First National Bank of Waynesville v. Haywood Furniture Co., 200 N.C. 371 (1931)

Feb. 18, 1931 · Supreme Court of North Carolina

200 N.C. 371

FIRST NATIONAL BANK OF WAYNESVILLE, N. C., et al. v. WAYNESVILLE FURNITURE COMPANY et al. and CITIZENS BANK AND TRUST COMPANY OF WAYNESVILLE, N. C., et al. v. HAYWOOD FURNITURE COMPANY et al.

(Filed 18 February, 1931.)

1. Fraudulent Conveyances A e — Transfer of bulls; of corporate property to another corporation is not binding on creditors not agreeing thereto.

A deed of an insolvent corporation of practically all its assets to another corporation, formed to take over its business, under an agreement that the purchasing corporation should satisfy the creditors of the selling corporation by issuing shares of stock or paying a percentage of their claims, is not binding on creditors of the selling corporation who did not agree thereto and who refuse to settle upon such basis, and who have not waived their rights, and they may have the deed to the purchasing corporation set aside.

2. Cox’porations I d — Creditors of insolvent corporations selling its assets to another held to have priority in assets transferred.

Where two insolvent corporations have conveyed by deeds their entire assets to a corporation formed for the purpose of merging them, and which continued to operate the property thus acquired, incurring further indebtedness, and subsequently placed in the hands of a receiver by order of court, the creditors of each of the selling corporations are entitled to a priority over the creditors of the merged corporation out of the assets derived from their debtor corporation respectively when they have not by their actions or conduct waived their right.

3. Trial F a — Where there is no evidence to support issue tendered refusal to submit the issue is not error.

A new trial for the refusal of the trial judge to submit an issue raised by the pleadings will be granted only where there is evidence tending to support the issue.

Appeals by defendants from Finley, J., at May Term, 1930, of Hat-wood, and at August Special Term, 1930, Oowper, Special Judge.

No error in either appeal.

The above-entitled actions were begun in the Superior Court of Haywood County, by plaintiffs, creditors of the defendant, Waynesville Furniture Company, and of the defendant, Haywood Furniture Company, respectively, to recover of said defendant in each of said actions the amount of their several claims; and also to recover judgment in each of said actions that a certain deed dated 28 June, 1928, and executed by the said defendant therein conveying all its property, real and personal, to the defendant, Robbins Furniture Company, is null and void, and that the defendant, C. W. Perry, receiver of the Robbins Furniture Company, be enjoined and restrained from paying out certain moneys in his hands as such receiver, the proceeds of sales made by him of part of said property, during the pendency of said actions.

The facts alleged in the complaints in both said actions, as consti- • tuting the cause of action on which plaintiffs in each of said actions demand judgment against the defendants therein, are practically identical. Defendants in their answer to the complaint in each action deny certain allegations therein, and allege matters in defense of plaintiffs’ right to recover on the allegations of .the complaint. There was evidence at the trial of each of said actions tending to establish the allegations of the complaint which are denied in the answer.

The facts admitted in the pleadings and shown by all the evidence at the trial of both actions, are substantially as follows:

The Waynesville Furniture Company and the Haywood Furniture Company are corporations duly organized under the laws of this State, and as such corporations were engaged in the business of manufacturing furniture in or near the city of Waynesville, in Haywood County, North Carolina, prior to 28 June, 1928. Both corporations had become and were on said day wholly insolvent. Each was indebted in an amount largely in excess of the value of its assets.

As the result of negotiations by and between said corporations and one R. C. Robbins, each of said corporations on 28 June, 1928, executed a deed by which it conveyed practically all its property, real and personal, to the Robbins Furniture Company, a corporation created under the laws of this State for the purpose of taking title to and possession of said property under said deeds. At the date of said deeds, no part of the capital stock of said Robbins Furniture Company had been issued, nor had the subscribers for said capital stock paid in any part thereof, in money or otherwise. The consideration recited in each of said deeds is, “Ten dollars, and other valuable considerations.” The value of the property conveyed by both of said deeds was not less than three hundred thousand ($300,000) dollars. Neither the Waynesville Furniture Company nor the Haywood Furniture Company retained property sufficient and available for the payment of its debts; nor did either of said corporations receive from tbe Robbins Furniture Company any consideration for tbe conveyance of its property by its deed. It was agreed, however, prior to and at tbe date of tbe delivery of said deeds, by and between tbe Waynesville Furniture Company, tbe Haywood Furniture Company, and tbe Robbins Furniture Company, that tbe said Robbins Furniture Company should satisfy all tbe creditors of tbe said Waynes-ville Furniture Company and of tbe said Haywood Furniture Company, by tbe payment of a certain percentage of their claims in money or by tbe issuance to said creditors of its stock for tbe full amount of their claims, at tbe option of said creditors. Prior to tbe date of the delivery of said deeds, many of tbe creditors of tbe Waynesville Furniture Company and of tbe Haywood Furniture Company bad accepted settlements of their claims by tbe Robbins Furniture Company. Pursuant to the terms of said settlements, creditors of both said corporations who bad agreed to accept stock of tbe Robbins Furniture Company in settlement of their claims, met in tbe city of Waynesville, N. 0., on 8 September, 1928, and as stockholders thereof organized tbe Robbins Furniture Company. Certificates of stock were issued by tbe Robbins Furniture Company to creditors of said corporations who bad agreed to accept stock in settlement of their claims. Neither of tbe plaintiffs in tbe above-entitled actions was present at tbe meeting held on 8 September, 1928; nor bad either of said plaintiffs agreed to accept a settlement by tbe Robbins Furniture Company of bis or its claim, in accordance with tbe agreement by and between tbe said company and tbe Waynesville Furniture Company and tbe Haywood Furniture Company.

