Southern Commission Co. v. Porter , 122 N.C. 692 ( 1898 )

The defendant, Davidson, and one Sherrill were partners doing business as merchants at Swannanoa, in Buncombe County. The partnership became utterly insolvent. Sherrill died and the defendant Davidson made an assignment of all the partnership effects to the defendant Porter. This assignment was made on 16 October, 1896, in which it is provided that Porter shall, at once, take possession of the goods and partnership effects; that he have the right to employ clerks and servants, and to buy and replenish the stock of goods, and out of the proceeds to pay the debts of the firm, and also the individual debts of thedefendant Davidson, pro rata with the firm debts, and no time is fixed when this trust is to be closed.

If this does not amount to fraud in law, upon which it was the duty of the court to so declare and to so instruct the jury, it is so near the line that it is difficult to mark the division. But we see that this assignment is almost a copy of the assignment considered by this Court in Stoneburner v. Jeffreys, 116 N.C. 78, except the provision that theindividual debts of the survivor are to be paid pro rata out of the partnership funds, with the partnership debts. This provision does not seem to have been in Stoneburner v. Jeffreys. But for this case, we might have been disposed to hold that there were such evidences of fraud — the right to hire clerks and servants, to buy goods and pay for them out of partnership effects, for an indefinite period of time — (698) that it was a case where the court should hold and declare it fraudulent and void.

There was other evidence of fraud besides those already noticed and contained in Stoneburner v. Jeffries, supra. The assignment requires the assignee, Porter, to pay out of the assets of the firm the individual debts of Davidson, as well as those of the firm. This was a fraud on the creditors of the firm. Strauss v. Frederick, 91 N.C. 121. And it has been held that the putting one fraudulent claim in the deed of assignment spoiled the whole, and the assignment would be declared void. Stone v.Marshall, 52 N.C. 300. This rigid rule has since been relaxed, where it is done without the knowledge and consent of the assignee. Morris v.Pearson, 79 N.C. 253. But it has been held since Morris v. Pearson that in case of a general assignment (which this seems to be), a fraudulentintent on the part of the assignor, whether known to the assignee or not, is such a fraud as will vitiate the deed of assignment. Woodruff v. Bowles,104 N.C. 197. But, of course, the assignee, Porter, knew that the individual debts of Davidson were in this deed of assignment. Davidson testified that he did not intend to commit a fraud upon the creditors of the firm; but he was incompetent to prove this fact. Booth v. Carstarphen107 N.C. 395; Cowan v. Phillips, 119 N.C. 26.

If the case was such that the court could not, as a matter of law, declare the fraud, there were so many badges of fraud that this issue should have been left to the jury with proper instructions, as fraud might very well have been found by them when it could not be declared by the court. Hinshaw v. R. R., 118 N.C. 1047; Mfg. Co. v. R. R., post, 881.

The court was asked to submit this issue to the jury, but declined to do so, and instructed the jury to find that there was no fraud. (699) In this there was error.

It was also held by the court that the defendant Davidson was entitled to have his personal property exemption paid him by the assignee out of the partnership assets. In this there was error. Boyd v. Redd, 118 N.C. 680.

There are no liens attached to this property that we can see, and it seems to us to be a proper case for the court to appoint a receiver to take charge of this partnership fund and to administer the same among the creditors, whether the deed is set aside or not.

It cannot be allowed to run on indefinitely. After the individual creditors of Davidson are eliminated and his claim for the $500 exemption declared illegal, the distribution under the trust would be substantially the same as if the assignment were set aside and the fund administered under the equitable jurisdiction of the court.

Error.