Toole v. . Darden , 41 N.C. 394 ( 1849 )

The bill alleges that the defendant Eason, being indebted to one Pender, with the defendant Sugg and Robert Belcher as sureties, the said Eason, Sugg, and Belcher entered into a fraudulent agreement by which Eason was to execute to Sugg and Belcher two notes for $500 each, to be held and appropriated by them for his use, and was then to (395) convey the land described in the bill and his other property to one Lewis Belcher, in trust to sell and pay the said debt due to Pender and the said feigned notes of $500 each; that the two notes and the deed of trust were accordingly executed on 4 January, 1843. The bill avers that the two notes were executed without consideration, and were included in the deed of trust for the secret benefit of Eason; and that the notes and deed were made with the intent to create a secret trust for Eason and to defraud his creditors, The bill also alleges that in January, 1844, the trustee sold, and the defendants Eason, Sugg, and Robert Belcher contrived to enable Sugg to buy, all the property for $2,879 (a sum much less than its value), for the fraudulent purpose that Sugg should hold it for the secret use of Eason; that in March, 1844, Sugg, having taken a deed from the trustee for all the property, sold the land to the defendants Darden and Beeman, "who had notice of the aforesaid fraudulent agreement, combination, and understanding"; that in November, 1846, the plaintiff Toole, being acreditor, obtained a judgment against him for $113, with interest from 20 November, 1846, and on which execution issued, and the land was levied on and sold and bought by the plaintiffs. The prayer is for a conveyance. The bill is filed upon the idea that, as there was actualfraud in the deed of trust and the deed to Sugg, by reason of the fraudulent contrivance and understanding that the property was to be held for the secret use of Eason, the deeds are void as against Toole, asubsequent creditor, and the plaintiffs, having purchased under the execution, could follow the land in the hands of the defendants, who paid value, but had notice of the fraud.

(396) When a subsequent creditor seeks to avoid a conveyance upon the ground that it was voluntary, and void as to creditors on account of fraud in law as distinguished from actual fraud, he must be able to show that there is some existing debt remaining unpaid; for if all such debts were provided for and paid, or afterwards paid without being provided for, that fact repels the presumption of fraud which the law makes from the mere fact that the conveyance was voluntary. The general expression in Hoke v. Henderson, 14 N.C. 14. "That a conveyance void as to one creditor is void as to all creditors," is qualified by what immediately follows. The meaning is, there must be one existing creditor unpaid, as to whom the conveyance is void; if so, that will let in all creditors and "bring the whole fund into subjection to general creditors."

In this case there was an actual fraud. The conveyance was colorable and in trust for the debtor; and being a continuing trust and a continuing fraud, a subsequent creditor can take advantage of it without the aid of an existing creditor whose debt is unpaid. The plaintiff could, without doubt, have reached the land in the hands of the trustee or of Sugg, but I do not think they can do so in the hands of the defendants, to whom it passed for value more than two years before the creation of Toole's debt, although they had notice of the original fraud.

In Martin v. Conly, 18 N.C. 30, it is held that a purchaser from a fraudulent grantee without notice can hold against an existing creditor. Here the creditor is a subsequent one, but the purchaser had notice of the original fraud, and the question is, What is the effect of the notice?

Eason, the debtor, had no right to the land as against the trustee of Sugg; nor could he have compelled them to executive the fraudulent trust, being "in pari delicto." The defendants, then, although (397) they had notice, did him no wrong. They did no wrong to any existing creditor, for there is none such unpaid; and they could do no wrong to the creditor Toole, for his debt was not then created; and as a matter of course the defendants could not have notice of it. The defendants, then, at the time they bought, did wrong to no one. And there is no reason why they were not at liberty to purchase. The plaintiffs have not the shadow of a right to complain, for the defendants took possession and have had possession ever since. And the plaintiff Toole cannot say that he trusted Eason on the credit of the land, nor does he venture to allege that he had not full notice of the defendant's purchase when the gave credit to Eason.

My conclusion is that a purchaser from a fraudulent grantee, when there is actual fraud, gets a valid title, unless he has notice of an existing debt unpaid, or of a debt subsequently contracted, before he makes the purchase.

PER CURIAM. Bill dismissed with costs.

NOTE — See opinion of Nash, J., in this case, post, 501-504.

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