Jackson v. Marshall's administrator, 5 N.C. 323, 1 Mur. 323 (1809)

July 1809 · Supreme Court of North Carolina

5 N.C. 323, 1 Mur. 323

Jackson v. Marshall’s administrator and devisee.

Pending' a suit against A. as security of E, A, to defeat any recovery that might be made ag'ainst Mm in said suit, conveys his property to C, by an absolute deed, purporting to be for a valuable consideration. And it was agreed between A: and C, that C should recon-vey the property to A, whenever, he should be requested. It appeared upon the trial of the suit against A, that the debt claimed of him had been paid by B, for whom he was security, and judgment was rendered in favour of A : upon which he filed a bill to compel C. to reconvey the property according to his agreement. Equity will not enforce tliis agreement, on account of its moral turpitude.

The bill charged that Jackson, in order to the more convenient settlement of his estate at a future day, so as to answer the exigencies of his family, concluded to raise a trust in fee on his estate, and to make such divisions and provisions out of the same, as a trust is capable of according to the rules of Equity, and which an estate at Common Law is not. That to this end, he applied to one Benjamin Marshall, late of Halifax county, now deceased, and made known to him his designs, and requested him to permit Complainant to make him a trustee for the said purposes : that Marshall consented thereto, and promised that he would, from time to time, make such conveyances as Complainant should direct, and rcconvey the property to Complainant if ever requested to do so. That in pursuance of this agreement, Complainant, in May 1801, by deed duly executed, conveyed to Marshall two tracts of land, lying in Halifax county; and by another deed executed about the same time, he conveyed to Marshall all his stock of cattle, horses, hogs, and all his other property, including negroes Hercules and Lydia. The bill ciiarged that the conveyances were upon trust, for the benefit of the Complainant, and that the said trust was declared by Marshall, %t and after the execution of the conveyances; that all the said- property was by express agreement to be at Complainants disposal,' and lie was to take the profits and proceeds thereof, and Marshall was to convey the same at any time, as Complainant should direct : that although a consideration was expressed in the conveyances, none was ever paid by Marshall for the property. That Marshall had since died, having duly executed his last will, and therein devised the lands aforesaid to his son, Howell Marshall, and the other property he directed in his will to be sold, and the proceeds divided amongst his other children : that Jeremiah Marshall had caused the will to be proved, and administration with the will annexed to be granted to him : that he and the said Howell Marshall denied the trusts aforesaid, and pretended that the conveyances aforesaid were intended by the parties to be absolute, and subject to no secret trust. The bill prayed that they might be compelled to answer, and be decreed to reconvey the lands and other property to Complainant.

To this bill, Jeremiah Marshall, the administrator, put in his answer, and therein alleged, that he had no personal knowledge of the transactions charged in the bill, but believed, from every information which he had been able to acquire, that the conveyances were intended by the parties to be absolute; that a considerable part of the purchase money had been paid by Benjamin Marshall, previous to his death, and that Complainant held his bonds for the balance.

This cause coming on to be heard in the Court of Equity for Halifax district, sundry issues were submitted to a Jury, who found, that the conveyances mentioned in the bill were upon trusts, and not intended to be absolute ; that they were made to defeat any recovery that might be made in a suit then pending in Halifax Superior Court against Complainant, as security for one Co-field, in which suit the Plaintiff failed to recover, it appearing that the debt was paid by Cofield before the institution of said suit. The Jury also found, that Comp! ainaht,.M the .time of executing the said conveyances, , Was-indebted toupbe Burt, and al^o to one Hilliard, to a amoub^bfft.that those debts bore a small propor-theva&ic of bis estate,, and that creditors were not ialcftded- to be defrauded by said conveyances, or hindered or delayed thereby of the recovery of their debts.

The bill, answer, and findings of the Jury, were sent to this CourHór the opinion of the Judges.

This, with the preceding case of Vick and others against Flowers, was argued by Cameron and Williams, (Chatham,) for the Complainants, and by Browne and Norwood for the Defendants.