Tbe Robbins .Furniture Company took into its possession all tbe property conveyed to it by tbe Waynesville Furniture Company and by tbe Haywood Furniture Company by tbe deeds dated 28 June, 1928, and operated tbe factories located on tbe lands described in said deeds from 8 September, 1928, to 23 August, 1929. During tbe time of such operation tbe Robbins Furniture Company contracted debts to various persons, firms and corporations in large amounts, which it has failed to pay. On 23 August, 1929, tbe said Robbins Furniture Company was duly adjudged insolvent, and the defendant, 0. W. Perry, was appointed as its receiver. At tbe date of tbe commencement of tbe above-entitled actions, tbe said defendant, 0. W. Perry, receiver of tbe Robbins Furniture Company, bad in bis possession as such receiver all tbe property which bad been conveyed to tbe said Robbins Furniture Company by tbe deeds dated 28 June, 1928, except such parts of said property as be bad sold under orders of tbe Superior Court of Haywood County. He bad in bis possession certain moneys, tbe proceeds of tbe sale of said property, and also moneys which be bad collected on accounts due tbe Robbins Furniture Company, at tbe date of bis appointment as its receiver.

On 28 June, 1928, tbe plaintiffs in tbe above-entitled actions were creditors of tbe Waynesville Furniture Company and of tbe Haywood Furniture Company, respectively, in tbe amounts alleged in tbe complaints in said actions. No payment bas been made on tbe claim of either of tbe plaintiffs by tbe Waynesville Furniture Company or tbe Haywood Furniture Company, or by tbe Robbins Furniture Company. In tbeir answer to tbe complaint in each of tbe above-entitled actions, defendants allege tbat plaintiffs therein ratified tbe conveyance of tbe property described in tbe deeds dated 28 June, 1928, and are estopped by tbeir conduct from asserting now tbat said deeds are null and void as against them.

In tbe action entitled “Citizens Bank & Trust Company et al. v. Haywood Furniture Company et al.” tried at May Term, 1930, of tbe Superior Court of Haywood County before Finley, J., and a jury, in response to tbe fourth issue, tbe jury found tbat plaintiffs in said action did not ratify tbe conveyánce of its property to tbe Robbins Furniture Company by tbe Haywood Furniture Company by its deed dated 28 June, 1928, as contended by tbe defendants in said action. Tbe court refused to submit an issue tendered by defendants involving tbe allegations in tbe answer tbat plaintiffs are estopped by tbeir conduct from asserting tbat said deed is null and void. To such refusal, defendants duly excepted.

In tbe action entitled “First National Bank et al. v. Waynesville Furniture Company et al." tried at August Special Term, 1930, of tbe Superior Court of Haywood County, before Oowper, special judge, and a jury, in response to tbe third and fourth issues, tbe jury found tbat plaintiffs in said action are not estopped by tbeir conduct from asserting tbat tbe deed dated 28 June, 1928, executed by tbe Waynes-ville Furniture Company to tbe Robbins Furniture Company, is null and void, and tbat said plaintiffs did not ratify tbe conveyance of its property to tbe said Robbins Furniture Company by tbe Waynesville Furniture Company by said deed, as contended by tbe defendants in said action. Defendants duly excepted to certain instructions of tbe court to tbe jury with respect to tbe third and fourth issues.

At tbe trial of each of tbe above-entitled actions all tbe issues submitted by tbe court to tbe jury were answered in accordance with tbe contentions of tbe plaintiffs, and against the contentions of tbe defendants.

