Opinion · Supreme Court of North Carolina

Brown v. Graves.

11 N.C. 342

Type: Opinion
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Date: 1826-06-05
Topic: bankruptcy

Hekbersok, Judge. — This transaction, upon its face, bears evident marks of a fraudulent contrivance between Graves, Bussell Groom, to give to Brotan a fraudulent preference in the payment of the debt which Graves owed to him, or to cause Graves’s property to rest in him in fraud of creditors. If the object had been to give Brown a preference, and that object bad been fairly, and with good faith effected, the law would not'have annulled it. The fraudulent design is evidenced throughout the whole transaction; the expediting the sale at the instance of Graves, and more especially by prohibiting the cestui que trust under the deed, by virtue of which the sale was made, from bidding at the sale; they could not have been objected to as not being good bidders, for the money was coming to them : The only object which can properly be assigned, was to prevent competition, and thereby enable Brawn to purchase the property at a reduced price; and if such was the object, of which a Jury were he proper judges, the law pronounces the sale to be fraudulent; yet as the sale was made by the trustee, who had the legal title, and at the instance of Brown, the property passed as to all, but those whose rights or interests were, affected by the sale. The Defendant does not claim under the trust deed, cither as cestui que trust, or purchaser, it is therefore not necessary to decide whether, if he stood in that capacity, he could avail himself of the fraud to *346 defeat the sale. He claims as a pu…

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BROWNv. GRAVES,11 N.C. 342(1826)

BROWN v. GRAVES.

Supreme Court of North Carolina

June Term, 1826.

A. made a deed of trust to satisfy several creditors; after this, part of the property is levied on and sold under execution. The sale passes nothing. A. had not such an interest as could be levied on under our act of 1812, subjecting equitable interests to execution.

APPEAL fromNorwood, J., at CASWELL.

Trover to recover the value of two oxen. The writ issued 23 October, 1823, and the following appeared to be the case:

The plaintiff claimed title to the property under a deed of trust executed by Zacharias Groom to William Russell, for the use of Philip Pierce (who was Groom's security), dated 22 November, 1821, and by the trustee he proved on the trial that on 11 February, 1822, a sale was made under the trust deed, at the house of Groom; that the land mentioned in the deed sold for $280, the mare for $32, the oxen (343) (now in controversy) for $32. These articles, except the mare, were purchased by the plaintiff, who retained the purchase money in his hands; the mare was purchased by some other person, and the money arising therefrom was paid over to the plaintiff. There was also a quantity of tobacco mentioned in the deed of trust; this had been carried off by Groom and sold, except some trash tobacco, which was bought by the trustee for $2. At the time of sale the plaintiff and Pierce forbade Swift Martin (to whom the debts mentioned in the deed of trust werePage 154due, and for which debts Pierce was Groom's security) to bid for any of the property, unless they paid the money down for the bid, and stated that if they bid, the amount bid should not be paid by their entering it as a credit on the sums respectively due to them from Groom.

It also appeared that before this sale defendant had informed the trustee that he had purchased these oxen at a public sale made by virtue of an execution which he had against Groom; that at the sale defendant claimed them, and requested the trustee to sell the other property mentioned in the deed first; that he mentioned it to the plaintiff and Pierce, who insisted on his first selling the personal property, and he did so.

Groom swore that he and Pierce agreed to sell the property before the debts to Swift Martin became due; that he owed the plaintiff by bond about $109; that he did not know what had become of the money plaintiff received from the trustee, for which the property was sold, nor had he ever agreed that plaintiff should apply it in satisfaction of his debt of $109; that the steers remained in his possession two or three days after the sale, plaintiff on the day of sale telling him to keep them until he, plaintiff, called for them, and that they were taken away by defendant. He further proved that he remained in possession of the land from the day of sale up to the time of trial, and it did not appear that (344) he was to pay any rent for the place. It further appeared that the oxen were in Groom's possession up to 11 February, 1822.

Swift proved that the plaintiff had a bond on him, and after the sale, on the same day, he and the plaintiff agreed that the claim he had against Groom and Pierce should be credited on his bond to plaintiff; and they afterwards so settled. He also stated that he had never called on Groom or Pierce for the money due him before 11 February, 1822.

It also appeared that Martin never made application to have his debt paid before or at the time of sale.

The defendant insisted that plaintiff could not recover, because —

1. The sale was fraudulent, it having been made to hinder the collection of Groom's debts, upon which judgments and executions had been obtained.

2. That the trustee by the terms of the deed had no authority to sell before the debts became due.

3. That defendant's purchase under execution, on 29 December, 1821, before the sale by the trustee, gave him the title.

4. That if defendant had not the legal title it was in the trustee, and, therefore, plaintiff could not recover.

Defendant then offered evidence of his having regularly purchased at execution sale on 29 December, 1821, under an execution dated 18 December, 1821, issuing on a judgment obtained 15 December, 1821.Page 155

To the charge of the court on the question of fraud no exception was taken. His Honor,Judge Norwood, further charged, that although Pierce could not direct the sale of the property before he was called on for the money, yet that Groom might direct it before the money became due on the judgments mentioned in the deed, notwithstanding that at the time there might be other judgment creditors who had executions; and that if he directed the trustee in this case to sell on 11 February, 1822, it would be valid.

