Opinion · Supreme Court of North Carolina

Dewey v. . Littlejohn

Dewey v. . Littlejohn, 37 N.C. 495 (N.C. 1843)

Type: Opinion
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Date: 1843-06-05
Topic: bankruptcy

Ruffin, C. J. The admitted fact's that the debts for which J. B. Littlejohn, John Nuttall and Willis Lewis were respectively sureties for T.

Citator

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Cited by: 1 opinion

DEWEYv. LITTLEJOHN,37 N.C. 495(1843)

CHARLES DEWEY v. THOMAS B. LITTLEJOHN AND OTHERS.

Supreme Court of North Carolina

(June Term, 1843.)

1. Notice of a deed of trust, not registered according to law, raises no equity against a creditor.

2. A creditormayhonestly obtain a security, by way of mortgage or deed of trust, for a debt known or believed to exist, though unliquidated, and a preference thus gained by one creditor over another for what may turn out to be due is not unfair.

3. So mere delay, either in settling or collecting the debt, will not of itself impeach the deed, since forbearance may arise from many motives besides that of giving a false credit to a debtor, and in many instances may be attributed to the most benevolent and praiseworthy motives.

4. Thus, where, upon a dissolution of copartnership between two brothers, a deed of trust was given by one to the other for an estimated balance supposed to be due, and no settlement was made nor any attempt to proceed under the deed was made for thirteen years, the creditor brother being in the meantime resident out of the State,it was heldthat the deed was not on that account fraudulent, the brothers both stating in their answer that the amount since ascertained to be due on a settlement was more than sufficient to cover the property secured by the deed of trust.

5. A man who is appointed to a public office, for the faithful performance of the duties of which he is bound to give sureties, may properly indemnify such sureties by a deed of trust on his property.

6. The circumstances that possession of the property conveyed by a deed of trust is to be retained by the maker of the deed until it is wanted for the purposes of the trust is not in itself an evidence that the deed is fraudulent.

7. If a sale under a deed of trust to sell for the benefit of creditors is, by the terms of the deed, to be delayed so long, or if the proportion in point of value of the consumable articles conveyed over those of a different character were such as to induce the court to believe that it was the object or an object of the deed to provide for the maker permanently or temporarily, and not for his creditors, the court would pronounce the deed void.

8. Where the parties to a deed of trust for the satisfaction of creditors do not definitely express the debts that are due or to become due, creditors have a right to demand an inquiry, and although they charge fraud in the deed and the charge is not established and their bill dismissed, yet they are not bound to pay any costs to the defendants.

9. An answer directly responsive to the bill must be received as true, in the absence of testimony contradicting it.

(496) THIS was a cause removed by consent from WAKE Court of Equity, at Spring Term, 1843. The bill wasPage 367filed, answers put in, replication thereto, and no proofs taken on either side. In this state of the cause it was set for hearing. The following facts were exhibited by the bill and answers:

The defendant Thomas B. Littlejohn became indebted to the plaintiff in 1839, by endorsing a bill of exchange, drawn by one Hunt, and the plaintiff recovered judgment thereon against him, T. B. Littlejohn, for $1,902.70, besides costs, at August County Court, 1840, of Granville. The plaintiff issued afieri facias, which was returnednulla bona, to February Term, 1841, and then he filed this bill on 4 March, 1841.