Cameron, for Complainants. — In making a decree in the case of Jackson against Marshall’s administrator and devisee, the Court will take into consideration the facts found by the Jury, unless the testimony offered upon the trial was improperly received. The bill seeks to enforce a trust which the Jury have found, but which does not appear upon the face of the conveyances. Can this trust be proved by parol evidence, when the parties have purposely omitted it in the deeds i And if proved, will Equity enforce it ? As to the first question, there can be no doubt but that parol evidence is to be admitted to prove a trust, where it is omitted to be inserted in a deed by fraud, accident or mistake; but where the trust is omitted purposely, the Court will be governed by the particular circumstances of the case, and will receive or reject the evidence, as will best subserve the ends of justice. This seems to have been the opinion of President Pen dleton, in the case of Ross against Norvell, 1 Wash. 1 Norvell filed a bill-to redeem certain negroes which, lié. r' charged, he had mortgaged to Ross, to secure the pay-fljjiW ment of a debt due to him. The negroes were conveyed! by an absolute bill of sale, with a warranty, and a receipt for the consideration stated in the deed was endorsed thereto. The bill charged, that' the conveyance, though absolute in form, was intended ás a sécurity, and that it was verbally agreed at the timé, that Norvell. might redeem at any time, upon payment odthe priiffcipal and interest. Ross, in his answer, insisted that thte’Sftlé was absolute, and was intended as a satisfaction of a prior debt due to him from Norvell. Parol evidence was received to prove the verbal agreement, and Norvell was permitted to redeem the negroes. The President of the Court of Appeals, in delivering the opinion of the Court, entered at large into the consideration of the question, Whether parol evidence could be admitted to set up this verbal agreement in contradiction to the deed ? And after an examination of the several cases upon this point, observed, “ that the general principles of these cases prove, that parol evidence, where there is a deed, is not to be admitted in all cases, nor refused m all, and that every case must depend on its own circumstances.” It is true, that in that case Norvell was suffered to remain two years in possession of the negroés, and this being contrary to the ordinary effect of a sale, was noticed by the Court, as a circumstance that gave an impression of a trust of some kind, between the parties. But the Court observed, that this circumstance rendered the difficulty less of admitting the parol proof,- from which it is to be inferred, that without it, such proof would have been received. Indeed, as between the parties to the deed, such proof will seldom be refused ; there-Is much reason to receive it with caution where the rights of third persons are to be affected.

As to the second question, Whether Equity will enforce the trust, if proved ? it may be observed, that the Courts of Equity in this State have enforced such trusts. The Jury have found, that the conveyances were not made to defraud creditors, nor to hinder or delay them in the recovery of their debts. They were, made to defeat a recovery that might be made, as Marshall apprehended,

in the suit then pending against him 5 but as the Plaintiff failed to recover, upon the ground that nothing was due to him,' he cannot he considered a creditor, whoso debt was to be defeated by the conveyances. It has been decided, that to set aside a conveyance, under the statute against fraudulent conveyances, it must appeat* that the person making the conveyance was a debtor, and the person to be defeated his creditor. For the statute speaks of persons indebted, and makes void the conveyances which shall be made by them to defeat, hinder or delay their creditors in the recovery of their debts.

Browne, for the Defendants. — Parol evidence cannot be admitted, to set up the trust which the Complainant seeks to enforce. The deeds upon their face purport to be made for a valuable consideration, and in 1. Fes. 128, Lord Hardwicke declares, that where a deed mentions that it was made for a valuable consideration, no evidence can be received to shew that it was made for any other consideration; for this would be to admit parol evidence to contradict a deed. In the present case, the deed declares that it was made- for Marshall’s use and the use of his heirs, &c. Can parol proof be admitted to contradict this ? 3 Wills. 275, 1 Br. Ch.- 92, shew that it cannot. The rule is, that paro'l evidence may be admitted, where the fact to be disclosed by it, and w inch creates the trust, has been left out of the deed by fraud, accident, or mistake; and the Court of Equity gives relief here, upon the ground of its ancient jurisdiction over cases of fraud, accident, or mistake. To admit such evidence in other cases, would be to add to, detract from, or explain a deed. This question has been often decided, and in Henry Black. 659, there is a case in point, shewing that parol proof cannot be received as to any thing dehors the deed, unless it appear to have been left out by fraud, accident or mistake.

But if the proof be received, the trust which it proves is founded in such iniquity, that Equity will not enforce it. Equity will not enforce a contract, nor a Court of Law give damages for the breach thereof, where the consideration of such contract is illegal. This is the general. principle to be extracted from various decided cases, particularly 3 Term, Rep. 454 — 4 Id. 466. Assumpsit is an equitable action, in which damages are recovered for the breach of such contracts as Equity will enforce. Equity cannot decree against a positive rule of Law — 2 Com. Big. 475-6. And if the rules of Law forbid a recovery for the breach of the contract, they likewise forbid the enforcement of the contract in Equity. In 4 Term Rep. 329, the principle upon which the Court always acts, in cases like the present, is laid down by Lord Kenyon : “No person shall take the chance of committing a fraud, without running the risk of losing by it, when he is detected.” Upon this principle, an alteration in a bond or note avoids it, and a fraudulent conveyance is made good against the party making it.