On tbe verdict at tbe trial of each of tbe above-entitled actions, it was ordered, adjudged and decreed tbat tbe plaintiffs therein recover of tbe defendant, Waynesville Furniture Company and of tbe defendant, Haywood Furniture Company, respectively, tbe amount of tbeir several claims; tbat tbe deed executed by each of said defendants dated 28 June, 1928, conveying its property described therein to the defendant, Robbins Furniture Company, is null and void, and that said deed be canceled on the record, and that the defendant, 0. W. Perry, receiver of the Robbins Furniture Company, turn over and deliver to each of said defendants all the property now in his possession, which was conveyed to the Robbins Furniture Company by said defendant, and account to the receiver of each of said defendants for all moneys in his hands derived from the sale by him of any part of said property. It was further ordered, adjudged and decreed that plaintiffs in each of the above-entitled actions have a first lien on all the assets of the defendant therein, recovered by said action.

From the judgment in each of the above-entitled actions, the defendants therein appealed to the Supreme Court.

Hannah & Hannah, John M. Queen, Edwards & Leatherwood and G. L. J ones for plaintiffs.

Thomas J. Gold, A. Hall Johnston, W. G. Hall and Alley & Alley for defendants.

Connoe, J.

The appeals by the defendants in the above-entitled actions, when called for hearing in this Court, were consolidated by consent, both for argument by counsel, and for consideration by the Court. Accordingly, the two appeals were argued and have been considered as if there were only one appeal by defendants from a judgment of the Superior Court of Haywood County, in favor of the plaintiffs and against the defendants. The questions involved in both appeals are practically the same. Assignments of error in one appeal which do not appear in the other are not vital, and even if sustained would not entitle defendants to a reversal of the judgment or to a new trial.

Defendants’ contention presented by their exception to the refusal of the trial court to sustain their demurrer ore tenus to the complaint in one of said actions, for that the facts stated therein do not constitute a cause of action, cannot be sustained. The facts alleged in the complaint in each action are sufficient to constitute a cause of action. It is well settled that a corporation cannot sell or in any way alien its property to the prejudice of its creditors, so as to hinder, delay ox defraud them in the collection of debts owing by the corporation; and in general, whenever a conveyance is made by a corporation under such circumstances as would characterize it as a fraud upon creditors if made by an individual, it will be set aside in equity, at the suit of such creditors, or other appropriate relief will be accorded them. On this principle, it has been held that a sale by a corporation to another corporation, in consideration of the latter delivering a specified amount of its stock to the individual shareholders of the selling corporation, and guaranteeing the payment of tbe debts of the selling corporation, is prima facie fraudulent as to creditors of the selling corporation. McIver v. Hardware Co., 144 N. C., 478, 57 S. E., 169. This principle is applicable in the instant cases where it is alleged in the complaints and shown by all the evidence at the trial of both actions that the conveyances were made upon the agreement by the Robbins Furniture Company to issue its stock to the creditors of the "Waynesville Furniture Company and of the Haywood Furniture Company, respectively, who should accept said stock in settlement of their claims. The conveyances by the deeds dated 28 June, 1928, were null and void as to such creditors who did not consent thereto, who did not subsequently ratify the same or who are not estopped by their conduct from asserting that said conveyances are void as to them.

It is not contended by the defendants in the above-entitled actions that the plaintiffs therein, who were creditors of the Waynesville Furniture Company and of the Haywood Furniture Company, respectively, at the date of the conveyances, consented to said conveyances. The jury found at the trial of both actions that plaintiffs did not ratify the conveyances. ■ In the action entitled, “First National Bank et al. v. Waynesville Furniture Company et al," the jury further found that plaintiffs in said action were not estopped by their conduct after the conveyance from asserting their claims against the defendants. The defendants contend that there was error in the trial of the action entitled, “Citizens Bank & Trust Co. et al. v. Haywood Furniture Company et al,” in that the court refused to submit the issue tendered by defendants, involving their contention that plaintiffs in said action are estopped by their conduct from maintaining said action. After a careful consideration of all the evidence offered by defendants at said trial, we are of the opinion that there was no evidence from which the jury could have answered this issue in the affirmative. There was no evidence tending to show that plaintiffs in said action made any representations prior to and at the date of the delivery of the deed executed by the Haywood Furniture Company to the Robbins Furniture Company, with respect to the conveyance by said deed of the property described therein; or that said plaintiffs, or either of them, received any benefit resulting from the execution of said deed; or that said plaintiffs by their conduct subsequent to the execution of said deed, gave the defendants any reasonable grounds to believe that said plaintiffs or either of them would not assert their rights as creditors of the Haywood Furniture Company.

While, ordinarily, the trial court should submit to the jury all the issues of fact raised by the pleadings, where, as in the instant case, there was no evidence tending to support an affirmative answer to an issue, tbe refusal of tbe court to submit sucb issue, altbougb duly tendered by tbe party wbo bas tbe burden of tbe issue, will not be beld for reversible error, on tbe appeal of sucb party. A new trial will be granted only where tbe court bas refused to submit an issue raised by tbe pleadings, and wben there was evidence tending to support tbe contention of tbe party wbo bas excepted to sucb refusal.

We find no error in tbe trial of either of tbe above-entitled actions. Tbe judgments are affirmed.

No error.