Foster Ex Rel. Foster v. Moore

ClaeicsoN, J. The plaintiff contends that on the pleadings the question presented is whether or not a conveyance of land, though absolute on its face, but intended as a mere security for a debt, is valid or void? We do not think the pleadings as a whole bear out plaintiff’s contention. The principle contended by plaintiff is well stated by Ruffin, J., and worth repeating, in Gulley v. Macy, 84 N. C., at p. 439-40, “That a deed absolute on its face but only intended as a security is fraudulent as to the creditors of the maker, has been thought to be the settled law of this State since the case of Gregory v. Perkins, 4 Dev., 50, and the case soon following it of Holcombe v. Ray, 1 Ired., 340. Such a rule, the Court declares in those two cases, is necessarily deducible from the statutes requiring mortgages and deeds in trust to be registered, and as those statutes were passed because of the experience of the evils resulting from secret trusts and encumbrances, the courts felt constrained to extend their operations to the extreme limit of the mischiefs intended to be remedied, so as to embrace every instrument which (whatever its form) was intended by the parties to be a security only, and this without regard to any intent on their part to defraud creditors. Such a grantee can acquire no title as against creditors or subseqeunt purchasers, not because of any evil intent to perpetrate a fraud, but because he cannot bring himself within the provisions of a statute which allows mortgages and deeds in trust to take effect from their registration only. As an absolute deed, it cannot be registered because such is not the intent of the parties; nor as a mortgage, because it does not purport to be one and would fail to give the notice to others dealing with its maker which it was the object of the statutes to secure.” Bernhardt v. Brown, 122 N. C., at p. 591. *12 Tbe plaintiff in tbe allegations of tbe complaint treats tbe conveyances as deeds and prays tbat tbe deeds be set aside for fraud and declared “null and void.” In tbe answer Fred Moore alleges tbat in consideration of a considerable sum of money theretofore borrowed from bis wife, Pearl Moore, be conveyed to ber tbe lots. In tbe further answer and defense, Fred Moore does say tbat Pearl Moore demanded security for tbe money loaned him and in compliance be made tbe deeds, but later tbe defendants deny tbat tbe conveyances were made as a result of a conspiracy to defeat tbe rights of plaintiff “tbat tbe same was made in good faith and not to defraud plaintiff,” and for a consideration of about $1,600. Tbe answer seems to be ambiguous as to tbe contention made by plaintiff tbat the deeds were a security for a debt and judgment should not have been rendered on tbe pleadings. It is for tbe jury to say from tbe present pleadings whether tbe deeds absolute on tbe face were in fact security for a debt. If this question is decided against plaintiff, then tbe principle governing this action in reference to fraudulent conveyances, is set forth in Aman v. Walker, 165 N. C., at p. 227-8, citing numerous authorities, as follows: “(1) If tbe conveyance is voluntary, and tbe grantor retains property fully sufficient and available to pay bis debts then existing, and there is no actual intent to defraud, tbe conveyance is valid. (2) If tbe conveyance is voluntary, and tbe grantor did not retain property fully sufficient and available to pay bis debts then existing, it is invalid as to creditors; but it cannot be impeached by subsequent creditors without proof of tbe existence of a debt at tbe time of its execution, which is unpaid, and when this is established and tbe conveyance avoided, subsequent creditors are let in and tbe property is subjected to tbe payment of creditors generally. (3) If tbe conveyance is voluntary and made with tbe actual intent upon tbe part of tbe grantor to defraud creditors, it is void, although this fraudulent intent is not participated in by tbe grantee, and although property sufficient and available to pay existing debts is retained. (4) If tbe conveyance is upon a valuable consideration and made with tbe actual intent to defraud creditors upon tbe part of tbe grantor alone, not participated in by tbe grantee and of which intent be bad no notice, it is valid. (5) If tbe conveyance is upon a valuable consideration, but made with tbe actual intent to defraud creditors on tbe part of tbe grantor, participated in by tbe grantee or of which be has notice, it is void.” Tire Co. v. Lester, 190 N. C., 411. This matter has recently been fully considered in Bank v. Lewis, 201 N. C., 148. Bank v. McCullers, 201 N. C., 412; Bank v. Finch, 202 N. C., 291. For tbe reasons given in tbe judgment of tbe court below there is Error.