Stone v. Marshall, 52 N.C. 300, 7 Jones 300 (1859)

Dec. 1859 · Supreme Court of North Carolina

52 N.C. 300, 7 Jones 300

JOHN F. STONE, Trustee v. JOSEPH MARSHALL.

Where a debtor included several feigned notes in a deed of trust, it was Held that such deed was void, in toto, as against creditors, notwithstanding there were other bona fide debts included, and there was no evidence of any complicity in the fraud, on the part of the trustee.

This was an action of trover, tried before Caldwell, J"., at Fall Term, 1859, of 'Stanly Superior Court.

The plaintiff declared for the conversion of three negroes and a wagon. The plaintiff offered, in evidence, and proved the execution of a deed of trust bearing date the 7th of March, 1856, from one John Stoker, conveying to him all his property, including the three negroes and wagon in controversy, to secure the payment of a number of debts set forth in said deed of trust, of various amounts, and due to different persons, amounting to about three thousand dollars, the most of which were proved to be just debts.

The defendant proved that John Stoker, the vendor, in the deed of trust, at the time of the execution of the deed of trust, was indebted to one Caleb A. Heilig, b}r note, for the sum of thirteen hundred dollars, which was put in suit against him in Rowan County Court, and reduced to a judgment at May Term, 1856, of said Court, upon which judgment, a fieri facias, tested as of that term, was issued to the defendant, who was then sheriff of Stanly county, and was by him levied on the three negroes and wagon, which were sold by him according to law, and the proceeds of the sale applied to the satisfaction of the execution. It was also in, proof, on the part of the defendant, that in the year 1853 and 1854, John Stoker, and one James Kirk, were merchants and partners in the county of Rowan; that Stoker was the business man of the concern, attended regularly at the store, kept the books, money, &c., while Kirk lived ten miles distant, and was there only occasionally; that they dissolved the copartnership in the fall of the same year, 1854, owing a considerable Northern debt at the time. On the dissolution, Kirk bought out the store, and the goods on hand, and Stoker agreed to- pay all the debts of the concern, but failed to do so, and they were paid by Kirk to an amount over thirty-two hundred dollars, as admitted by Stoker, who, however, insisted at the time, that Kirk had received enough of the copartnership fund to indemnify him, but this was denied by Kirk.

It was further in proof, by the defendant, that Stoker told one Kendall, a witness, some few months before the execution of his deed, that he was worth two or three thousand dollars. It was also in proof, by him, that three of the notes given by John Stoker, and secured in the deed of trust, one of date the 29th of February, 1856, for six hundred dollars, payable to his brother, one A. T. Stoker, one of date 26th of February, 1856, for two hundred dollars, payable to James Roseman, and another payable to the same, for three hundred dollars, and bearing the false date of June 26th, 185F, its true date, as proved, being the 26th of February, 1856, were fraudulently made without any consideration, and that there was an express agreement in relation to the two last notes between Stoker and James Roseman, the payee therein, that he should collect the same from the trustee, and deducting certain commissions for his services, pay over the residue of their proceeds to John Stoker, and that some two years ago, since the pending of this suit, Stoker offered to give Roseman one hundred dollars, if he would swear they were genuine.

There was no evidence that the trustee had any knowledge of the said Stoker’s fraudulent conduct. The defendant’s counsel insisted that if the deed of trust was made with the fraudulent intent of hindering or delaying the creditors of Stoker, or for his ease and benefit, that the deed was void under the statute of 13 Eliz., although there were some just debts secured therein.

The Court charged the jury, as a general rule, it was true that a deed of trust made to defraud creditors, or for the ease and benefit of the trustor, was void; hut in this case, if they believed the debts were true debts, as set forth in said deed, save the three alleged to be founded in fraud, and there was no collusion between the trustor and trustee, and there was no evidence of any, as to the trustee, the legal estate vested in the trustee, and he could maintain the action. Defendant excepted.

Yerdict for plaintiff. Judgment. Appeal by defendant.

Ashe, for defendant.

No counsel appeared for plaintiff in this Court.

Manly, J.

If a conveyance be made upon several -considerations alike moving the maker, one of which is against law, the whole is void. But, if the consideration be good, and there is attached to the convejmnce several conditions or trusts, separate and independent of each other, some of which are good, and some bad, the deed will be supported as to the good. The difference is, that every part of the deed is induced and affected by the illegal consideration; but when the consideration is not thus tainted, but some of the conditions only are illegal, the illegality of the bad does not contaminate the good, except in some peculiar cases where they are inseparable or dependant. This distinction is taken and supported by a number of cases cited in the note to Collins v. Blantern, 1 Smith’s Leading Cases, 169.

