should remain in possession and management of the property as the agent of the trustee, and might also make private sales thereof as aforesaid, and that he should, "as early as (349) practicable," make out a complete list of all the judgments, bonds, notes and other debts of every description belonging to him, for the said Young; and that, out of the proceeds of such sales, and with the sums collected on the debts, all necessary expenses of executing the trusts should first be paid by the said Young, and then certain enumerated debts for which persons were bound as sureties; and, thirdly, certain other debts specified, and also all others which the said McNeily then owed, whether particularly mentioned therein or not — the said debts to be fully paid, if the fund should be sufficient therefor, and, if not, they should be paid pro rata. The deed then adds: "It is understood and agreed that the said McNeily is to support his family upon the property hereby conveyed, until this trust is closed by a sale of the property."

A short time after the execution of the deed a judgment was rendered by a justice of the peace for one of the debts mentioned in the deed, and an execution issued thereon, under which the defendant purchased the tools for which the action is brought. The question on the trial was whether the deed of trust was fraudulent as against the creditors of McNeily existing at the time. It was admitted by the defendant that the debts mentioned in the deed were just and true, and that the property and effects assigned were not sufficient for their discharge, and also that there was no evidence of any actual fraud in the object of the deed; but it was insisted on the part of the defendant that the deed was fraudulent in law, from the stipulations on its face. By the agreement of the parties, a verdict was thereupon rendered for the plaintiff, subject to the opinion of the court upon the question, as a point reserved, whether the deed was or was not thus fraudulent. The court afterwards set aside the verdict and gave judgment of nonsuit, and the plaintiff appealed.

Without the admission on the part of the defendant that there was no actual fraud intended in the execution of the deed, the Court would hold the judgment to be erroneous. It is exceedingly difficult to find fraud, as a matter of law, unless it be so plain and express in the deed as to constitute fraud in itself, without any inference of one fact from another, and thus appear so distinctly as to admit of no explanation from extraneous circumstances. Where the conveyance is in trust for the maker merely, or, upon no valuable consideration, in trust for his family, it has always been considered as constituting fraud, thus incapable of explanation. Sturdevant v. Davis, 31 N.C. 365. But where the provisions are, in the nature or under the circumstances of the particular case, equivocal — that is, may have been introduced for bad or good ends, taken as a whole — then the law cannot justly infer the dishonest intent in order to avoid the instrument, but ought rather to presume good faith. Hence, in such cases, the actual intent is a subject of inquiry by a jury, and not of decision by the Court. Cannon v. Peebles, 26 N.C. 204. It is argued, however, upon this deed that it reserves to the debtor himself the management and power of disposition of the property for nearly a year, and also that one of the trusts is for his own support and that of his family for the same period; and that the provisions establish a fraud. It may be yielded that those parts of the deed afford just grounds of suspicion, but, certainly, they are not conclusive of an intent to the prejudice of the creditors in the actual state of things, and under which the deed would appear to have been made. A man justly indebted beyond the value of his property, and, indeed, in very large sums, as stated in the deed, finds himself unable to meet his engagements and go on with his business, and makes an assignment of everything he has (351) on earth — not reserving even the lawful allowance to insolvent debtors; and the principal part of the effects conveyed consists of a steam cotton factory and stock of cotton and wood. Now, every one must know several things concerning such property in this part of the world — that its value is materially impaired by suspending its operations, and that there are but few persons among us with skill and experience for its judicious management, and, particularly, that there is no ready sale for such establishments; and a forced, public and immediate sale could, probably, be only made at a great sacrifice. Therefore, it may have been with no intent to his own benefit or to reserve to himself any wrong power, but with an eye single to the interest of his creditors in the mass, that the debtor here deferred the period at which the sale should be made publicly, at all events for eleven months, and provided for fair sales in the meanwhile by private contract. He does not reserve that power to himself. That is not the fair construction of the deed. It is legally vested in the trustee by virtue of his estate, and the debtor was to act as "the agent of the trustee," and subject, therefore, to his approval of the contracts and receipt of the price got. It may have been rather a stipulation for services by the debtor, than the reservation of a privilege or dangerous power to him. For, as he had conducted the business of the factory, and a profit might result from working up the stock on hand, and other competent managers might not be readily procured hereabouts, it might have been important to the proper care and disposition of the trust fund that this person should attend to the factory or seek purchasers either at home or abroad, and preserve and show the property. If those were the purposes of the agency to be performed by McNeily, they were beneficial, not to him, but to his creditors, to whom alone the fund belonged. That they were, is rendered probable by the consideration that there is no allegation that the debts were in (352) judgment or even suit; and hence it would have been almost entirely in the power of the debtor, if that had been his object, to have retained the possession and use of all the property for nearly that period by pleading to suits brought against him. As that provision might, then, have been innocent, it must be so taken, as fraud is not to be presumed. Thus regarding that part of the deed, it affords evidence rebutting, or tending to rebut, the presumption of fraud arising out of the provision in the conclusion of the deed for the support of the debtor's family out of the property. That provision, simpliciter, is undoubtedly fraudulent. But it is not, in this case, an isolated stipulation, by which a benefit is secured to the debtor in spite of the creditors, and without just compensation to them therefor. The support of the family is to be for the same period for which the debtor was to serve the trustee, and it may be fairly concluded that the former was in remuneration for the service. We are not informed what were McNeily's qualifications for the business, nor what would be fair wages for him, nor the amount required for their support; and if we were, the Court could not pass upon their weight, as they belong, important as these circumstances are, to the jury exclusively. It is apparent, therefore, that the questions on which the validity of the deed depends are questions of actual intent, and that the provisions of the deed, by itself, do not enable the Court to pronounce against it, but are proper for the jury in connection with such facts dehors as the parties may be able to adduce. If, however, that were otherwise, the admissions in the case, of the value of the property, the justice of the debts and that there was no actual fraud intended, are conclusive for the plaintiff. Hardy v. Skinner, 31 N.C. 191.

PER CURIAM. Judgment reversed and judgment upon the verdict for the plaintiff according to the agreement.

Cited: Hardy v. Simpson, 35 N.C. 141; Gilmer v. Earnhardt, 46 N.C. 560; Jessup v. Johnston, 48 N.C. 339; Cheatham v. Hawkins, 76 N.C. 337; s. c., 80 N.C. 162; Stoneburner v. Jeffreys, 116 N.C. 85.