J. L. Smathers & Co v. Toxawat Hotel Co
| Decision Date | 23 December 1914 |
| Docket Number | (No. 567.) |
| Citation | 83 S.E. 844,167 N. C. 469 |
| Court | North Carolina Supreme Court |
| Parties | J. L. SMATHERS & CO. et al. v. TOXAWAT HOTEL CO. |
Where, in a suit to set aside an alleged fraudulent conveyance, two purchasers of notes secured by a deed of trust on the property intervened, and, complainants' indebtedness having been established, the court granted a new trial because of error in instructing the jury peremptorily as to interveners' claims, it was not necessary on the new trial to submit issues as to the validity of complainants' claims, which had been fully sustained on the first trial.
[Ed. Note.—For other cases, see New Trial, Cent. Dig. § 337; Dec. Dig. § 170.*]
Where a new trial was granted for error in failing to submit to the jury certain issues raised by intervening petitions, the court correctly refused to permit the reading of the original complaint to the jury; the issues raised by it having been previously and finally decided.
[Ed. Note.—For other cases, see New Trial, Cent. Dig. § 337; Dec. Dig. § 170.*]
Where defendant company recognized and dealt with intervener as a corporation and indorsed certain notes in question to intervener as a corporation, such proof, with other evidence, was sufficient to show prima facie intervener's corporate capacity to contract.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 100-118, 2086, 20S7; Dec. Dig. § 32.*]
Where intervener's good faith in accepting certain notes from defendant company had boon impeached, he was entitled to testify whether, in accepting the notes, he acted fraudulently or in good faith.
[Ed. Note.—For other cases, see Evidence, Cent. Dig. § 440; Dec. Dig. § 151.*]
An indorsement on a note does not prove itself, but requires some outside or extraneousevidence to show the handwriting of the alleged indorser.
[Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. §§ 1822-1825; Dec. Dig. § 523.*]
Under the express provisions of Revisal 1905, § 2205, an indorsee of a note secured by a deed of trust executed by a fraudulent purchaser of the property, to be deprived of his right to claim that he is a bona fide purchaser, must have had actual knowledge of the infirmity or defect in his title or knowledge of such facts that his action in taking the instrument amounted to bad faith.
[Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. §§ 805, 815, 816; Dec. Dig. § 332.*]
Where a conveyance was fraudulent as against creditors, and certain creditors attacked and defeated it on that ground after having attached the property, but it was sustained as to one intervener as a bona fide purchaser of notes secured by a deed of trust on the property, and another intervener was held not to be a bona fide purchaser and therefore not entitled to share in the proceeds of the property, complainants, as attaching creditors, were not entitled to subrogation to the share of the proceeds which the latter would have been entitled to had he been held a bona fide purchaser, as against the right of the other to have his claim paid in full before any of the proceeds could be applied to complainants' claims.
[Ed. Note.—For other cases, see Fraudulent Conveyances, Cent. Dig. § 981; Dec. Dig. § 318.*]
Appeal from Superior Court, Buncombe County; Harding, Judge.
Action by J. L. Smathers & Company and others against the Toxaway Hotel Company. Decree for intervener McMichael, from which complainants appeal, and against intervener Frank & Company, from which they also appeal. Affirmed on complainants' appeal.
