Page Trust Co. v. American National Bank, 193 N.C. 528 (1927)

April 13, 1927 · Supreme Court of North Carolina

193 N.C. 528

PAGE TRUST COMPANY v. AMERICAN NATIONAL BANK et al.

(Filed 13 April, 1927.)

Evidence — Demurrer—Equity—Reformation of Instruments — Cross-Action — Defenses.

Where equity is sought to remove a cloud upon title to lands by those claiming the reformation of their conveyance into a deed conveying a fee simple absolute title by reason of judgment liens against the former owner obtained subsequent to the registration of the plaintiff’s deed, and the defendants, the judgment creditors, set up a cross-action asking affirmative relief on the grounds of fraud against their rights, and therefore no title had passed to the plaintiff, with evidence to support their allegations, plaintiff’s demurrer to the defendant’s evidence admits every material fact reasonably to be inferred therefrom, and the validity of the plaintiff’s title being directly involved, the plaintiff's demurrer thus interposed is bad, and is properly denied.

Stacy, C. J., not sitting.

Civil action, tried before Bond, J., at Spring Term, 1927, of New Hanover..

It was alleged in tbe complaint tbat on 31 December, 1919, William H. Duls and wife conveyed tbe land in controversy to J. C. Rourk, trustee. This deed was duly recorded. J. C. Rourk, trustee, conveyed tbe land to W. H. Sanders, trustee, by deed dated 12 March, 1923, and duly recorded. W. H. Sanders, trustee, conveyed'tbe land to plaintiff, Page Trust Company, by deed dated 10 November, 1926, and duly recorded.

Paragraph six of tbe complaint is as follows: “Tbat tbe plaintiff is informed and believes, and upon such information and belief alleges tbat tbe said J. C. Rourk, trustee, in taking ,title to tbe said lands and premises described in tbe said deed from William H. Duls and wife, Theresa Marshall Duls, took said lands, and all of them, ... as trustee for the said J. O. Rourk and Thomas E. Cooper, and for no other person, firm, corporation, or individual.”

Plaintiff further alleged “that when the said J. O. Rourk, trustee, conveyed the lands and premises described in the third article of this complaint to W. H. Sanders, trustee, by deed dated 12 March, 1923, that he was requested, directed, and instructed so to do by the said Thomas E. Cooper and the said J. C. Rourk, cestui que irustents, and that their failure to join in the execution of said deed with the said J. O. Rourk, trustee, together with their wives, was an inadvertence and oversight, and contrary to their firm intention and purpose so to do; that the said J. C. Rourk, trustee, and the said defendants, Thomas E. Cooper and J. O. Rourk, intended to convey the lands and premises in fee simple, including every interest therein, to the said W. H. Sanders, trustee; that said lands and premises were conveyed by said J. O. Rourk, trustee, to said W. H. Sanders, trustee, for a valuable consideration, it being the purpose of said J. C. Rourk, trustee, to vest in the said W. H. Sanders, trustee, the legal and equitable title to the same, pursuant to the authority vested in him and in accordance with the directions of his cestui que irustents.”

Plaintiff further alleged that the defendant American National Bank, and a number of other creditors, were judgment creditors of Thomas E. Cooper and J. O. Rourk, “having acquired judgments since the date and registration of the deed from Joseph O. Rourk, trustee, to W. H. Sanders, trustee, aforesaid.” Plaintiff further alleged that these judgments constituted a cloud upon its title, and prayed that a decree be entered removing said cloud upon its title, and declaring the plaintiff to be the owner in fee simple of the lands described, and that said Thomas E. Cooper and J. O. Rourk and wife, and all of said judgment creditors, be forever barred from asserting any right or title whatsoever in the land.

The American National Bank filed an answer, alleging in substance: (1) That Thomas E. Cooper and J. C. Rourk are still the owners of said property, and have never conveyed the same; (2) that the conveyance from W. H. Sanders, trustee, to the plaintiff was not a genuine conveyance in law and equity, and that no legal or equitable title passed from said J. C. Rourk, trustee, to Sanders, trustee, or from Sanders, trustee, to plaintiff.

