Rea v. Alexander, 27 N.C. 644, 5 Ired. 644 (1845)

June 1845 · Supreme Court of North Carolina

27 N.C. 644, 5 Ired. 644

ELIZABETH REA vs. EZEKIEL W. ALEXANDER.

The retaining of the possession of slaves by a vendor, alter giving a bill of sale absolute on its face, though not per se fraudulent, yet is a circumstance, which with other facts and circumstances, found or admitted, would authorize the Court to say, that the transaction' was void for fraud. Fraud is a question of law, upon facts apd circumstances, found or admitted.

■Where it is a part of the agreement of sale, that, notwithstanding the absolute deed, the vendor shall have the possession and use of the property conveyed, for an indefinite period, this amounts to an express secret trust lor the vendor, and constitutes a'fraud on creditors deceived or hindered by the transaction.

Appeal from the Superior Court of Law of Mecklenburg county, at the Special Term in May 1845, his Honor Judge PjsarsoN presiding.

This was an action of detinue for a female slave, named Caroline. The defendant admitted the detention. The plaintiff read in evidence a bill of sale for four slaves, of whom Caroline was one, executed by one Benjamin Boyd to the plaintiff, dated in April 1840, and registered in October 1841, purporting to be in consideration of the sum of $ 1550. One Boyd, the father of Benjamin, was the subscribing witness__ He stated that he was present, when the bill of sale was executed by his son to the plaintiff, who was his son’s mother in law, and saw the plaintiff execute and deliver to his son a note for $ 1550, as the consideration. He also stated that the plaintiff, at the time the bill of sale and note were executed,, agreed to let his son keep possession of the negroes and have the- use of them, but for how long a time or ivhéther for any definite period- he could not recollect. He thought the agreement was, that the plaintiff should give her note for $ 1550 and let his son have the use and possession of the ne-groes, and his son was to make her the title. This took place at his son’s house in Charlotte, no other person being present. His son kept possession of the negroes until he was broken up and sold out in January 1842. A week or two before the negroes were levied on, they were sent to the house of the plaintiff, who lived out of town.

The defendant read in evidence a judgment and execution against Benjamin Boyd, and proved that the negro whs levied upon and sold by the Sheriff under the execution. At the sale, which was in January 1842, the defendant became the purchaser. The defendant proved, that, at the time the bill of sale was made by Boyd, he was very much in debt, and turned out to be hopelessly insolvent — that, a few years before5. he had married a daughter of the plaintiff — that the plaintiff was herself in debt and had since been sold out — that, at the-time, she had her dower in a tract of land, owned a negro woman and two boys, the usual quantity of stock &c., and had purchased a tract of land at the price of one thousand dollars, towards which she had paid $ 500 — that her annual crops, which constituted her only income,- were worth on an average about $500, out of which she had to support herself, pay expenses, «fee.

In reply, the plaintiff produced the note of $ 1550 and proved, that Benjamin Boyd, in October 1841, had assigned the note to Dr. Boyd, his brother, to secure him for debts he had paid for him. Several witnesses stated, that in 1840 the plaintiff’s credit was good, and she could have obtained credit in the purchase of negroes for $ 1500, although she did not have much property and afterwards became insolvent. The plaintiff also proved, that, at February Term 1845, Dr. Boyd having sued her on the note returnable to that term, she confessed judgment.