If a voluntary conveyance be made, with a view to being indebted at a future time, it is fraudulent — £ Mk. 481 — 3 Ves.jun. 461. Sometimes there is no debt until judgment is obtained — 2 Bl. Com. 436. A judgment recovered for criminal conversation entitles one to set aside a fraudulent deed — Tree. Ch. 103 — 1 Eq. M. 149. The statutes against fraudulent conveyances cannot receive too liberal a construction — Cowp. 434. Hence all gifts, grants, &c. which are fraudulent, are void as to creditors, whether they claim by elder or younger titles— Com. Big. Covin, d — but good against the party and his representatives — Felv. 196 — Cro. Jac. 271 — 1 Ver. 100, 122, 464 — Com. Big. Covin, B. 2. The object of the Law is to put an cud to all trust and confidence between persons disposed to commit a fraud.

Weight, Judge,

delivered the following opinion, as the opinion of the Court in both of the preceding cases:

It is rather a singular circumstance, that claims, such as the present bills set up, are made at this day, and attempted to be enforced without theiauthority of a single adjudged case to support them. That conveyances like those set forth, made* under similar agreements, have before occurred, there can be little doubt; and it is equally certain, that if these agreements had ever been considered as entitled to the assistance of a Court of Equity, the diligence and industry of the Complainant’s counsel would have discovered the cases in which application to enforce them had been sustained, and relief granted. The silence of the Books on the subject, would seem oi‘ itself to affordwstrong presumptive evidence, that the Complainants are not entitled to the relief which they seek. But although such presumption exists, yet if they eould have shewn, that under the influence of any of those principles which direct the decisions of our Courts of Equity, they were entitled to relief, the Court would feel bound to grant it, notwithstanding it might seem to militate against the policy of the statutes which have been, from time to time, made for the protection and security of creditors. It is believed, that so far from granting relief to the Complainants, not only the statute against fraudulent conveyances, but every principle and rule which has been adopted and matured in Courts of Equity, for the purpose of suppressing fraud and of inculcating a course of fair and honest dealing among men, directly forbid 'it. The'* Complainants’ counsel rested their arguments much on the nature of trusts in the Civil Law, from which they have been taken and adopted into our Jurisprudence by the Courts of Equity; and cases were cited to shew, that by that Law, they were enforced, although they had originated in fraud on the part of the cestui que trust. To this it is a sufficient answer to say, that although the Courts of Equity may have derived. their idea of a trust from the Civil Law, yet that that Law lias no binding force or authoritative influence on these Courts, _twhich are guided altogether by a set of rules and. principles, peculiarly their own, that have gifown out of the condition and positive institutions ®f the country where they have been established. The Com‘plainants’ claim will derive very little w eight from the consideration that it would have been enforced by a Roman Praetor, if it 'be opposed by'any of these rtiles or principles. Some reading is also cited from Saunders on Uses, and Reeves's History of the English Law, to shew that trusts originated in covin, and that on their first introduction, they were applied to what might be deemed fraudulent purposes; that is, to avoid the statutes of mortijhaifti. But it is to be observed, that the clerical Chancellors who presided in the Courts of' Equity at that time, did not consider these conveyances as dishonest or against conscience, and rather leaned in favor of them, and enforced the secret trusts which arose out of them, and which produced a variety of acts of Parliament that were deemed necessary to prevent the fraudulent purposes to which they were applied : among others,. the 13th aiid 27 th of Elizabeth •, of the former, our act of. 1715 is nearly a copy. The Complainants’ counsel, however, contend, that although the statute makes the conveyances to which it. alludes void, yet that it does not give validity to any thing, and hence an inference is drawn, that when a'debt is discharged, to delay the payment of which a conveyance or secret trust is made,'the conveyance ceases to be binding, and the debtor becomes entitled to a reconveyance. But this argument is cer-' tainly unsound $ for although the statute does not validate any thing in express terms, it does by a very strong implication. It declares, “ that all "and every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels,” &c. made for the purposes, or with the intent stated in the preamble, shall henceforward be deemed and taken “ only as against that person or persons, his or their heirs, executors, administrators and assigns, and every of them, whose fictions, suits, debts, accompts, damages, penalties and forfeitures, shall release by such cóviuous or fraudulent devices and