Morgan v. Bostic

• Decision Date: 06 June 1903
• Citation: 44 S.E. 639,132 N.C. 743
• Parties: MORGAN et al. v. BOSTIC et al.
• Court: North Carolina Supreme Court

44 S.E. 639

132 N.C. 743

MORGAN et al. v. BOSTIC et al.

Supreme Court of North Carolina

June 6, 1903

Appeal from Superior Court, Buncombe County; Councill, Judge.

Action by J. P. Morgan and others against J. B. Bostic and others. From a judgment in favor of plaintiffs, defendants appeal. Judgment reversed as to defendant C. H. Yeatman.

Frank Carter and T. H. Cobb, for appellants.

Merrimon & Merrimon and Tucker & Murphy, for appellees.

CONNOR J.

This action was brought by the plaintiffs, creditors of the defendant J. B. Bostic, against him and the defendants Miller and Weaver, for the purpose of having the two last named declared trustees for the benefit of plaintiffs in respect to the title of certain real estate. Summons was issued March 3, 1898, and served on defendants the same day. The plaintiffs the same day filed in the office of the clerk of the superior court of Buncombe county a notice of lis pendens, in proper form, containing a sufficient description of the land sought to be subjected, and the purpose for which the action was brought; the land being situate in Buncombe county. The original complaint was filed in the office of the clerk of the superior court of Buncombe county February 15 1899. An answer was filed by the defendants, denying the material allegations of the complaint. At April term, 1902 of said court, plaintiffs secured an order making C. H Yeatman a party defendant. Summons was duly issued and served upon Yeatman May 16, 1902. Plaintiffs filed an amended complaint, alleging that the defendant Bostic was the beneficial owner of the land described in the complaint, the legal title being in one C. S. Baylis, of New York; that Bostic became entitled to the said land in a trade made between Baylis and himself, but, being insolvent, the legal title remained in Baylis, with the understanding that he was to convey the same to such person as Bostic might direct; that this arrangement was made by the said Bostic with intent to prevent his creditors from reaching the said land, to hinder, delay, and defraud them in the collection of their debts; that the said land was worth about $5,000; that thereafter the said Bostic entered into an agreement with the defendants Weaver and Miller, in the name of the J. B. Bostic Company, a corporation organized by the said Bostic, by which he agreed to sell the said land to the defendants Weaver and Miller for $1,250, and to have a deed made therefor by the said Baylis, and with the further agreement that, after the $1,250 was paid back to Weaver and Miller from the sale of the land, the balance of the proceeds would be equally divided between the Bostic Company and Weaver and Miller; that pursuant to said arrangement the said Baylis conveyed the said land, known as the "Bede Smith Farm," to said defendants; that this arrangement was made and the deed executed with intent to hinder, delay, defeat, and defraud the creditors of Bostic, and the defendants Weaver and Miller had notice thereof; that thereafter, on the 18th of October, 1898, the defendants Weaver and Miller conveyed the land to C. H. Yeatman for the consideration as recited in the deed of $3,000, and Yeatman had notice at the time of the execution of the deed of the pendency of said action by the lis pendens filed therein; that on the same day, to wit, October 18, 1898, the said Yeatman conveyed to Weaver and Miller certain lots in the city of Asheville for the recited consideration of $3,000. The plaintiffs allege that, by reason of these facts, they were entitled to have Yeatman declared a trustee for their benefit. The defendants denied the material allegations in the complaint, and, for a further defense, alleged that the defendants Weaver and Miller purchased the land from the J. B. Bostic Company, a corporation, and that the deed was made to them by Baylis; that at the time of the purchase neither of them knew that Bostic, individually, had any interest in the land, and they, and all of them, denied expressly that he had any such interest. They further denied that the defendants, or either of them, had any knowledge of the insolvency of Bostic; that their purchase of the land was in good faith and for full value.