For some years before 1827 a partnership existed between the two brothers, Thomas B. Littlejohn and Joseph B. Littlejohn, in merchandise at Oxford, and also in a tannery under the firm of Littlejohn Locker. Thomas B. Littlejohn was also indebted on two notes to a bank in Raleigh, which Joseph B. Littlejohn had executed as his surety. By a deed bearing date 30 October, 1827, reciting the two debts, and also that on their partnership accounts T. B. Littlejohn was considerably indebted to J. B. Littlejohn, and that as he was desirous of securing the payment of all those debts, T.B. Littlejohn conveyed to John Nuttall several parcels of land in Granville and one negro slave, in trust to sell, when required by either of the parties, and pay those debts. This deed was duly registered in 1828. By two other deeds of the same date T. B. Littlejohn conveyed certain slaves to John Nuttall in trust to sell and pay certain debts for which Willis Lewis was his surety, and conveyed to Willis Lewis certain slaves in trust to sell and pay certain debts for which John Nuttall was his surety. The debts set forth in the two deeds last mentioned, it is admitted by the defendants, (497) have been long since paid. It is admitted, likewise, that the debts for which J. B. Littlejohn was the surety for T. B. Littlejohn, as mentioned in the first deed, were paid many years ago, and the deed is now set up as a security for such sum only as T. B. Littlejohn may owe the other party on their partnerships. On 29 February, 1836, Thomas B. Littlejohn became indebted to John A. Hicks in the sum of $2,500, for which he executed his bond, and Abram W. Venable joined therein as his surety; and for the further security of the debt and as indemnity to Venable, T. B. Littlejohn on that day executed a deed to Thomas B. Lewis for four negroes, Pleasant, Reuben, Robin and Davy, in trust to sell and pay the said debt. Afterwards Davy was sold, and his price with other sums of money, amounting in all to $1,350, applied in part payment of the debt, but still leaving a balance of $1,150 of principal, besides interest due thereon. This deed was registered on 18 May, 1840. ThePage 368bill charges that there was nothing due from T. B. Littlejohn to Joseph B. Littlejohn or their partnerships; that they lived near each other for several years after the execution of the deed and made no settlement nor took any account of the state of their concerns so far as to enable other creditors to know what sum the one owed the other, and, in fact, that J. B. Littlejohn removed to Tennessee a number of years past, leaving all the effects of the partnerships and the property conveyed in the hands of T. B. Littlejohn; from which circumstances the plaintiff charges that nothing was due to J. B. Littlejohn originally, or that he had released or abandoned all claim to any sum that might be owing to him, and therefore that the deed first mentioned was kept on foot as a subsisting security, fraudulently and for the mere purpose of deceiving and hindering the plaintiff and other creditors of T. B. Littlejohn.

The bill further states that by another deed bearing date 29 July, 1840, T. B. Littlejohn conveyed to John R. Hicks the same negroes, Pleasant, Reuben and Robin, and eight others, and also several parcels of land in Granville County and the town (498) of Oxford; also two mules, three horses, twelve head of cattle, all his crops of corn, fodder and oats, and his household and kitchen furniture — the same being all his visible property — for the purpose of securing certain debts or pretended debts therein recited, that is to say, a debt to Thomas Brown on bond for $1,709, due 12 January, 1829; one to R. and R. H. Kingsbury for $743.76, by bond, and several others specified, and also for the purpose of securing Samuel J. Downey and Abram W. Venable from loss from any liabilities they have incurred or may hereafter incur as sureties for the said T. B. Littlejohn in his bond, given for the performance of his duties as Clerk and Master of the Court of Equity for the years 1838 and 1839, with power and direction to the trustee, upon being required by the parties therein secured, to sell the property and out of the proceeds pay,first, such moneys as Venable and Downey may be liable for as sureties on the official bond as aforesaid;secondly, the debt to Brown, and,lastly, all the other debts, with a proviso that, by consent of the parties, T. B. Littlejohn is to remain in possession until the trustee shall want the property for the purpose of a sale, and that T. B. Littlejohn shall surrender the possession when required for that purpose. This deed also recites that before mentioned as having been made to T. B. Lewis for the negroes Pleasant, Reuben and Robin, on 29 February, 1836, and conveys those slaves subject to the operation of that previous deed.Page 369

The bill states that the period when this last-mentioned deed, dated 29 July, 1840, was in fact executed was unknown to the plaintiff, and it charges that it was not executed, or, if so, was kept under the control of T. B. Littlejohn until after the plaintiff got his judgment, which was on the first Monday of August, 1840, and that none of the creditors accepted the deed before that day, and that without the concurrence of any creditor, T. B. Littlejohn, of his own head, wrote and executed the deed for the sole purpose of hindering and defeating the plaintiff; that if any of the creditors knew of the execution of the deed they and T.B. Littlejohn and Hicks contemplated that Littlejohn was to enjoy, consume and dispose of the property (499) in the same manner as if he were still the owner, and that the creditors assented thereto for the ease and favor of T.B. Littlejohn, and that he had kept and used the property ever since.

