Opinion
(June Term, 1864.)
1. Where a witness who had an interest in a cause gives or accepts a release in order to extinguish his interest, which expresses to be given in consideration of a sum of money named therein, it is competent for the other party to ask him whether there was in fact any consideration.
2. A deed absolute on its face, which is intended to operate as a mortgage, is void in law as against creditors.
3. If any part of the consideration of a deed be feigned or fraudulent as to creditors, the whole deed is void as to them.
4. A. and B. were partners in trade in 1851 and 1852; an account is taken in 1857, by which a balance is ascertained to be due to B. In 1855 A. conveys his property to C. without a valuable consideration; the conveyance is void as to B., for he was a creditor of A. from 1852.
5. A deed made with the intent to convey property in discharge of a supposed debt, which in law is not a debt, is void against creditors, although the alienor thought he owed the debt, and made the conveyance in discharge of his supposed legal obligation.
6. A conveyance of property, absolute on its face, and declared to be made in payment of a debt, is a mortgage, if the supposed debt be merely an obligation on the part of the vendor to indemnify the vendee against an event which has not happened and may never happen.
ACTION for trover, for the conversion of two slaves by the defendant, tried before French, J., at Fall Term, 1863, of MOORE.
On the trial it was in evidence on the part of the plaintiff that (287) on 7 May, 1855, one Samuel E. Johnson, being in the possession of two slaves named Nat and Charles, conveyed them and other slaves, by his deed, bearing said date and registered January, 1856, to his brother, Duncan Johnson, the plaintiff's testator, in consideration of $2,789.43. About 1 January, 1858, the said slaves, being in possession of plaintiffs as executors of Duncan Johnson, were seized by the sheriff of Moore, and at January Term, 1858, sold under execution, when the defendant became the purchaser, who, on demand made by plaintiffs, refused to give them up.
On the part of defendant, Robert Belden testified that in September, 1857, he was called upon to make a settlement between Samuel E. Johnson, the bargainor, and the defendant; that they had been partners in trade in 1851, and the latter year the partnership was dissolved. Upon the settlement it was ascertained that Samuel E. Johnson was indebted to the defendant about $2,200. The defendant then gave in evidence a judgment for the debt, execution levied on the slaves, a sale and purchase by him in January, 1858.
Upon the part of the plaintiff, Samuel E. Johnson was offered as a witness. He was objected to by the defendant, on the ground that he was a legatee of his brother, Duncan Johnson. Plaintiffs then gave in evidence a deed from Samuel E. Johnson to his brother, Malcolm, dated 3 October, 1857, and registered in 1861, conveying all his interest under his brother Duncan's will in consideration of $1,100. Defendant then proved that the mother of Samuel E. Johnson was a legatee under the will, and that she was dead intestate. Plaintiffs then gave in evidence a release of his interest as one of the next of kin of his mother for the consideration of $50. Defendant insisted that the witness was still incompetent, on account of his interest in the costs of this suit, whereupon the plaintiff gave in evidence a release from them to (288) the witness of his liability for the costs in consideration of $50. The witness then testified that on 9 May, 1855, he was justly indebted to his brother, Duncan, in the sum of $1,500 by note, dated 28 August, 1849, in three other notes dated 12 June, 1852, 1853, 1854, for $150 each, payable to Duncan Johnson, and in the further sum of about $260, due by notes executed by him in 1849 and 1852, in favor of one Duncan Morrison, which were held by his brother, Duncan. He conveyed Charles and Nat, and the other slaves, in order to pay these debts. Of these debts, the note for $1,500 was to secure the payment of that amount of money, which he owed Duncan for work done for him; the three notes for $150 each were given to secure the payment of the hire of a negro from his brother, Duncan, for three years, and the debt for $260, or thereabouts, accrued in this way: Duncan Morrison was the creditor of the witness for that sum, he was uneasy about the debt, and desired that it should be either paid or secured, and a note was made to secure it, payable to Duncan Morrison, and executed by Buie, one of the plaintiffs, as principal, and the witness and Duncan Johnson as sureties, and the witness's old notes to Morrison were delivered to W. A. Buie. This witness was asked by defendant's counsel whether, when he executed the release for his mother's interest, expressed to be in consideration of $50, he had received that or any other sum, and whether he had paid anything as a consideration for the plaintiff's release of his liability for costs. These questions were objected to by the plaintiff's counsel, and the objection overruled by the court. The witness answered that he received nothing in the one case, for he thought his mother had no interest, having sold it, and he paid nothing in the other. It was proved that Samuel E. Johnson was embarrassed and in failing circumstances in 1854 and 1855.
(289) The counsel for the defendant contended that so much of the consideration for the conveyance of Nat and Charles from Samuel E. Johnson to Duncan Johnson as related to the notes from Samuel E. Johnson to Duncan Morrison, viz., $260, or thereabouts, was feigned and covinous between Samuel E. Johnson and Duncan Johnson. The plaintiff's counsel contended that W. A. Buie, when he gave his note with Samuel E. and Duncan Johnson as sureties, received and held the Morrison notes as an indemnity.
The court charged the jury that if they believed the witness Samuel E. Johnson, the plaintiffs were entitled to recover; that if Buie held the Morrison notes as an indemnity, as contended by the plaintiff's counsel, and Duncan Johnson held them in the same way, then the deed, being absolute on its face, was void, and the plaintiffs could not recover; that the debts which were due from Samuel E. Johnson to Duncan Johnson formed the consideration of the bill of sale, and the intention of the conveyance is to accomplish the object which moved the maker to execute it, and if any part of the consideration be feigned or fraudulent, the intent is so, and the whole deed is void. The counsel for the plaintiffs requested the court to charge the jury, there being no account stated between Murchison and Samuel E. Johnson as partners in May, 1855, no debt ascertained to be due to Murchison, and no evidence that the deed was made to defraud Murchison, that the deed was not fraudulent in law as to him. The court declined to give the instruction, and the plaintiffs excepted. The counsel for the plaintiffs asked for further instruction, "that although Duncan Johnson might not indeed be able to collect the Morrison notes from Samuel E. Johnson, yet if Samuel E. Johnson thought so, and took them in good faith in part consideration of the negroes in the bill of sale, the bill of sale would not be void as to creditors on that account." The court declined to give such instruction and the plaintiffs excepted.