There was testimony tending to show that, some time during the year 1897, Bostic, being insolvent, negotiated a trade with Baylis, and, as a part of the consideration and pay for his services in the matter, he was to have the title to the Bede Smith farm; that the title was to remain in Baylis, to be conveyed to such person as Bostic might name. It further appeared that some time during the year 1895 Bostic secured a charter for and organized a corporation under the name of J. B. Bostic Co.; that 100 shares of stock were subscribed for, of which 15 were taken by J. B. Bostic, trustee for G. P. Bostic, 35 by B. P. Bostic, and 30 by B. P. Bostic; that J. B. Bostic was elected manager of the corporation, at a salary of $1,800 per year; that the contract with Baylis was made by the J. B. Bostic Company, and the contract with Weaver and Miller was made by the said company; that the defendant Bostic was the manager of the corporation, and sold the land to the defendants Weaver and Miller, who paid $1,250 therefor. There was evidence tending to show that the value of the land was in excess of this amount. The defendant Yeatman swore that he had no knowledge or notice of the pendency of this suit at the time he bought the land and took title thereto. The plaintiffs contended that the organization of the J. B. Bostic Company was had with the intent to cover up the property of J. B. Bostic, and remove it from the reach of his creditors, and that it was a fraudulent contrivance for that purpose. The defendants denied that they had any notice or knowledge thereof, and allege that they are bona fide purchasers for value.

The court submitted the following issues to the jury: "(1) Did the defendant J. B. Bostic cause to be executed to his codefendants, Weaver and Miller, the deed set out in the complaint? Yes. (2) Did the J. B. Bostic Company cause to be executed to the defendants Weaver and Miller the deed set out in the complaint? _____. (3) Was the deed executed with the intent to hinder, delay, defeat, and defraud the creditors of J. B. Bostic? Yes. (4) Were the defendants Weaver and Miller bona fide purchasers of the land described in said deed, for value, and without notice of or participation in any fraud, if there was any, on the part of J. B. Bostic, or J. B. Bostic Company, to hinder, delay, defeat, and defraud the creditors of said J. B. Bostic? No." Upon the coming in of the verdict, the court rendered judgment declaring that the defendants Weaver and Miller took title to the land in trust for the creditors of Bostic, and that Yeatman purchased with notice of the pendency of this action, and was fixed with knowledge thereof, and held the title to the said land upon the same trust. There were numerous requests for instructions by both the plaintiff and defendant, many of them becoming immaterial by reason of the finding of the jury upon the first issue. Among other instructions given the jury, his honor charged them, at the request of the defendants, "that the burden of proof is upon the plaintiffs to satisfy the jury that J. B. Bostic caused C. S. Baylis to execute the deed described in the complaint with intent to hinder, delay, defeat, and defraud the creditors of the said J. B. Bostic," and, unless they did so satisfy them, they should answer the third issue "No." He also charged the jury that the burden of the first issue was upon the plaintiffs. Upon the fourth issue he charged the jury that the burden was upon the defendants Weaver and Miller to show that at the time they purchased this land they did it in good faith, without notice of any purpose of Bostic to hinder, delay, defeat, and defraud his creditors, and that they purchased it for value; that if they did satisfy the jury that, at the time they purchased the land, they knew of it and its condition, and that they exercised their best judgment in ascertaining what the land was really worth, and after doing so they considered it not worth more than $1,250, allowing to themselves what would be a reasonable margin to be made upon the land as an investment, they would be purchasers for value, within the meaning of the law; that, in order to protect themselves against a prior donor or creditor, they must prove a fair consideration; that the court adopted in this connection the language used by the Supreme Court in Worthy v. Caddell, 76 N.C. 82, which had been read to the jury and commented upon.

We are of opinion that his honor correctly instructed the jury in regard to the burden of proof. It is well established by decisions of this court that, if one executes a deed or enters into an arrangement for the purpose of defrauding his creditors, the grantee will take the title to the land conveyed subject to the claims of the creditors of his grantor, unless he shall show by a preponderance of evidence that he purchased for full value, and without notice of the fraudulent purpose and intent on the part of his grantor. Section 1545 of the Code of 1883 declares "that all deeds and other conveyances which might be contrived and devised of fraud with...