Kelly Springfield Tire Co. v. Lester

• Decision Date: 04 November 1925
• Docket Number: 288.
• Citation: 130 S.E. 45,190 N.C. 411
• Parties: KELLY SPRINGFIELD TIRE CO. ET AL. v. LESTER ET UX.
• Court: North Carolina Supreme Court

130 S.E. 45

190 N.C. 411

KELLY SPRINGFIELD TIRE CO. ET AL. v. LESTER ET UX.

No. 288.

Supreme Court of North Carolina

November 4, 1925

Appeal from Superior Court, Hoke County; Grady, Judge.

Action by the Kelly Springfield Tire Company and another against W P. Lester and wife. Judgment for plaintiffs, and defendants appeal. New trial.

Trustee's interest in land held in trust may not be subjected to payment of his debts.

Action by plaintiffs, judgment creditors of W. P. Lester, against defendants to set aside a deed from W. P. Lester to Florence Lester, his wife, dated March 18, 1922, duly registered, and conveying some 190 acres of valuable land, under C. S. § 1005, St. 13 Eliz. c. 5, § 2. From a judgment in favor of plaintiffs on a directed verdict, the defendants appealed. New trial.

The defendants allege that W. P. Lester, who was a partner with T. B. Lester, as W. P. Lester & Co., knew nothing of the firm's business, and that T. B. Lester made all contracts, and incurred all the firm debts, and that the deed in controversy was executed by him to his wife, Florence Lester, "upon the consideration and for the purpose of conveying to her her rightful interest in said property according to the amount of money expended by W. P. Lester for her in the purchase of the lands conveyed," and denied the fraud and other material allegations, but admitted the debts sued on.

The defendants' evidence tended to show that W. P. Lester was the husband of Florence Lester, and was connected with W. P Lester & Co. as a partner, but had nothing to do with the management of the garage business, and knew nothing of the company's status, but admitted the execution of the deed to his wife; that upon the death of Florence Lester's father she received $1,100, which she "let me have in reference to settling up some debts," about 20 years ago; that this money was used in paying for the mortgage on the place on which they were then living in South Carolina that the money used in buying land in controversy "belonged to my wife and myself. I thought she ought to have half of it. She was not liable for any of the indebtedness that I paid, the $14,000 mortgage. That was not my individual indebtedness, but some that I stood for"; that W. P. Lester did not own any property after he made the conveyance in controversy.

It was admitted that, about 20 years ago, certain lands of Mrs. Lester were sold in South Carolina for $1,100, and this money was used by W. P. Lester in buying various tracts of land, upon which larger profits were made, and that this money was used in buying lands in controversy. No claim was made that any actual money was paid at the time of this last purchase by Mrs. Lester.

The defendants excepted to the admission of the financial statement given by W. P. Lester & Co. through T. B. Lester, one of the partners, to R. J. Dunn & Co., a mercantile agency, and to the refusal of the court to allow their motion for judgment as of nonsuit made in apt time.

The court submitted the following issues:

"(1) Was the deed from W. P. Lester to his wife, Florence Lester, made in consideration of a pre-existing debt, due by said W. P. Lester to his said wife?

(2) Was there, at the time of said deed, any present valuable consideration moving from said Florence Lester to W. P. Lester?

(3) At the time of the execution of said deed, did W. P. Lester reserve to himself property fully sufficient and available for the satisfaction of his then creditors?"

There was evidence tending to show the contentions of the plaintiffs.

The court charged the jury, if they found the facts to be true, as testified to by all the witnesses, to answer the first issue "Yes"; the second issue "No"; the third issue "No." Defendants excepted to these directions. The jury rendered a verdict as directed, and, from a judgment declaring the deed void, the defendants excepted and appealed.

G. B. Rowland and Smith & McQueen, all of Raeford, for appellants.

H. W. B. Whitley and J. W. Currie, both of Raeford, for appellees.

VARSER J.

The evidence tends to sustain the contentions of both plaintiffs and the defendants, and therefore appropriate issues must be submitted to the jury in order for the facts to be determined.

The principles relating to fraudulent conveyances are set out in Aman v. Walker, 165 N.C. 227, 81 S.E. 164, by the late Justice Allen as follows:

"(1) If the conveyance is voluntary, and the grantor retains property fully sufficient and available to pay his debts then existing, and there is no actual intent to defraud, the conveyance is valid.

(2) If the conveyance is voluntary, and the grantor did not retain property fully sufficient and available to pay his debts then existing, it is invalid as to creditors; but it cannot be impeached by subsequent creditors without proof of the existence of a debt at the time of its execution, which is unpaid, and when this is established and the conveyance avoided, subsequent creditors are let in and the property is subjected to the payment of creditors generally.

(3) If the conveyance is voluntary and made with the actual intent upon the part of the grantor to defraud creditors, it is void, although this fraudulent intent is not participated in by the grantee, and although property sufficient and available to pay existing debts is retained.

(4) If the conveyance is upon a valuable consideration, and made with the actual intent to defraud creditors upon the part of the grantor alone, not participated in by the grantee and of which intent he had no notice, it is valid.