In the assignment to pay debts, the debts secured, form the consideration for the deed. In the case now before us, some of these are admitted to be fabricated and fraudulent. They are inseparably connected together, and as a whole, constituted the consideration which moved the debtor to make the conveyance. The Code declares that every conveyance made with the intent to delay, hinder or defraud creditors, as against such creditors, (and only as against them,) shall be utterly void. Rev. Code, ch. SO, sec. 1.

The intention of a conveyance is to accomplish the objects that moved the maker to execute it, and if any of these latter be covenous, the intent is necessarily so.

The charge of the Judge below cannot, as we think, be sustained. In substance, it was that no matter for the fr'audulent purpose of the grantor, if the trustee did not participate in that purpose, and there were honest debts secured by the trust, the deed shduld be upheld. The enactment of the Legislature is that every conveyance made with the intent to delay, hinder or defraud, shall be void. The intent of the mal&er is the criterion, and if that intent be bad, the trustee, however innocent, cannot hold as against creditors.

In the case of Harris v. He Graffenreid, 11 Ired. Rep. 89, it was held that a bona fide purchaser for value, from a trustee holding under a fraudulent deed, would get a good title; for there was a legal title in the trustee as against the grantor and others, (not creditors) which was transmissible; and which would be effectually transmitted to one who buys without notice of the fraud and for value. This decision is in accordance with a number of cases, in which it has been held that, although a deed may be void, for fraud, as against creditors, yet, if the assignees were free from participation in the fraud, their acts, done in good faith, would be ratified and protected.

And so it has been held, and we take that to be clear law too, when there is no trust implied, but a debtor conveys directly to his creditor, in payment of a bona fide debt,' the conveyance should be upheld, notwithstanding the debtor made it wdth a fraudulent intent. The cases of this class rest upon the ground, that the creditor was not a party to the fraud, but received the conveyance in good faith, in payment of an honest debt; and in conformity to the rules of law, which govern the case of an ordinary vendee, who is without fraud and pays value, the creditor is not affected by the fraud of his vendor.

But the rule which exists as between vendor and vendee, has never been applied, so far as we know, to a case like the one now under consideration. Assignments of this kind, prefering creditors, can only be made by an insolvent debtor. They are not favored when preferences are given. The law only tolerates them when honestly made for the purpose of giving the preference, and devoting the property of the debtor to the payment of his debts. If then, there be in the mind of the debtor a purpose to defraud, or make provision for himself, (which is a fraud) the assignee, who is selected by him to carry out his fraudulent designs, cannot hold as against the creditor. The assignment is void under the provision of the Code referred to, (the stat. 13 Eliz.)

The conclusions here reached, are supported by the cases in our own reports of Hafner v. Irwin, 1 Ire. Rep. 490, and Flynn v. Williams, 7 Ire. 32, and the cases in New York of llatliburn v. Plainer, 18 Barbour Rep. 272. The case of Brannock v. Brannock, 10 Ire. 428, does not conflict with the cases of B.qfner v. Irwin and Flynn v. Williams, though relied on for that purpose. By referring to the reasoning of the Court, in that case, it will be seen that is made to turn upon the distinction taken by Smith in his leading cases, between bad considerations, that are inseparable from the others, and furnish the bad motive for the deed, and bad considerations that are separable and independent, and inserted without covin or malice. In the former case, the whole is tainted, and the conveyance is void under the statute in toto ; in the latter, the had may be eliminated by the creditors, and the conveyance upheld as to. the good. In the case of Bran-nook, the objection to the assignment was the insertion, among the debts secured, of some that were founded upon usurious considerations, not covinously inserted, but as the case supposes bona fide, with intent to have them paid. On this state of facts, the deed was upheld for the good debts upon the distinction stated.

The ease now before us, for decision, is between the assignee and the sheriff. The former claims, as trustee, under an assignment, made by the debtor, with an intent to defraud; the latter justifies under a fi. fia., of a judgment creditor. As between these parties, we think the assignment clearly void, notwithstanding the freedom of the trustee from any participation in the fraud,, and notwithstanding, there were some honest creditors secured in the deed..

Per Curiam,

Judgment reversed, and a venire de novo.