No counsel for defendant. (290)
Buxton for plaintiffs.
The exceptions to the trial below which appear upon the record may be disposed of in the order in which they stand.
During the examination of Samuel E. Johnson as a witness on behalf of plaintiffs he was asked whether certain releases, which he had given to quality himself, were not, in truth, without any consideration. This was objected to by plaintiffs, but allowed by the court, and answered in the affirmative.
The case does not disclose for what purpose this was used in the argument, or whether it was used for any purpose. We should take it for granted, therefore, that it was applied only to such uses as were proper, if there be any such.
There is one point of view in which, however little it may of itself weight, it would nevertheless be proper to consider it, and that is in respect to the feelings and relations of the witness to the parties respectively, and the consequent bias under which he might be disposed to testify. The subsequent explanation which the witness gives of his estimate of these considerations makes the testimony of little or no significance, and we suppose it could not have influenced the verdict. We see no wrong that it can have done the plaintiffs, and it is not therefore a just ground of exception.
The second exception arises upon the charge of the judge, and is to that part of it in which he instructs the jury, "that if Buie held the Morrison notes as suggested by plaintiff's counsel, and Duncan Johnson held them in the same way, then the deed, being absolute on its face, was void." This instruction appears to be justified by the facts and the law of the land as settled in this Court in Halcombe v. Ray, 23 N.C. 340. It seems that Samuel E. Johnson was indebted to (291) Morrison by several notes, and being unable to pay them on demand, it was arranged, in order to quiet Morrison's apprehensions, that Buie should become the principal in a note to him for the amount, with the uncles, Samuel E. and Duncan Johnson, as sureties. Upon this arrangement the notes of Samuel E. Johnson to Morrison were left in the hands of Buie, with that precise understanding does not appear; and the obvious inference might well be made that they were left there to abide the result of Buie's liability for the debtor, and an indemnity in case of loss; and, therefore, in respect to that part of the consideration, and the deed from Samuel E. to Duncan Johnson was a mere security for debt. In other words, the deed in question was a mortgage. The court was justified in presenting the case to the jury on this hypothesis, and the law, we think, was properly declared. The principle that makes void a deed, which is absolute on its face, but intended to operate as a mortgage only, springs from the requirements of our registration laws. To hold otherwise would defeat entirely the objects of the Legislature in requiring mortgages to be registered before taking effect. These laws for registration were passed to provide for creditors such means of knowledge as would enable them to avail themselves promptly of the remedies the law provides.
If an absolute deed could be substituted and upheld, it would enable the debtor to baffle the creditor in pursuit of his just demands, and the latter would be in the same condition as if no law for the registration of mortgages had ever been passed. We are obliged, therefore, to hold such a deed void, in order to give effect to the repeatedly declared will of the Legislature. There is no error in the instruction of the judge on this point.
The third exception is to that part of the charge in which the jury are told "that the debts which were due from Samuel E. Johnson to (292) Duncan Johnson formed the consideration of the bill of sale, and the intention of the conveyance is to accomplish the object that moved the maker to execute it; and if any part of the consideration be feigned or fraudulent, the intent is so, and the whole deed is void." This is in strict conformity to the law as laid down by this Court in Stone v. Marshall, 52 N.C. 300, when this Court announced the same principle in about the same words. The court is now satisfied with the soundness of this view.
The fourth exception is to the refusal on the part of the court to charge the jury "that, as there was no account stated between Samuel E. Johnson and Murchison in May, 1855, and no debt ascertained to be due Murchison at that time, and no evidence that the deed was made to defraud Murchison, the deed was not fraudulent in law as to him." In asking for the instruction, it seems to be assumed that Murchison was not a creditor to be defrauded until after the balance was struck in his favor in 1857. This is manifestly wrong. The testimony discloses the fact that the settlement spoken of was solely in relation to partnership transactions in the years 1851, and 1852. So that the balance, ascertained to be due in 1857, and for which judgment was recovered in that year, had been due since 1852. It would, therefore, have been manifestly improper for the judge to predicate any part of his charge on such an assumption, and he was right in refusing the specific instructions asked.
The last and only remaining exceptions of the appellant is to the refusal of the court to give this instruction, "That although Duncan Johnson might not, in strict law, be able to collect the Morrison notes out of Samuel E. Johnson, yet, if Samuel E. Johnson thought so, and took them in good faith, in part consideration of the bill of sale, the bill of sale would not be void as to creditors on that account." This instruction was properly refused. The note not being due and (293) collectible by Duncan Johnson, which is the supposition made, it follows it could only be held by him as a collateral security against his liability for the maker; and we have already seen that such a consideration cannot support an absolute deed so as to defeat a creditor. The claim or demand is a contingent and not an absolute one. The event may never happen upon which a legal demand would arise, and to estimate the value of such a risk, and insert it as a consideration in a deed absolute upon its face, is a fraud in law upon creditors. The necessary intendment of such an instrument is to defraud, and it is duty of the court so to hold, irrespective of any special evidence of the mind or intent of the maker.
Upon the whole, we see no error upon the trial of this case in the court below, and, therefore, it is considered by us that the judgment be affirmed.
PER CURIAM. No error.
Overruled: Woodruff v. Bowles, 104 N.C. 207.