The bill further charges this intention the more for the reason that in fact Downey and Venable were not responsible for any default of Littlejohn in his office of clerk and master for 1838 or 1839, or for none before the execution of the deed, and because the deed provides for future defaults. The bill particularly charges that Brown removed many years ago to Scotland, and would not have left a debt so long uncollected and, especially, allowed the interest to run so long in arrear, and for those reasons charges that the said debt was pretended and not truly owing. The bill further charges that if the said debts were just, and there was no such original fraudulent purpose, yet that the creditors now indulged the debtor fraudulently and to the prejudice of the plaintiff, for as much as they do not sell enough of the property to pay their debts and thus leave the residue unencumbered and open to the plaintiff's execution. The bill is brought against Thomas B. Littlejohn, Joseph B. Littlejohn, the heirs and executors of Nuttall (who is dead), and the executors of Willis Lewis (who is also dead), Thomas B. Lewis and John R. Hicks, the trustees in the two deeds last mentioned, Venable, Downey, Brown and all the creditors secured in the deed of 25 July, 1840, and it interrogates them particularly upon the matter before alleged, and especially T.B. and J. B. Littlejohn, whether they had settled their partnership, and whether any and what sum is due thereon from the former to the latter; and also interrogates T.B. Littlejohn and Brown whether any part of the said alleged debt to the latter is really owing, and why the same was not sooner paid. The bill also interrogates T. B. Littlejohn, Venable and Downey, when aPage 370default took place in the office of clerk and master, whose money was misapplied, and how, and when, and at what period it was disclosed to the parties.

(500) The prayer is that all the deeds may be declared fraudulent and void as against the plaintiff, and that he may have satisfaction decreed out of the property therein conveyed, and for general relief. The representatives of Nuttall and Willis Lewis did not answer, and the bill has been takenpro confessoagainst them. The answer of T.B. Littlejohn states the debts for which those persons, Nuttall and Willis Lewis, were sureties to have been paid long ago, and that releases were not taken, because they were not known to be necessary, or through mere inadvertence. As to the debts from Thomas B. to J.B. Littlejohn, the separate answers of both those persons state that in both of the firms J.B. Littlejohn had advanced a large capital; that they were conducted chiefly and almost exclusively under the management of T.B. Littlejohn, as the active partner; and that, although in October, 1827, no settlement had taken place, it was well known to both of them that T.B. Littlejohn was largely indebted thereon to J. B. Littlejohn; that a settlement could not well have been made at the time, as the concern then owed large debts and had a large amount of debts owing to them, but that from a rough estimate of the assets and the accounts of the respective partners they then believed that T. B. Littlejohn was indebted to J. B. Littlejohn in a sum not less than the utmost value of all the property conveyed by the deed, and certainly not short of $10,000. These answers state that before settlement could be made J. B. Littlejohn removed to Tennessee, in 1829, and has resided there ever since, and that owing to the want of opportunity for making a settlement one was not made until, by the filing of this bill, it was made necessary for J. B. Littlejohn to come to this State for that purpose, and that he accordingly came, and on 29 November, 1841, the parties stated their accounts and came to a settlement, a copy of which is annexed to the answer of J. B. Littlejohn; whereby it appears that at the execution of the deed there was a balance due to J. B. Littlejohn of about $17,000 of principal money, and that including interest up to November, 1841, the balance amounted to $24,933.48, after deducting large payments (501) made in the meantime. The answers admit that some parcels of the land, particularly mentioned, had been sold, but they state that J. B. Littlejohn concurred in the sales and received such parts of the purchase money as had been paid.

