Hobbs v. Cashwell

MANNING, J., after stating the case: The plaintiffs rest their contention upon the theory that as they were seized of an estate in fee in the locus in quo, under the deed of G. W. Hobbs, and being m esse, were parties neither by service nor appearance to the action by the creditors of G. W. Hobbs, in which the land was sold and through which defendant claims title, the judgment and the proceedings were, as to them, void and wholly insufficient to divest their estate. In support of this contention and the correctness of his Honor’s ruling in their favor, the plaintiffs rely upon the decisions of this Court in Yarborough v. Moore, 151 N. C., 116; Moore v. Lumber Co., 150 N. C., 261; Card v. Finch, 142 N. C., 140; Carraway v. Lassiter, 139 N. C., 145; Harrison v. Hargrove, 120 N. C., 96, and the cases cited and approved in them. The principles determined by these cases are too well established to admit of doubt, and yet, conceding to them, as far as they may be applicable to the present case, their fullest influence, we do not think they are decisive of the questions presented by this appeal. In our opinion, this case is controlled by sections 960 (13 Eliz.) and 962, Eev. 1905. The plaintiffs’ title is derived immediately through a deed of gift from their grandfather. The evidence offered by them disclosed that the donor was indebted at that time, and at the same time he disposed of his entire landed estate by deeds of gift to his children; and it tended to show that he left no personal estate; that his indebted [188] ness could be satisfied only by resort to bis lands field under tfie deeds of gift. Section 962, Rev., declares tfiat no voluntary gift, by one indebted, sfiall be deemed void as to creditors, by reason merely of sucfi indebtedness, “if property, at tfie time of making sucfi gift or settlement, fully sufficient and available for tfie satisfaction of fiis tfien creditors, be retained by sucfi donor or settler; but tfie indebtedness of tfie donor or settler at sucfi timq sfiall be field 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, binder or defraud creditors may be inferred; and in any trial sfiall, as sucfi, be submitted by tfie court to the jury, with sucfi observations as may be right and proper.” In McCanless v. Flinchum, 89 N. C., 373, it is said: “A voluntary deed of land or other property made to a son by a father unable to pay his- debts, is void per se, as to creditors; indeed, sucfi a deed to any person is void, and sucfi a deed appearing, tfie court declares it void in law. It is well-settled law in this State, tfiat no voluntary deed can be upheld as against creditors, when tfie bargainor is unable to pay fiis debts at tfie time of tfie execution of tfie deed.” Worthey v. Brady, 91 N. C., 265. It is not required to go to the full length of tfie above decisions to be convinced of tfie error in fiis Honor’s rulings. In Warren v. Makely, 85 N. C., 12, this Court, speaking through. Smith, G. J., said: “The existence of tfie debt reduced to judgment before tfie making of tfie deed of gift and subsequent insolvency of tfie donor, renders her deed prima facie fraudulent and void against tfie creditors seeking to subject tfie land to tfie payment of fiis debt, and equally so against tfie defendant purchasing under the execution issued to enforce it, unless, at tfie time, tfie debtor retained property, in'the words of tfie act, ‘fully sufficient and available’ for tfie satisfaction of fier creditors; and the duty of proving this fact to sustain the conveyance devolved upon the plaintiff.” In Creedle v. Carrawan, 64 N. C., 422, this Court, in referring to a voluntary deed, said: “If its validity depends upon these considerations alone (love and affection and $5), it is a voluntary conveyance, and fraudulent as to debts existing at tfie time of it's execution, unless tfie defendant can show in evidence sucfi a state of facts as will bring it within tfie excej)tion mentioned in tfie statute, Rev. Code, cfi. 50, see. 3 (now sec. 962, Rev.). Where tfie rights of creditors are affected, a voluntary conveyance is presumed in law to be fraudulent, and to rebut tfie presumption, it is incumbent on tfie party claiming under sucfi deed to show tfiat it was executed under sucfi circumstances as will meet tfie requirements of said statute.” In Black v. San [189] ders, 46 N. C., 67, Pearson, J., thus speaks for the Court: “Apart from the act of 1840, if there be an existing debt and the debtor makes a voluntary conveyance, and afterwards becomes insolvent, so that the creditor must lose his money-or the donee must give up the property, the latter is required to give way, on the ground that one must be honest before he is permitted to be generous. To effect this, such voluntary conveyance is presumed, as a matter of law, to be fraudulent. Jones v. Young, 20 N. C., 353; Houston v. Bogle, 32 N. C., 496. The act of 1840 makes an important change in the law and requires the question of fraud to be submitted to the jury as an open question of fact, in those cases where, at the time of the conveyance, property fully sufficient and available for the satisfaction of all his then creditors is retained by the donor. This is made a condition precedent, in order to bring a case within the operation of the act.” While in the case of Cox v. Wall, 132 N. C., 732, sec. 961, 27 Eliz., was the particular statute considered by the Court, much of its reasoning is applicable to the section now under consideration. In that case this Court said inter alia: “It would appear from these cases that whatever must exist in order to protect the title, must be averred and proved by him who holds that title. The burden is with him.” It would seem obvious, therefore, from these authorities, that the burden was upon the plaintiffs, claiming only as voluntary donees under