This action was brought by the plaintiffs to set aside as fraudulent a bill of sale made by the Toxaway Hotel Company to R. A. Jacobs, conveying certain personal property, and a deed of trust executed by Jacobs to the Wachovia Loan & Trust Company to secure the purchase-money notes given for the personal property described in the bill of sale; the same being a stock of goods and certain cattle, horses, farming utensils, and so forth. The deed of trust and notes referred to were dated November 13 1906. There were 14 of the notes, each for the sum of $500. The plaintiffs alleged that the bill of sale, notes, and deed of trust were executed by Jacobs and the Toxaway Hotel Company with the intent to hinder, delay, and defraud the plaintiffs and other creditors of the Toxaway Hotel Company. McMichael intervened pending the action, and alleged that he was an innocent purchaser for value of 4 of the notes secured by the deed of trust, amounting to $2,000, principal, which said notes were all dated November 13, 1906, and were due, respectively, July 1, 1907, January 1, 1908 July 1, 1908, and January 1, 1909, and also that he was a holder of the same in due course without notice of any fraud. Frank & Co. also intervened and made a like claim as to $2,000 of the notes. The case was first tried before Foushee, Judge, at November term, 1912, when there was a verdict in favor of the plaintiffs; but, upon appeal by the interveners and defendants, this court granted a new trial (162 N. C. 346, 78 S. E. 224), where the principal facts are stated. The case again came on for hearing before Judge Justice, at February term, 1914. At that term, the court submitted to the jury four issues, which appear in the record, and the jury found that the debts of the plaintiffs were as claimed by them; that the deed of trust and bill of sale referred to were fraudulent; and that the interveners, McMichael and Frank & Co., were each purchasers for value of the notes claimed by them. The judge, at this trial, instructed the jury peremptorily on the issues as to the interveners' claims, and the interveners and defendants admitted that the deed of trust and bill of sale were fraudulent. The judge, however, at that term, upon motion of the plaintiffs, set aside the verdict on the third and fourth issues, in which the jury found that McMichael and Frank & Co. were innocent purchasers for value of the notes held by them, becoming convinced that he had committed error in not submitting those issues to the jury under proper instructions, and retained the other issues by consent. When the case came on to be heard, at the April term, 1914, of the court, before Judge W. F. Harding, he submitted two issues only to the jury. One was as to whether or not McMichael was an innocent purchaser for value and without notice of fraud in the notes claimed by him, and the other involved the same inquiry as to Frank & Co. As has been stated, the jury found in favor of McMichael on this trial and against Frank & Co., and returned a verdict that McMichael was an innocent purchaser for value of the notes claimed by him, and that Frank & Co. were not innocent purchasers for value of the notes claimed by them. There was a judgment in favor of McMichael, directing that he be allowed to recover the full sum of $2,000, principal, with interest thereon from the date of the notes, and that this sum be paid out of the funds in the hands of the receiver heretofore appointed in this cause. There was a further judgment that the plaintiffs recover on their debts, and that the receiver pay the balance of the funds to them pro rata; there not being sufficient funds to pay their debts in full. It appeared on the trial that the deed of trust referred to had originally secured $7,000 in notes; that one of the notes had been paid by the defendant Jacobs; and that $6,500 principal, of the notes, was still outstanding. McMichael claimed $2,000 ofthe notes, and Frank & Co. claimed $2,000 of the same. No one presented the other notes or made any claim thereon. It appeared on the trial that the plaintiffs had brought this action in June, 1907, and had levied an attachment on all of the property then in the possession of the defendant Jacobs, which had been conveyed to him by the defendant Toxaway Hotel Company, and that a receiver had thereupon been appointed by the court in this cause to convert the property into money, and that he had on hand at the time of the trial of this cause about $4,500 of the funds derived from the sale of the property, covered by the bill of sale and the deed of trust, which had been attached in this cause.
The parts of the deed of trust from R. A. Jacobs to Wachovia Bank & Trust Company, dated November 13, 1906, material to this inquiry, are as follows: After reciting the execution of the 14 notes, each for $500 and aggregating $7,000, and the dates of their maturity, Jacobs conveys to the Wachovia Bank & Trust Company the property, describing it:
"Upon this special trust, nevertheless, that the said party of the second part, its successors and assigns, shall hold said personal property for the following and no other purpose, to wit: If the party of the first part shall fail to pay the aforesaid sum of money or any part thereof promptly as it, or any part thereof, shall become due, or shall fail to pay any part of the interest that may accrue thereon promptly as the said interest becomes due, or shall fail to keep the personal property insured strictly in accordance with the promise of the said party of the first part, as hereinafter set forth, or shall fail to pay the taxes] on said property within the time prescribed by law for their payment, or shall fail to keep faithfully all other covenants contained herein, and in the notes hereby secured, then immediately upon such default in any of these respects, the party of the third part may declare the whole of said indebtedness and interest and all other moneys then owing from the said party of the first part to the said party of the third part secured hereby, instantly due...
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J.L. Smathers & Co. v. Toxaway Hotel Co.
...intervener Frank & Co., and Frank & Co. appeal. Reversed, with directions to call another jury for the trial of an issue. See, also, 83 S.E. 844. holder of a note, negotiated by one who participated in its execution in fraud of creditors, took it without notice of such fraud, held for the j......
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