J. B. Littlejohn admits that he did not press a settlement and payment of this claim, as he would have done in the case of aPage 371stranger or if he had considered any person interested besides himself, and says that the delay arose from a desire not to distress his brother and from the belief that his debt exceeded two or three times the value of the property conveyed for its security, and that no other person had an interest in the execution of the trusts; and he denies that he released or ever intended to release the debt.

Both of the defendants aver their belief that the settlement is correct and that the balance appearing thereon is just and truly due, and they submit to produce their books and to have an account taken in this cause of their partnerships, if required.

The answer of T. B. Littlejohn further states that the deed to Hicks, dated 29 July, 1840, was executed and delivered to Abram W. Venable, therein named, on the day it bears date, and that it was proved and registered on the 30th day of the same month, as appears by the certificate of the register on the copy of the deed exhibited by the plaintiff to be true. This defendant, the trustee Hicks, Venable and Downey, and the other creditors who have answered, each for himself, state that the debts secured in that deed are justly due and fully owing: particularly, T. B. Littlejohn states that he had used money received in his office to the amount of $3,618, which he found himself unable to pay without the sale of some of the property conveyed in the deed, and that Venable and Downey, as his sureties for the years aforesaid, were liable therefore; that the debt to Brown was justly due, and that Brown, when he left this country, appointed the defendant Venable his agent, with directions not to press the collection of the money unless it should become necessary to its security; that such directions were given in consequence of a long intimacy and personal (502) friendship between Brown and T. B. Littlejohn. The answer of T. B. Littlejohn has annexed to it a schedule of the debts secured and the property conveyed, with an estimate of the value thereof, whereby the debts, without interest, appear to be $8,714.73 and the value of the property $8,200; and it states that all those debts being justly due, and his property not more than sufficient to pay them, and believing that if the plaintiff recovered his debt, for which he was bound as a surety only, and raised the same out of his property, some of those debts contracted on his own account would go unpaid, he mentioned his fears to Abram W. Venable, his principal creditor and surety, and his desire to secure himself and his creditors; and thereupon, both at the instance of Venable and of his own accord, he executed the deed of 29 July, 1840, for the purpose of preferring those to whom he was justly indebted on his own account asPage 372aforesaid, and for that purpose only; that some of the creditors mentioned therein assented to the deed at the time and that all the others did so immediately afterwards, and that there was no understanding or secret trust whereby any benefit whatever was intended to be reserved to himself personally or variant from the contents expressed in the deed, which he avers was in all respectsbona fide. The answer of Venable corresponds with that of T. B. Littlejohn as to the debt of Brown and the responsibility of this defendant and Downey as sureties in the official bond, referring to the answer of Littlejohn for the particulars of his official default, of which the sureties have no personal knowledge. Venable states that the deed was delivered to him for the trustee, and that on the same day he delivered it to Hicks, the trustee, who accepted it. He likewise insists on the deed made to Thomas B. Lewis for his indemnity as the surety for the debt to John R. Hicks.

The answer of Downey states that Venable and Littlejohn informed him of the intention to execute the deed of 29 July, 1840, and he assented thereto, and denies any fraudulent (503) purpose therein, and in all other respects concurs with that part of Venable's answer which respects Littlejohn's official defaults. The trustees, Thomas B. Lewis and Hailes state their respective executions of the several deeds to them and their belief that the debts mentioned in them were just and the deedsbona fideand not intended to defraud the plaintiff or any other person. Replication was taken to the answers, and the cause set down for hearing without any proofs having been taken on either side, and transferred to this Court for hearing.

Badger and W. H. Haywoodfor plaintiff.Iredellfor defendants.

RUFFIN, C. J.