a deed of gift against the defendant claiming through a creditor of their donor, existing at the date of the deed of gift, to show the existence of those facts required by the statute to make their title good. Clement v. Cozart, 112 N. C., 412; Arnett v. Manett, 23 N. C., 41. The next question presented for consideration is the effect to be given to the creditors’ action instituted against the administrator and the heirs at law of the deceased debtor. As the plaintiffs were not parties to that action, the proceedings are ineffectual as an adjudication to divest their title, and do not, as to them, constitute an estoppel. Finch v. Card, supra, and authorities cited above. The plaintiffs, by the present action, have their “day in court” and an opportunity to establish the validity of their title. If the sale had -been made under an execution issued in the lifetime of the judgment debtor, then the purchaser at that sale and the plaintiffs, as voluntary donees, could have settled their title in an action brought by either against the other; they could have had “a, fair fight” and the “question be put on its own merits,” to quote the apt words of Pearson, C. J., in Paschal v. Harris, 74 N. C., 335. But the death of the judgment debtor prevented this somewhat sum [190] mary method, and the creditor must obtain the satisfaction of bis debt through the administrator or executor. Sawyers v. Sawyers, 93 N. C., 321; Tuck v. Walker, 106 N. C., 285; Webb v. Atkinson, 124 N. C., 447; Holden v. Strickland, 116 N. C., 185. And where the administrator fails to perform this duty— to subject the real estate of his intestate to the payment of his debts — the creditors may compel him to do so. Tuck v. Walker, supra; Baker v. Carter, 127 N. C., 92; Harrington v. Hatton, 129 N. C., 146. The complaint filed by the judgment creditor in his action seems to contain all the averments necessary to invoke the aid of the court in the enforcement of his right to have the lands of his judgment debtor subjected to the payment of his debt. In Tuck v. Walker, supra, this Court said: “When it becomes necessary to sell the real estate of a decedent to make assets, The Code, 1446 (now Rev. 1905, see. 72) provides in explicit terms that the court may decree a sale of ‘all real estate that deceased may have conveyed with intent to defraud his creditors, and all rights of entry, rights of action, and all other rights and interests in land, tenements or hereditaments, which he might devise, or by law would descend to him,’ and the language has been so construed by this Court. Mannix v. Ihrie, 76 N. C., 299; Heck v. Williams, 79 N. C., 437.” Section 73, Rev., provides that no order to sell the real estate shall be granted till the heirs or devisees of the decedent have been made parties. The heirs at law of the decedent were made parties to the action, as shown by the records offered in evidence in this case. While we have reached the conclusion that the voluntary donees were not necessary parties to the proceeding to subject the lands to payment of the debts of the decedent, we think they were proper parties, and that it would be more consistent with the chief purpose of judicial sales to have had them before the court before the order of sale is made, in order that when the property is sold an undisputed title may be offered and the highest possible price may be obtained for the property. This accords with the trend of modern legislation and judicial opinion. Crockett v. Bray, 151 N. C., 615. As the plaintiffs were not made parties to the creditors’ action presented in this case, the judgment was not in any way conclusive upon them or an adjudication upon the validity of their title. Its whole force and effect was to divest whatever title the judgment debtor had in the land, and to place the donees claiming under the voluntary deed from the common source of title, and the defendant — a purchaser at the sale had [191] under order of the court — in the same relative positions that the plaintiffs would have occupied to the purchaser at a sale under execution, having the right to use the same range of defenses to protect their title derived from the donor. If their title can be established under the law, then the title in the purchaser under the creditors’ action will be worthless and his deed will be ordered to be canceled on the record. The position of the plaintiffs is admittedly that of donees holding under a voluntary conveyance from a donor indebted at the time, and their deed will be valid if property was retained by their donor fully sufficient and available for the satisfaction of his then creditors, the defendants having denied plaintiffs’ title to the land. “At an early period in the judicial history of this State,” says Avery, J., in Helms v. Green, 105 N. C., 251, “it was held that courts of law might hear evidence and allow a jury to pass, even incidentally, upon the question whether a deed was void for fraud in the factum or under 13 or 27 Eliz. (The Code, secs.-1545 and 1546), Logan v. Simmons, 18 N. C., 16. Hence, in the trial of actions of ejectment, where the question arose whether a deed, relied upon by either of the parties as a part of a chain of title, was executed to hinder, delay or defraud creditors, evidence was heard to attack or sustain such conveyances, though the action was not brought to directly impeach its character. Lee v. Flanagan, 29 N. C., 471; Hardy v. Skinner, 31 N. C., 191; Hardy v. Simpson, 35 N. C., 132; Blade v. Caldwell, 49 N. C., 150; Winchester v. Reed, 53 N. C., 377; Wharton on Evidence, sec. 931.” We think, therefore, that his Honor erred in his rulings, and the questions arising upon the evidence affecting the validity of plaintiffs’ title ought to have been submitted to the jury, “with such observations as may be right and proper.” There must be a New trial.