The Court charged, that, although a man was in debt, the law allowed him to sell his property, at any time before there was an execution so as to create a lien ; but the sale must be bona fide and for a valuable consideration,- otherwise creditors have a right to object and to treat the transfer as a nullity. — . If, in this case, the jury were satisfied, that the sale was made by Boyd, he being-much in debt, with the understanding that he was not to collect the note, his object being to transfer the title to his mother in law to keep off creditors, then the bill of sa^e be v°ld. Or, in the second place, if the jury came to the conclusion that Boyd did intend to collect t he note, but was t0 convert the negroes, which could be levied on and sold under an ordinary execution of fieri facias, into a note, which could only be reached by a ca. sa. or in Equity, and in this way to hinder and delay his creditors in the collection of their debts, while he could, from time to time, receive payments upon the note as might suit his convenience, and they were also satisfied that the plaintiff, at the time she purchased, was privy to this fraudulent intent,- then, although there was a valuable consideration, there would not be the bona fides required and the transfer would be Void. Or, in the third place, if the jury were satisfied, that it was a part of the contract, that Boyd should keep possession of the negroes and have the use of them, as long as he could do so without the interference of his creditors, or until the plaintiff was required to pay the note, it would present the case of a secret trust for the benefit of the debtor at the expense of his creditors, which would render the transaction fraudulent and void. If, however, the jury were not satisfied that either of these three views was sustained by the facts of the case, and the sale was bona fide and for a valuable consideration, although Boyd was in debt at the time, the plaintiff would be entitled to recover.

The jury found a verdict in favor of the defendant, and, from the judgment rendered on this verdict, the plaintiff appealed.

Boyden and Osborne for the plaintiff

J. H. Bryan and Alexander for the defendant.

Daniel, J.

The bill of sale for the slaves was absolute and was not registered for eighteen months after it was given. The slaves were left by the vendee in the possession of the vendor, who was then very much in debt, and soon became insolvent. The vendee, much in debt, was"the mother-in-law of the vendor. The sale was made in a secret manner, no person being present but the parties to it, except the witness, who was the father of the vendor ; the law requiring at least one witness to it. The court told the jury, that they must be satisfied that the sale was bona fide, and for a valuable consideration, otherwise the creditors of the Vendor had a right to object, and to treat the transaction as a nullity: and that if the vendor was much in debt at the time, and there was an understanding between them, that he was not to collect the note given for the purchase money, and the object was to transfer the slaves to her, to keep off his creditors, then the sale was fraudulent and void. The court further said, that if it was a part of the contract that the vendor should keep possession of the slaves, and have the use of them as long as he could do so, without the interference of his creditors, or until the plaintiff should be required to pay the purchase money, then it would present the case of a secret trust, for the benefit of the debtor, at the expense of his creditors, which would render the transaction fraudulent and void as to them. It would enable him to obtain a false credit; and the vendee, aiding in this, shall be postponed to the creditors. And if the sale was made by the parties to it, for the purpose .of turning the vendor’s interest in the slaves into choses in action, which would not in law be liable to the fieri facias of his creditors, then it was-fraudulent and void.

We do not discover from the case sent here, that the court charged that the bare fact of leaving the slaves in the possession of the vendor was per se fraudulent, after he had made an absolute bill of sale of them. Such retaining the possession was a circumstance, which with other facts and circumstances, found or admitted, might authorise the court to say that the transaction was void for fraud. For fraud is a question of law, upon facts and circumstances found or admitted. If, said the court, by the arrangement of the parties, the vendor was to have the liberty to retain the slaves, until the ven-dee was required by him or his. assignee to pay the note given for the purchase money, then this would be a secret trust, for the benefit of the debtor at the expense of his creditors, which would make the act fraudulent and void as to his creditors__ The truth and the force of the facts and circumstances were. ' as it seems to us, left fairly to the jury, with instructions from thG cour|; as (0 ^e law, in case the jury found the facts to be true or not so. But in truth the court might have gone .much farther; for the plaintiff’s own witness expressly proved, that it did form part of the agreement of sale, that notwithstanding the absolute deed, the vendor was still to have the possession and use of the negroes, as before, for an indefinite period. Now, that amounts to an express secret trust for an insolvent vendor, and, upon every principle of law and fair dealing, must constitute a fraud on creditors deceived or hindered by the transaction. The principles of law, as laid down by the court, are we think correct; and therefore the judgment must be affirmed.

Per Curiam, Judgment affirmed.