Opinion
(September Term, 1896.)
Action of Claim and Delivery — Fraudulent Conveyance — Burden of Proof — Bill of Sale — Subsequent Insertion of Other Property Without Noted Change of Consideration — Conveyance as Security — Erroneous Rejection of Testimony Cured by Admission of Fact Intended to be Proved — Instructions.
1. In the trial of an action of claim and delivery of personal property, in which defendant alleges that the bill of sale under which plaintiff claims is fraudulent, the burden is upon the defendant to prove the fraud, unless the instrument is fraudulent upon its face or enough appears therein to raise a presumption of fraud, and a finding by the jury that such bill of sale is not fraudulent will not be disturbed unless based on improper evidence or erroneous instructions.
2. The erroneous rejection of testimony on a trial is cured by a subsequent admission of the fact attempted to be proved thereby.
3. Where, in the trial of an action of claim and delivery of personal property, to which the defense was that the bill of sale under which plaintiffs claimed was fraudulent, it appeared that the grantor, after executing the bill of sale for certain property upon a recited consideration of $4,000, the estimated value of the property, agreed to include other property if the grantees would assume and pay other debts of his for which they were sureties, and did subsequently insert such other property in the instrument without changing the recited consideration: Held, that it was not error to refuse an instruction that, if plaintiffs and the grantor in the bill of sale agreed on a consideration of $4,000 for the transfer of certain personal property, and subsequently other property was inserted in the bill of sale without change of consideration, the instrument was fraudulent.
4. An insolvent debtor may, in good faith, pay one or more of his creditors, though nothing remains for his other creditors.
5. Although an insolvent debtor, in selling his property to a creditor in payment of a debt, may have the intent to secure a benefit to himself, or to hinder, delay or defraud his other creditors, the transaction will be upheld if the creditor who is paid does not participate in or know of the debtor's fraudulent purpose.
6. The refusal to give an instruction not warranted by the testimony is not error.
ACTION of claim and delivery, tried at July, 1895, Special Term of GUILFORD, before Boykin, J., and a jury. The action was brought by the plaintiffs, claiming to be the owner and to have right of recovery of the property named in the complaint, under a bill of sale made to them by one L. F. Ross. The defendant admitted the taking and holding the same, and justified the same on the ground that said bill of sale was fraudulent and void as to creditors, that he had levied upon and held the property as sheriff, under and by virtue of the authority of three several warrants of attachment against the said Ross. In the course of the trial when Newell, a witness on the part of the plaintiff, was under examination, the defendant, in support of his defense, proposed to show by him that L. F. Ross, on the day, and just a few days before, the making of the bill of sale under which the plaintiffs claim, told him that he was insolvent, and on objection by plaintiffs his Honor excluded the evidence, to which defendant excepted.
In the course of the argument to the jury the counsel for plaintiff admitted that L. F. Ross was insolvent, and in the charge to the jury the Court called the attention of the jury to this admission, and stated that there was no denial that he was insolvent.
Two issues were submitted, the first relating to the ownership (167) of the property, and the second to the value of the property at the time of seizure.
The defendant asked the Court for the following instructions:
"1. If the jury shall find that the bill of sale executed by L. F. Ross was so executed with the intent to hinder, delay or defraud his creditors or to secure a benefit to himself, the burden is upon the plaintiffs to show that a consideration actually passed in the shape of (168) money paid, something of value delivered or the discharge of a debt actually due from L. F. Ross to them, and that they acted in good faith.
"2. If the jury shall find that L. F. Ross executed said bill of sale with such intent to hinder, delay or defraud creditors or to secure a benefit to himself, and that plaintiffs participated in his purpose, or knew of his intent at the time, though the consideration may have been a preexisting debt, it is their duty to find that said bill of sale was executed to defraud creditors.
"3. The notice or knowledge of L. F. Ross's fraudulent intent on the part of plaintiffs does not mean that they must know as a matter of law that said bill of sale was fraudulent, but did they know the circumstances which the law says makes the transaction fraudulent, if it was so, on the part of L. F. Ross (which have been explained), and if they did know of such circumstances the jury will find that said sale was fraudulent and that plaintiffs are not entitled to recover.
"4. Even if the plaintiffs paid a full price for the property conveyed in said bill of sale, yet, if the jury shall find that they purchased with the intent to aid L. F. Ross to defeat his creditors or any of them, or to secure a benefit to himself, their purchase is void, and the jury will answer that plaintiffs are not entitled to recover.
"5. If the jury shall find as a fact that the plaintiffs and L. F. Ross agreed upon the sum of $4,000 as the consideration for the transfer of the buggies, carts, wagons and harness, and that subsequently other property, mules and wagon and harness and hosiery-mill stock notes were inserted in the bill of sale without change of consideration, such insertion of property being without consideration was fraudulent, (169) and hence plaintiffs would not be entitled to recover.
"6. If the jury shall find that the bill of sale was executed in whole or in part as a security, and not as an absolute sale of property, then the same is in law fraudulent and void, and the plaintiffs are not entitled to recover.
"7. The plaintiffs having testified that the hosiery-mill stock was inserted in the bill of sale as a security, the same was fraudulent, and the jury will answer the first issue, `No.'"
The Court gave all the prayers, save the 5th and 7th. Defendant excepted to refusal of the Court to charge as requested in those prayers.
It was admitted by plaintiff's counsel, and the admission was called to the attention of the jury, that L. F. Ross was insolvent.
His Honor explained the contention of the parties to the jury and, among others, instructed them as follows: "That an insolvent debtor had the right to pay one or more of his creditors, though it resulted in not having enough property left to pay his other creditors, but the transaction must be bona fide, without intent to hinder, delay or defraud his other creditors or any one of them, and without purpose to secure a benefit to himself; and although a debtor did sell his property to a creditor as a payment of his debt, in order to secure a benefit to himself or with the intent to hinder, delay or defraud other creditors, still the law will uphold the contract unless the creditor participated in his purpose or knew of his intent at the time.
