Peoples Bank & Trust Co. v. MacKorell

143 S.E. 518, 195 N.C. 741, 1928 N.C. LEXIS 199

• Court: Supreme Court of North Carolina
• Decided: June 6, 1928
• Status: Published

Opinion

Clarkson, J.

“In Aman v. Walker, 165 N. C., 224, 227, 81 S. E., 162, it was beld that the principles to be deduced from the authorities as to fraudulent conveyances, 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 -with the 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 has notice, it is void. Black v. Sanders, 46 N. C., 67; Warren v. Makely, 85 N. C., 12, 14; Credle v. Carrawan, 64 N. C., 422, 424; Worthy v. Brady, 91 N. C., 265, 268; Savage v. Knight, 92 N. C., 493, 498; Clement v. Cozart, 112 N. C., 412, 420, 17 S. E., 486; Hobbs v. Cashwell, 152 N. C., 183, 188, 67 S. E., 495; Powell Bros. v. McMullan Lumber Co., 153 N. C., 52, 58, 68 S. E., 926.” Michie’s N. C. Code, Anno., p. 385; Tire Co. v. Lester, 190 N. C., 411; Wallace v. Phillips, ante, 665. See C. S., 1005, 1006, 1007, 1008, 1009.

There can be no dispute that the contract between the father and son, in the present action, there being no mistake or fraud, both being sui juris, is a, valid and binding one. The record indicates it is being carried out in accordance with its terms. As between the parties, the question of adequacy of consideration ordinarily is not material in the absence of fraud. Young v. Highway Com., 190 N. C., 52. On the subject it may be of interest to quote from Shirley’s Leading Oases in the Common Law, 3d ed., p. 1: “ ‘Farmer Whitacre,’ said the cunning Thorn-borrow, ‘let us strike a bargain. If I pay you a five-pound note down now, will yon give me 2 rye corns next Monday, 4 on the Monday week, 8 on the Monday fortnight, and so on — doubling it every Monday — for the year?’ Whitacre jumped at it; five pounds never were earned so easily. So the thing was settled. But when our yokel friend came to calculate bow much rye be should have to deliver, be found that it came to more than was grown in a year in all England. Tbornborrow, however, brought bis action, and succeeded; for the court said that ‘though the contract was a foolish one, it would bold in law.’ There was a consideration, and as for the other point raised for the defendant, that it was an impossible contract, it was only impossible in respect to tbe defendant’s ability.” Thornborrow v. Whitacre, 2 Ld. Raym., 1164 (1705).

There are now modifications and exceptions to the harsh rule — -where a contract is extortionate and unconscionable as to indicate mistake and fraud. An instance of such a bargain is where one bought a horse and agreed to pay a penny for the first nail in his shoes and to double each time for every other nail. Williams v. Chaffin, 2 Dev., 13 N. C., at p. 335. So, where a contract is so extortionate and unconscionable on its face as to raise a presumption of fraud or to require but slight additional evidence to justify such presumption, it will not be enforced— for instance, the famous contract of the United States government to pay sixty cents a pound for shucks worth at the time 1% cents per pound. Hume v. U. S., 132 U. S., p. 406; Mordecai’s Law Lectures, 2 ed., p. 112.

C. S., 1007, is as follows: “No voluntary gift or settlement of property by one indebted shall be deemed or taken to be void in law, as to creditors of the donor or settler prior to such gift or settlement, by reason merely of such indebtedness if property, at the time of making such gift or settlement, fully sufficient and available for the satisfaction of his then creditors, be retained by such donor or settler; but the indebtedness of the donor or settler at such time shall be held and taken, as well with respect to creditors prior as creditors subsequent to such gift or settlement, to be evidence only from which an intent to delay, hinder or defraud creditors may be inferred; and in any trial shall, as such, be submitted by the court to the jury, with such observation as may be' right and proper.”

The stock — $7,000—was assigned, transferred and set over from the father to the son. The consideration was $100, and to support and provide for the father and his wife the balance of their lives and the life of the survivor of them. The book value of the stock is $1.10 on the dollar.

Under C. S., 1009, a, purchaser for value and without notice of any fraud gets good title by conveyance or transfer from fraudulent vendor. See Cox v. Wall, 132 N. C., 730.

In Bigelow on Fraudulent Conveyances, Revised Edition, at p. 545, it is said: “The courts are not agreed in regard to the effect of undertakings by a grantee to support a debtor-grantor by way of consideration for the conveyance of all or a large part of the grantor’s estate. In New York, Illinois, and elsewhere, it is held that such a case does not make the valuable, or rather the valuable and bona fide, consideration required by the statute to cut off the claims of creditors of the grantor. . . . (p. 547). Tbe exclusion of such a consideration should not rest upon the ground that it may not be valuable, but rather on the ground that, being in effect of the nature of a trust or reservation to the exclusion of creditors or of a trust or a reservation in favor of some one apparently having no estate in the property, and seldom appearing of record, the consideration lacks good faith. This is shown directly by some of the cases, and indirectly by others. Tbe real question then is, whether the nature of the proposed consideration should fix upon the grantee the duty of inquiry concerning the effect of the transaction. See Sturdivant v. Davis, 31 N. C., 365; Kissam v. Edmundson, 36 N. C., 180; Cansler v. Cobb, 77 N. C., 30; Worthy v. Brady, 91 N. C., 265; Eddleman v. Lentz, 158 N. C., 65; Shuford v. Cook, 169 N. C., 52; Bank v. Pack, 178 N. C., 388.”

We think the principle applicable in the present action is thus stated: “It has in some jurisdictions been held that where the grantee has in good faith furnished support, be may be reimbursed for the same when the conveyance is set aside (or be held liable merely for value of the land beyond that; of the support furnished).” Bigelow, supra, at p. 546, note, citing authorities.

The subject, with full annotations, is set forth in Cherry Co. v. Helms, 98 Neb., 626, 2 A. L. R., p. 1436; Smith v. Clark, 23 A. L. R., p. 582.

It is contended by defendant, T. M. Mackorell, that in compliance with tbe contract made with bis father, tbat be in good faith bought tbe stock, without notice or knowledge of bis father’s indebtedness; tbat be paid out and became responsible for (1) Tbe sum of $100, paid at tbe time of tbe sale and transfer; (2) tbe sum of $350, which be became liable on for money borrowed for bis father; (3) tbe sum of $77.55 in cash given to bis father from time to time; (4) tbe sum of $1,044.48 on which be is now liable to tbe corporation for advances to bis father; (5) money expended for groceries for bis father and approximating (at tbe time of tbe trial in tbe lower court) $80.00.

We think tbe issues submitted practically correct, so far as they go, but under tbe facts and circumstances of this case tbe issue tendered by defendant, as modified below, should have been submitted to tbe jury: “Was tbe defendant, T. M. Mackorell, a bolder in good faith (and for value — stricken out) and without notice of tbe seventy shares of stock mentioned in. the pleadings?” And also an issue: “Did the defendant, T. M. Mackorell, in good faith and without notice, make advances under the agreement with R. J. Mackorell, and if so, in what amount?”

We think the allegations of the complaint, taken as a whole, sufficiently show that the grantor did not retain property fully sufficient and available for the satisfaction of his then creditors, and the motion of defendants for judgment as in case of nonsuit at the close of plaintiff’s evidence and at the close of all the evidence, properly refused. C. S., 567. See Wallace v. Phillips, ante, 665.

On a new trial the other matters discussed by the parties can be determined on the evidence as presented. For the reasons given, there must be a

New trial.