The Citizens Bank and Trust Company, another judgment creditor, filed an answer, alleging in substance: (1) That the conveyance from J. C. Rourk, trustee, to W. H. Sanders, trustee, was without consideration, and “for the purpose of securing the payment of past-due- debt in fraud of other creditors of said Thomas E. Cooper and J. O. Rourk; (2) that there was no misunderstanding, inadvertence, oversight, or mistake in tbe execution of said deed, and that the judgment taken by it against Cooper and Eourk was for indebtedness past due and owing at tbe time of tbe execution of tbe deed from Eourk, trustee, to Sanders, trustee; (3) tbat botb Eourk and Cooper were insolvent, and tbat tbe land in controversy was tbe only available assets; (4) tbat tbe plaintiff in tbis action acquired title to said land from Sanders, trustee, witb full knowledge of all tbe facts and circumstances.

Thereupon tbe judgment creditors prayed tbat tbe deed from Eourk, trustee, to Sanders, trustee, be set aside, and tbat Eourk and Cooper be adjudged to be tbe owners of tbe land.

Tbe plaintiff filed demurrers to tbe further defense set up by tbe judgment creditors, American National Bank and Citizens Bank and Trust Company. Tbe demurrers asserted tbat tbe judgment creditors were neither tbe owners of a legal nor equitable estate or interest in tbe lands in controversy, and tbat their further defense constituted a collateral attack upon tbe deed. Tbe trial judge overruled tbe demurrers and refused to strike out tbe further defense and cross-bills asserted by tbe judgment creditors, and tbe plaintiff appealed.

Joseph W. Little for plaintiff.

L. J. Poisson and Norman G. Shepard for defendants.

Emmett N. Bellamy in loehalf of American National Bank of Richmond, Ta.

Brogden, J.

Tbe gist of tbe action instituted by plaintiff is to reform tbe deed in controversy to remove tbe lien of tbe docketed judgments, which it alleges constitutes a cloud upon tbe title.

Tbe judgment creditors allege as a defense to said action, and as a basis for affirmative relief, tbat tbe deed from Eourk, trustee, to Sanders was executed without consideration and in fraud of creditors, and tbat, as a matter of fact, tbe land in controversy still belongs to Thomas E. Cooper and J. C. Eourk, who are insolvent, and tbat this parcel of land constitutes tbe only available assets owned by said insolvents.

Tbe demurrers to tbe cross-action of defendant admit tbe truth of said allegations. It has been repeatedly held by tbis Court tbat “a demurrer to an action admits as true every material fact alleged in tbe answer to tbe same extent and witb tbe same force as a demurrer to a complaint.” Trust Co. v. Wilson, 182 N. C., 168; Real Estate Co. v. Fowler, 191 N. C., 616.

Therefore, assuming these allegations to be true, the defendant would have tbe right to have tbe land in controversy subjected to tbe payment of their judgments in accordance witb law. Murchison v. Williams, 71 N. C., 135; Bryan v. Dunn, 120 N. C., 36; Eaton v. Doub, 190 N. C., 14; Farrow v. Ins. Co., 192 N. C., 148.

Moreover, the cross-bill of defendant does not constitute a collateral attack upon the deed. In defining a “direct proceeding,” in Houser v. Bonsal, 149 N. C., p. 57, Hoke, J., said: “That under our present system, where courts are empowered to administer full relief in one and the same action, when all the parties to be affected by the decree are before the court, and a judgment is set up in bar and directly assailed in the proceeding for fraud, this is a direct and proper proceeding to determine its validity.”

So, in this case the plaintiff comes into a court of equity alleging that his deed is defective, and praying for equitable relief for the purpose of reforming it, in order to remove a cloud upon the title. Thereupon, in the same action, the defendant asserts that the deed was given without consideration and in fraud of creditors, the plaintiff having notice thereof.

~We are of the opinion that this is not a collateral attack upon the deed and that the demurrers were properly overruled.

Affirmed.

Stagy, C. J., not sitting.