(5) If the conveyance is upon a valuable consideration, but made with the actual intent to defraud creditors on the part of the grantor, participated in by the grantee or of which he has notice, it is void."

These principles are approved in the following authorities: Black v. Sanders, 46 N.C. 67; Warren v. Makely, 85 N.C. 14; Credle v. Carrawan, 64 N.C. 424; Worthy v. Brady, 91 N.C. 268; Savage v. Knight, 92 N.C. 498, 53 Am. Rep. 423; Clement v. Cozart, 112 N.C. 420, 17 S.E. 486; Hobbs v. Cashwell, 152 N.C. 188, 67 S.E. 495; Powell v. Lumber Co., 153 N.C. 58, 68 S.E. 926; Cox v. Wall, 132 N.C. 730, 44 S.E. 635; Morgan v. Bostic, 132 N.C. 743, 44 S.E. 639; Michael v. Moore, 157 N.C. 462, 73 S.E. 104; Pennell v. Robinson, 164 N.C. 257, 80 S.E. 417, Ann. Cas. 1915D, 77; Smathers v. Toxaway Hotel Co., 168 N.C. 69, 70, 84 S.E. 47; Garland v. Arrowood, 177 N.C. 371, 99 S.E. 100; Bank v. Pack, 178 N.C. 391, 100 S.E. 615. These principles, however, relate to fraudulent conveyances of land that is the property of the grantor therein, and do not apply to the conveyance of property held by a mere naked trust, for another who is, in equity, the real, or beneficial, or equitable owner.

The evidence in the case at bar is ample to sustain the verdict under a proper charge which submits to the jury the contentions in the complaint, and in the answer. However, if there is a resulting trust in favor of the defendant Florence Lester by virtue of the payment of the purchase money out of her funds, then W. P. Lester has no such beneficial interest in the McNair lands as may be subjected to the payment of W. P. Lester's debts.

A trust for the sole benefit of another does not support dower for the trustee's widow (Hendren v. Hendren, 153 N.C. 505, 69 S.E. 506, 138 Am. St. Rep. 680; Pridgen v. Pridgen, 190 N.C. 102, 129 S.E. 419), and the trustee has no such interest in the land as may be subjected to the payment of his debts (Mordecai's Law Lectures, 312, 314, 316, 787, 987, 997; Thurber v. La Roque, 105 N.C. 301, 11 S.E. 460; Arrington v. Arrington, 114 N.C. 116, 19 S.E. 278; Evans v. Cullens, 122 N.C. 55, 28 S.E. 961).

If a resulting trust is established, the McNair land is, ab initio, the estate, the interest, the property of Florence Lester, and is liable for her debts, as provided by law, and subject to her right of alienation. Mordecai's Law Lectures, 997, 998 et seq.; Holmes v. Holmes, 86 N.C. 205, 208; Bank of Greensboro v. Clapp, 76 N.C. 482; Miller v. Bingham, 36 N.C. 423, 36 Am. Dec. 58; Rouse v. Rouse, 167 N.C. 211, 83 S.E. 305; Harris v. Harris, 42 N.C. 116, 53 Am. Dec. 393; Carson v. Carson, 62 N.C. 58; Cheatham v. Rowland, 92 N.C. 344; Hollowell v. Manly, 179 N.C. 264, 102 S.E. 386; Whichard v. Whitehurst, 181 N.C. 80, 106 S.E. 463; Bond v. Moore, 90 N.C. 242; Dover v. Rhea, 108 N.C. 92, 13 S.E. 164; Fulbright v. Yoder, 113 N.C. 457, 18 S.E. 713; Clark v. Cox, 115 N.C. 96, 20 S.E. 176; Helms v. Austin, 116 N.C. 753, 21 S.E. 556; Wilson v. Leary, 120 N.C. 91, 26 S.E. 630, 38 L. R. A. 240, 58 Am. St. Rep. 778; Allen v. Baskerville, 123 N.C. 127, 31 S.E. 383; Johnson v. Blake, 124 N.C. 109, 111, 32 S.E. 397; Smith v. Proctor, 139 N.C. 319, 51 S.E. 889, 2 L. R. A. (N. S.) 172; Gaylord v. Gaylord, 150 N.C. 237, 63 S.E. 1028.

Hence there arises the inquiry whether, upon any view of the evidence, taken in its most favorable light for the defendant, Florence Lester, a resulting trust arises. We are of the opinion that, when so considered, it does arise. Lord Chief Baron Eyre in Dyer v. Dyer, 2 Cox, Ch. 93, gives the nature of resulting trusts of the kind invoked as follows:

"The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether taken in the name of the purchaser and others jointly, or in the names of others without the purchaser, whether in one or several, whether jointly or successive, results to the man who advances the purchase money."

The classes of resulting trusts may be stated thus: (1) Where a purchaser pays the purchase money, but takes the title in the name of another; (2) where a trustee or other fiduciary buys property in his own name, but with trust fund; (3) where the...