"That a conveyance of property absolute upon its face, but intended as a security for a liability, is fraudulent and void as to creditors.
"It being admitted that L. F. Ross was insolvent at the time (170) of the execution of the bill of sale, the jury should inquire, first, if he intended by said transfer of his property to the plaintiffs to hinder, delay or defraud any of his creditors or to secure a benefit to himself; second, if he did so intend, did the plaintiffs participate in his purpose or know of his intent; third, was the alleged consideration for the transfer of said property reasonably fair and just; fourth, whether the bill of sale was executed, in whole or in part, as a security or as an absolute sale of the property.
"If the jury finds that L. F. Ross conveyed the property to the plaintiffs with the intent to hinder, delay or defraud any of his creditors, or to secure a benefit to himself, and shall also find that the plaintiffs participated in his purpose and knew of his intent, then the conveyance was fraudulent and void, and the plaintiffs can not recover, and are not the owners of the property; or, if the jury shall find that the bill of sale was executed in whole or in part as a security, and not as an absolute sale of the property, then the same is in law fraudulent and void, and the plaintiffs are not the owners of the property and are not entitled to recover.
"But if the jury shall find that L. F. Ross conveyed the property in good faith for a reasonable, fair consideration, without any intent to secure a benefit to himself, or to hinder, delay or defraud any of his creditors, or if he did so with such intent and purpose, if the plaintiffs did not participate in such purpose, or know of such intent, then the plaintiffs are entitled to recover and are the owners of the property, unless the conveyance and transfer of the property was made, in whole or any part thereof, as a security.
"If the conveyance and transfer of the property was made, in whole or in part, as a security, then the same is void and fraudulent as to creditors, and the plaintiffs are not the owners of and are not (171) entitled to recover the same."
There was a verdict for the plaintiffs; prayer for judgment by the plaintiffs; motion for a new trial by the defendant for refusal by his Honor to give defendant's fifth and seventh special instructions, and for error in excluding the proposed evidence of witness Newell as to declarations of insolvency by L. F. Ross. Motion denied, and judgment for plaintiffs, from which defendant appealed.
J. T. Morehead for plaintiff.
Dillard King, R. M. Douglas and Shepherd Busbee for defendant (appellant).
This is an action for the possession of personal property, and comes to this Court on the appeal of defendant. Plaintiffs claimed title under a bill of sale bearing date 15 August, 1893, which defendant alleged was fraudulent, as to creditors under whom he claimed, being intended to hinder and delay the creditors of L. F. Ross from collecting their debts. And further, that this transaction between L. F. Ross and the plaintiffs was not an absolute sale, but in fact an assignment to secure plaintiffs as his sureties, and was, therefore, a fraud on the registration law, and void on that account.
It is not contended by the defendant that the bill of sale contains such evidence of fraud on its face that it was the duty of the court to declare it void, as a matter of law. Nor is it contended that sufficient appears on its face to create a presumption of fraud, which must be rebutted by the plaintiffs. Cheatham v. Hawkins, 76 N.C. 335; S. c., 80 N.C. 161; Booth v. Carstarphen, 107 N.C. 395; Cowan v. Phillips, ante, 26. This being so, it devolved on the defendant to establish (172) the fraud. And this was a question of fact for the jury and the jury has passed upon it, and found there was no fraud. This ends the case, unless this finding was based upon improper evidence, or erroneous instructions from the Court.
There is but one exception to evidence assigned as error, and that is that the defendant was not allowed to prove that "Ross told witness (Newell) that he was insolvent." This exception was virtually abandoned on the argument, and it was admitted on the trial that he was insolvent. So we see no ground upon which it should be sustained.
The defendant's only other exception is that the Court declined to give his 5th and 7th prayers for instruction, which are as follows:
"5. If the jury shall find as a fact that the plaintiffs and L. F. Ross agreed upon the sum of $4,000 as the consideration for the transfer of the buggies, carts, wagon and harness, and that subsequently other property, mules and wagons and harness, and hosiery mill stock and notes, were inserted in the bill of sale without change of consideration, such insertion of property being without consideration was fraudulent, and hence the plaintiff would not be entitled to recover."
"7. The plaintiffs having testified that the hosiery mill stock was inserted in the bill of sale as a security, the same was fraudulent, and the jury will answer the first issue `No.'"
This case discloses the fact that the plaintiffs, Ferree and R. R. Ross, were the sureties of L. F. Ross for considerable amounts, over and above $4,000, the estimated value of the property L. F. Ross at first agreed to sell them; that he afterwards agreed with the plaintiffs that, if they would agree to pay other debts for which they were his sureties, and to assume a liability of his to one Gwynn, he would sell them other (173) property, which was then inserted in the bill of sale. The evidence in the case tends to establish this state of facts, and in our opinion justified the Court in declining to give the defendant's fifth prayer.
We fail to find that the seventh prayer is sustained in fact. There may be sufficient evidence for the defendant to argue that the hosiery mill stock was inserted as a security. But we do not find that the plaintiffs testified that it was. This being so, the defendant's exception to the Court's refusing to give this prayer must fail.
Whatever might be our opinion if we were sitting as a jury, we find no error of law committed by the Court on the trial. The defendant's prayers for instruction, and the judge's charge, (which the reporter will set out in full), show that the defendant has no cause to complain of the Court in this trial. Failing to find error, the judgment is
AFFIRMED.
Cited: McBrayer v. Haynes, 132 N.C. 611.
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