practices, as is aforesaid, or shall er^ngbt be in any wise disturbed, hindered, delayed or defrauded, to be clearly and utterly void, frustrate and of.no effect; any pretence, colour, feigned consideration, expressing of use, or any matter or thing to the contrary notwithstanding.” As to the parties themselves, therefore, it must mean, that it shall be taken to be good ; for that which would otherwise be1 good, and is declared void only as to a certain intent, remains good to all other intents 5 and that such has been the construction- which the statute has heretofore received, may be gathered not only from the opinion of elementary writers on the subject, but from adjudged cases in the English Courts, and in our own—2 Bac. Mr. 605-Fonblanque on Equity, 139—Roberts on Fraudulent Conveyances, 643—Cro. Jac. 270—1 Ch. Ca. 59—2 Hayw. 348. In the case cited from Cro. Jac. the alienee was permitted to recover at Law from the executors of the debtor, the property conveyed, on the ground, that although the conveyance was void as to creditors, (it being made to defraud them of their debts) yet that it was good as against the person making it, and his representatives. But supposing.no adjudged casp or elementary opinion could be- found in support of such -a construction, yet the object and spirit of the Law would seem evidently to require it. ...The.design and intention of the act was the protection and security of creditors 5 this can only be effected by destroying all confidence between the parties to secret agreements ; by multiplying the difficulties which fraudulent debtors would have to-encounter in attempting to defeat their clai^ft; and denouncing every species of, forfeiture and risfc against such attempts, which can be .raised up against them in a Court of Equity. The act of Assembly, therefore, would seem a complete answer to the claims of the Complainants. But independent of the act, the claims are in direct opposition to some of the ím>St fundamental maxims which direct and influence the conscience of a Chancellor. He who hath done iniquity, shall not have Equity „• He who requires the aid of a Court of Equity, must disclose a fair and honest transaction „• are maxims which have never been departed from, aud ar,e |n ti¡rect hostility to the claims of the Complainants. It is true, that Francis, in his exposition of the first maxim, says that the iniquity must be done to the Defendant himself, and this exposition was much relied on by the Complainants’ counsel. But this exposition is certainly incorrect, nor does the case cited by Francis for the purpose, prove it. He cites a case where a person, during the great rebellion, who, in order to avoid a . sequestration by the usurper, had sworn, in an answer in Chancery, that he had been satisfied for a debt, was permitted to recover by a Chancellor sitting after the restoration ; and who, no doubt, held that the opposition to the claim was more unconscientious than the means taken to avoid the sequestration. The true exposition of the maxim is to be found in 1 Fonbl. ch. 4, sec. 13, where, after stating it, he says, “ But this must be understood where such person is Plaintiff,” &c. And the following adjudged cases illustrate it: 2 Vern. 602—1 Ch. Ca. 202—1 Vern. 475—2 Ves. 156. The case of Gale v. Lendo, 1 Vern. 475, was a case where the party against whom relief was sought, was in no wise to be injuriously affected by the transaction, in as much as she had received the money for the bond which she had given to her brother on her marriage. The obligor,, however, was not permitted to recover, because he had taken it with a fraudulent intention to operate against her husband,/who had died ; and although he was not affected by it, nor could his estate be made liable for it, yet as it was givpn originally for a fraudulent purpose, it was void as against all persons. This case is also ah answer to the argument of the counsel, which went to shew that although a fraud was contemplated, yet none was effected, and that therefore no forfeiture should attach against Complainants. The fraud consists, not in the actual injury sustained by the person intended to be injured, but in tlie act itself, and the turpitude of the motive which influenced the party to its commission; p,nd that which was once a fraud always remains a fraud — 1 Vern. 475.

It would therefore seem, from this view of the cases, that so far from Complainants’ being entitled to relief upon any ground of Equity, they are opposed not only by the statute against fraudulent conveyances, but also by the maxim, that he who hath done iniquity, shall not have Equity; and by the principle, that no Plaintiff is entitled to the aid of a Court of Equity to enforce a contract entered into with a fraudulent intention, and for a fraudulent purpose. This renders it unnecessary to consider the other part of the cases, that is, whether parol proof.should be admitted to prove the private agreement; for if this agreement had been reduced to writing, with all possible solemnity, it would not have received the aid of a Court of Equity for a specific performance. ‘ The bills must therefore be dismissed. '