Aman v. . Walker , 165 N.C. 224 ( 1914 )

This is an appeal from a judgment overruling a demurrer to the complaint. The plaintiff alleges three causes of action:

In the first, that the defendant Waller is indebted to him in the sum of $454.74, and that while this debt was being contracted in 1910 and 1911 said Waller was in the employment of the defendant lumber company, and that the lumber company, knowing of the existence of the debt to the plaintiff, discharged Waller, while indebted to him, and that the company ought to be restrained from paying Waller.

In the second, in addition to the facts alleged in the first cause of action, that on 25 January, 1910, the defendant Waller executed a mortgage to the defendant lumber company, purporting to (225) convey practically all of his property to secure a pretended indebtedness of $2,400; that on 8 October, 1910, said Waller executed to said lumber company a bill of sale for certain property; that at the time of executing said mortgage and said bill of sale the said Waller did not retain sufficient property to pay his debts, and that both were made with the intent to hinder, delay, and defraud the creditors of the said Waller, and that this intent was participated in by said lumber company.

In the third, the same allegations are made, and the additional ones, that practically all the property of said Waller was included in said mortgage and bill of sale; that this was in legal effect an assignment; that no schedule of debts and assets was filed; that in 1912 said lumber company sold the property embraced in said mortgage and bill of sale to E. H. Hagman Son for $3,000.

The defendant lumber company filed the following demurrer:

"First. As to the first cause of action, the complaint does not state facts sufficient to constitute a cause of action, in that no privity is alleged between the plaintiff and these defendants, and said complaint does not allege that these defendants are now indebted to the other defendants in any sum whatever, nor does it allege that they were ever indebted to the other defendants in any stated amount. Wherefore these defendants pray that said first cause of action be dismissed.

"Second. As to the second cause of action, said complaint does not state any facts sufficient to constitute a cause of action, in that it is alleged in the first cause of action (which is reiterated and made a part of the second cause of action) that the defendants, other than G. A. Waller and wife, are copartners, and that the bill of sale referred to therein was made to a corporation, which bill of sale could not convey any property to said copartnership. It is also alleged that the mortgage complained of was dated 25 January, 1910, which was before any of the debts due the plaintiff by G. A. Waller or L. M. Waller Co. were contracted, and the plaintiff cannot complain of the same, as it antedated the debts now sued on.

(226) "Further, these defendants allege as a matter of law that both of said conveyances were made more than four months before the institution of this action, and therefore, under the statute, chapter 918 of the Public Laws of 1909, the plaintiff cannot recover in this action.

"Third. As to the third cause of action, the complaint does not state facts sufficient to constitute a cause of action, for that all of the debts alleged to be due the plaintiff by G. A. Waller, or by L. M. Waller Co., were contracted after the execution and registration of the chattel mortgage referred to therein.

"And further, because it is alleged in the complaint that the goods were sold to L. M. Waller Co., and said goods were sold after the execution and registration of the bill of sale referred to in the complaint.

"Fourth. The defendants further demur to the entire complaint because it does not contain facts sufficient to constitute a cause of action, in that it is nowhere alleged that the defendants are indebted to G. A. Waller at this time in any sum whatever, nor is it alleged anywhere that these defendants were ever indebted to L. M. Waller Co. in any sum whatever.

"Wherefore this defendant prays that they be dismissed hence and recover their costs of the plaintiffs and the surety on their prosecution bond."

The demurrer was overruled, and the lumber company excepted and appealed. Judgment was rendered against the defendant Waller for the amount of the debt claimed by the plaintiff upon admissions made in open court. The demurrer to the first cause of action ought to have been sustained. The plaintiff does not allege in this cause of action that the lumber company owes him anything or has incurred any obligation to him, and the only ground of complaint is that the defendant Waller is indebted to the plaintiff, and that the lumber company is indebted to Waller in an amount not stated.

This furnishes no reason for interference by a court of equity (227) to restrain the payment to Waller, and the plaintiff has an ample legal remedy by garnishment, or by proceedings supplemental to the execution.

The demurrer to the second and third causes of action was properly overruled. It is alleged in these causes of action that the mortgage and bill of sale were executed with the intent to defraud creditors, and that this fraudulent intent was participated in by the lumber company, which, if true, would make both void, although supported by a valuable consideration.

The principles to be deduced from the authorities as to fraudulent conveyances, in so far as they are applicable to the facts alleged, are:

(1) If the conveyance is voluntary, and the grantor retains property fully sufficient and available to pay his debts then existing, and there is no actual intent to defraud, the conveyance is valid.

(2) If the conveyance is voluntary, and the grantor did not retain property fully sufficient and available to pay his debts then existing, it is invalid as to creditors; but it cannot be impeached by subsequent creditors without proof of the existence of a debt at the time of its execution, which is unpaid, and when this is established and the conveyance avoided, subsequent creditors are let in and the property is subjected to the payment of creditors generally.

(3) If the conveyance is voluntary and made with the actual intent upon the part of the grantor to defraud creditors, it is void, although this fraudulent intent is not participated in by the grantee, and although property sufficient and available to pay existing debts is retained.

(4) If the conveyance is upon a valuable consideration and made withthe actual intent to defraud creditors upon the part of the grantor alone,not participated in by the grantee and of which intent he had no notice, it is valid.

(5) If the conveyance is upon a valuable consideration, but made with the actual intent to defraud creditors on the part of the grantor, participated in by the grantee or of which he he has notice, it is void.Black v. Saunders, 46 N.C. 67; Warren v. Makely, 85 N.C. (228) 14; Credle v. Carrawan, 64 N.C. 424; Worthy v. Brady,91 N.C. 268; Savage v. Knight, 92 N.C. 498; Clement v. Cozart,112 N.C. 420; Hobbs v. Cashwell, 152 N.C. 188; Powell v. Lumber Co.,153 N.C. 58.

As a cause of action is stated, without reference to the allegation of failure to file a schedule of debts under the assignment law, it is not necessary to pass upon the effect of chapter 918, Public Laws 1909, and best not to do so until the facts are fully developed.

No objection is made on account of a defect of parties, but it appears from the complaint that the property in controversy has been sold, and the purchaser not a party to the record. His presence is necessary to a complete determination of the controversy, as it now appears, and he should be made a party. Bank v. Harris, 84 N.C. 206.

The judgment of the Superior Court is modified in accordance with this opinion, and as thus modified is affirmed. The appellant will pay the costs of the appeal.

Modified and affirmed.

Cited: Garland v. Arrowood, 117 N.C. 374 (2g); Sutton v. Wells,177 N.C. 527 (2g); Bank v. Pack, 178 N.C. 391 (2g); Tire Co. v. Lester,190 N.C. 414, 417 (2g); Wallace v. Philips, 195 N.C. 671 (2g); Bank v.Mackorell, 195 N.C. 744 (2g); Rhodes v. Tanner, 197 N.C. 462 (2f); Bankv. Finch, 202 N.C. 295 (2g); Theiling v. Wilson, 203 N.C. 810 (1f);Foster v. Moore, 204 N.C. 12 (2g); Dillard v. Walker, 204 N.C. 70 (2g);Bunn v. Harris, 216 N.C. 372 (2g).