The admitted facts that the debts for which J. B. Littlejohn, John Nuttall and Willis Lewis were respectively sureties for T. B. Littlejohn have been paid many years past require the Court to put all the deeds of 30 October, 1827, out of the plaintiff's way, except so far as one of those to John Nuttall may be supported as a security for the balance that may be due from T. B. Littlejohn to his brother on their partnership dealings. So the deed to Thomas B. Lewis, dated 29 February, 1836, for the indemnity of Venable as surety for the debt to John R. Hicks, and not registered until 18 May, 1840, must likewise be declared not to be an effectual encumbrance on the slaves mentioned therein, for the want of due registration. The act of 1820 expressly enacts that a deed of trust not proved andPage 373registered within six months shall, as against a creditor, be held utterly void, and the circumstance of the registration before the plaintiff got his judgment and execution makes no difference, as notice of a deed of trust not duly registered raises no equity against a creditor.Davidson v. Cowan,16 N.C. 470. The case is, therefore, narrowed down to the questions that can be made upon the deed of 30 October, 1827, as a security for the partnership balances, and the deed of 29 July, 1840, (504) as a valid security for the debts mentioned in it. As far as the object of the bill is to have those deeds declared void as having been made with a fraudulent intent towards creditors, the Court must hold the bill unsupported. As to the first deed, it is to be remarked that the circumstance of the security being given by one brother to another for an unknown balance of accounts, represented to be large, as the parties believed, and the further circumstance that there was no attempt to settle and ascertain the balance for so long a period as thirteen years, during which time the alleged debtor continued to enjoy the estates conveyed, certainly furnished grounds for suspicion of the fairness of the claim and of the deed made to secure it, and well justified the plaintiff, as a creditor likely to be defeated by the deed, to call the parties to an explanation upon their oaths. But those circumstances are not absolutely conclusive of fraud, either as evidence that there was no debt owing or that the parties intended to deceive the world by the possession being so long with the debtor. For a creditormayhonestly obtain a security for a debt, known or believed to exist, though unliquidated, and a preference thus gained by one creditor over another for what may turn out to be due is not unfair. So mere delay, either in settling or collecting the debt, will not of itself impeach the deed, since forbearancemay arisefrom many motives besides that of giving a false credit to a debtor, and in many instances may be attributed to the most benevolent and praiseworthy motives. In the case before us the answers of both the parties, T. B. Littlejohn and J. B. Littlejohn, satisfactorily and fully repel, if to be credited, all those imputations of fraud. They establish, although the debt is not specified in the deed by its amount, that it in fact existed, and exceeded the value of all the property conveyed to secure it. They account for the debt not being ascertained at the time by the state of the business of the firms, and for the subsequent procrastination by the separation of the parties by distant residences, by their fraternal confidence and the natural unwillingness of the (505) creditor to distress the debtor. It furthermore is seen that all the property conveyed (except the slave, who died longPage 374ago) was land, of which the possession merely is not evidence of title, and of the conveyance of which notice was given to creditors by due registration. Those statements of the answers must be received as true by the Court, as the case stands, for in all respects they are directly responsive to the allegations of the bill and are in no respect contradicted, even by a single witness. Upon the face of the pleadings, therefore, this deed cannot be declared to have been made with a fraudulent intent to deceive creditors nor to have been kept on foot for that purpose after the payment of all the debts intended to be secured thereby, but it must be declared to be still a valid security for such sum as may be really owing from T. B. Littlejohn to his brother on their copartnerships. With respect to the last deed, dated 29 July, 1840, the Court is led to the like conclusion, much for reasons of the same kind. The answers, being responsive to charges in the bill, are evidence for the defendants, while uncontradicted. They prove the justice of all the debts mentioned in the deed. In truth, the bill does not particularly question any one of them, except those to Brown and the alleged misapplications of money in the master's office. As to each of them the answer of Thomas B. Littlejohn is precise and positive. So is that of Venable in respect to the debt to Brown, with the collection of which he was charged, and for the security of which, with the other debts, he was active in getting the deed in question executed. No one but Littlejohn himself could answer directly to the conversion of the funds in his office, either as to the time or the amount, and he has given an explicit and positive statement as to both, in which the sureties, Venable and Downey, could only concur to the extent of their belief, and to that extent they do fully concur. Assuming the defaults to have occurred, and the other debts to exist, as being thus established, the Court does not perceive any sufficient ground for impeaching the deed.