And further, that the sale under execution of 29 December, (345) 1821, having been made before the debts mentioned in the deed of trust had been satisfied, was unauthorized by law, and passed no title to the purchaser; that if the debts mentioned in the deed had been satisfied by a sale of part of the property, the remainder of the property would then be subject to execution; but not otherwise.

Verdict for plaintiff, new trial refused, judgment, and appeal.

Badger for appellant.Hogg, contra.

HENDERSON, J.

This transaction, upon its face, bears evident marks of a fraudulent contrivance between Graves, Russell, and Groom to give to Brown a fraudulent preference in the payment of the debt which Graves owed to him, or to cause Graves' property to vest in him in fraud of creditors. If the object had been to give Brown a preference and that object had beenfairlyand with good faith effected, the law would not have annulled it. The fraudulent design is evidenced throughout the whole transaction; the expediting the sale at the instance of Graves, and more especially by prohibiting thecestui que trustunder the deed, by virtue of which the sale was made, from bidding at the sale; they could not have been objected to as not being good bidders, for the money was coming to them. The only object which can properly be assigned was to prevent competition, and thereby enable Brown to purchase the property at a reduced price; and if such was the object, of which a jury were the proper judges, the law pronounces the sale to be fraudulent; yet as the sale was made by the trustee, who had the legal title, and at the instance of Brown, the property passed as to all but those whose rights or interests were affected by the sale. The defendant does not claim under the trust deed, either ascestui que trustor purchaser. It is, therefore, not necessary to decide whether, if he stood in that capacity, he could avail himself of the fraud to defeat the sale. He claims as a purchaser at a constable's sale, under a justice's execution against Graves, (346) issued and levied after the sale under the deed in trust. The question, therefore, is, Had Groom, at the time of the levy and sale, or at thePage 156sale, such an interest as could be sold under that execution? If he had not, the defendant is a mere stranger, and, however much to be regretted, appears in the character of an intermeddler — not, though, in the opprobrious meaning of that term; it appears that he has acted honestly. But if such be the case, that is, if the property was not subject to the execution, he cannot avail himself of the fraud practiced by Brown and others — if it be fraud. I believe nowhere can be found a more lucid and satisfactory opinion upon the subject than the one given byChief JusticeSpencer, of New York, inBogert v. Perry, 17 Johnson, 351. To this, therefore, I refer. They have in New York, as regards this point, a statute similar to ours of 1812, both, in substance, taken from the statute of Charles. It is evident that, independent of that statute, Groom had not such interest as could be sold under an execution at law; he had nothing but a mere equity, at most a mixed trust, or a chose in action, neither of which an execution at law could affect. Our act provides that it may be lawful for the sheriff or other officer to whom a writ shall be directed, at the suit of any person upon a judgment then had or hereafter to be had, to so make and return execution to the party suing, of all the goods, lands, etc., as any other person shall be possessed or seized in trust of for the person against whom the execution issued, and that said lands and goods shall be held by the purchaser at execution sale free from and discharged of the title and encumbrances of the trustee. These are not the words, but the substance of the act. If there had been a doubt, upon reading the first part of the statute, whether a mixed trust such as this could be sold where part is held for one person and one purpose and part for another person and another purpose, I think the doubt would (347) have been removed by that branch of it which divests the seizin out of the trustee and vests both his estate and the estate of thecestui que trustin the purchaser. It could not be designed by the Legislature to work this wrong, and it will not be attributed to them when there are proper subjects on which the act can operate, and coming more within its bounds — a person seized or possessed in trust for another, not one seized in trust for one for one purpose and to another for another purpose, where the formal and nominal title is in one in trust for another. By confining the statute to such cases, no injury is done, for the trustee had no other duties to perform than to permit thecestui que trustto enjoy the property. There is no possible way to reconcile the statute to anything like common justice but to say that the estates shall be apportioned, and all shall be taken out of the trustee, and with the trust estate vested in the purchaser, except what will enable the trustee to perform the trusts to others; in this case it would leave an estate in the trustee, of which I cannot well conceive. What is it? As much as will pay Pierce? What, then, is the nature of the estate which thePage 157purchaser has? He has Groom's right to the surplus, and the trustee's legal title to the property out of which this surplus is to be raised. If the trustee could find property which would bring the debt to Pierce, and no more, he might sell it, and then the balance of the property in kind would belong to the purchaser at execution sale; sell as much as will pay Pierce, the balance is the purchaser's — the trustee has nothing to do with it; both legal and equitable title is in the purchaser. The purchaser might say to him, Take your pound of flesh, but not one pennyweight more. How the purchaser at the trustee's sale stands, who purchased one article which overwent the debts of the remainingcestui que trust, I know not; as to the amount of the debt, the sale was good, and bad for the balance; for that power which he once had to sell, being dependent on his title, was taken from him. As to part of the article the purchaser would have a right to it, and none to the other. I cannot see the extent (348) to which it may be carried. By such sales speculation would be encouraged, but would be placed upon unequal grounds. One might have correct and another incorrect information. I think that the Legislature intended to leave such interest (entirely untouched by the act) to the jurisdiction of a court of equity, where the property itself would be sold and the money divided according to the rights of the parties.

This is a hard case on the defendant; but I cannot see how he can prevail in this action.

By the Court, Affirmed.Cited: Gillis v. McKay,15 N.C. 174;McKay v. Williams,21 N.C. 406;Gowing v. Rich,23 N.C. 557;Thompson v. Ford,29 N.C. 421.