There were, however, some objections stated in the (506) argument which it is proper to notice.

It was said that as a provision for an indemnity to the sureties in the official bond, it was against good morals and public policy, especially as it includes future as well as past breaches of duty. But we think there is no force in the argument. We see no reason why a person who is entering into a bond as surety for the faithful performance by an officer of his public duties, may not provide in any manner he can for his counter-security. The principal contracts at the time to repay to the surety any money the latter may be compelled to pay for him, and, therefore, he may superadd thereto any further or collateral security. If this may be done when the obligationPage 375is contracted, it must be competent to do so whenever the party apprehends danger, and certainly when an acknowledged default has happened.

It was likewise said that as some of the property conveyed, as the crops, were perishable, and consumed in the use, and as the possession was to be retained by the debtor, the deed is thereby shown to be fraudulent, as appearing to be made, for the case or favor of the debtor.

If it so appeared we should not hesitate to pronounce the deed fraudulent. But the intent to secure any benefit, ease or favor to the debtor is peremptorily denied, and we do not think those provisions in the deed, when considered with other parts of it, do establish such an intent. The possession was to be kept by Littlejohn no longer than the property was required for the purpose of a sale, and as to the period or terms of making the sale he has no voice, but they are to be determined by the creditors at their will.

It is true that some of the crops might be consumed before the sale; but even that might be for the benefit of the creditors, as keeping the property together until the crops growing when the deed was made, in July, would mature and be gathered, and have had in view rather the convenience of the trustee than favor to the debtor. We need not, however, further consider the point at present, since our views are fully expressed (507) on it inMoore v. Collins,14 N.C. 137, and have been more recently repeated inCannon v. Peebles,24 N.C. 449. If the sale had been delayed so long, or if the proportion, in point of value, of the consumable articles over those of a different character was such as to induce the Court to believe that it was the object or an object of the deed to provide for Littlejohn permanently or temporarily, and not for his creditors, it would be the duty of the Court to pronounce the deed void. But it is seldom practicable, and seldom prudent, to have an immediate sale under such assignments; and until a sale, if to be in a reasonable time, as fixed in the deed or to be fixed by the trustee or creditors, it is more convenient to all parties that the possession should not be changed. We must presume the creditors will be governed by their own interest and not Littlejohn's ease, until the contrary appears, and especially when any view to his benefit is so positively denied. The Court must therefore declare that the plaintiff has not established the allegation in his bill, that the deed of 29 July, 1840, to John R. Hicks was fraudulent, and, consequently, it is supported as a valid deed and security for such sums and debts as may remain due to the several creditors or sureties therein provided for. But should the plaintiffPage 376think proper to proceed no further in his suit, and to dismiss his bill upon the declarations thus made, he may do so without costs, for in the opinion of the Court he had a right, under the circumstances, to call for a discovery upon most of the points on which he asked it. The case, however, is one on which the plaintiff, supposing those two deeds to be fair, and subsisting securities, has a right to relief by having the encumbrances cleared from the property, and to that end to have such inquiries and accounts taken as will ascertain the sums really due on the claims provided for, so that they may be raised out of the property, if sufficient, and the plaintiff get satisfaction out of the surplus if any. Therefore, the plaintiff is allowed to have such inquiries upon any or all of those debts as he may (508) choose, but if they should result against him they will probably be made at his cost.

The plaintiff declined to have the proposed inquiries made.

PER CURIAM. Bill dismissed, but without costs.Cited: Hardy v. Skinner,31 N.C. 194;Moore v. Ragland,74 N.C. 346.

(509)