
    
      Doe on the demise of MAUGER LONDON v. O. G. PARSLEY AND Z. LATIMER.
    A deed of trust, made by a corporation, or an individual, for the purpose of gaining time at the expense of creditors, in order to dispose of property to advantage, and prevent a sacrifice by a sale for cash, where the company -or individual has the means and resources from which enough might be realized to pay all of the debts, is fraudulent and void, as against creditors.
    Tms was an action of Ejectment, tried before Caldwell, J., at the last Eall Term of New Ilanover Superior Court.
    The premises, in dispute, hacl belonged to “The Clarendon Iron Works Company,” a corporation existing by virtue of certain letters patent, dated the 26th of September, 1854-, issued by the Governor, under the provisions of the act of the General Assembly, entitled “an act to encourage the investment of capital for mining and agricultural purposes,” ratified the 22d clay of December, 1852.
    The capital stock of the company was $300,000, and the corporators were Adrian IT. Yan Bockkelen, Robert. B. Drane, Alexander McRae, and the defendants Parsley and Latimer.
    . The plaintiff gave in evidence, a deed from the sheriff of New Hanover, to the lessor of the plaintiff, for the premises sued for, dated the létli of March, 1857, and made by virtue a levy and sale under certain executions against the said company, issued on judgments against said company, at June Term, 1856, of New Hanover County Court. These judgments, amounting to $11.000 or $12.000, were founded upon debts owing by said company, and, upon which, suits were pending at, and before the making of the assignment hereinafter referred to, all of which debts were included in the fourth class of debts in the deed of assignment. Hpon these judgments, or some of them, executions were issued returnable to September Term, 1856, alias executions to December Term, and pluries executions to March Term, 1857; under which last the lessor of the plaintiff purchased at the price of $5.000.
    
      The defendant then gave in evidence a deed of assignment from the said company, to Levi A. Hart, for the premises sued for, dated the 6th of June, and proved and registered on the same day. The defendants then produced a deed from the said Levi A. Hart, to themselves dated in December, 1856.
    It was admitted, on the part of the defendants, that of the capital stock of the said company, only $50,000 had been called for or paid in, and it was admitted by the plaintiff, that all of the debts of the company, set forth in the deed of assignment were just.
    It was in evidence that the trustee, Hart, on the 19th of September, 1856, caused to be inserted in the two daily papers, published in Wilmington, an advertisement for the sale of the’ premises sued for, by public auction on the 12th of November, 1856, which advertisement was continued from day to day in said papers, up to the 12th of November, 1856, when the said premises were sold upon the terms set forth in the deed of assignment, and the defendants became the purchasers at the sum of $28,000, and having complied with the terms of sale, received from the trustee, Hart, the deed above referred to. And it was also, in evidence, that of the capital stock of the company, A. H. Van Bokkelen had subscribed for $192,000, and paid in $32,000; R. 13. Drane had subscribed for $30,000, and paid in $5,000; Alexander MacRae had subscribed for $18,000, and paid in $3,000; and each of the defendants had subscribed for $30,000, and paid in $5,000 ; that at, and before the organization of the company, the corporators had agreed among themselves that they would commence their operations in manufacturing under the letters patent, upon a capital of $50,000; and that no greater amount of the capital stock should be called for without the assent of all the corporators, as the business being new, the3r did not know’how far it might prove profitable; and, if upon trial, they should find it did prove profitable, they could then increase it if thc3r chose, without the necessity' of taking out new letters patent; that the business of the company' was the manufacturing of iron machines and machinery’, and almost all kinds of iron manufactures ; that the business of the company, after it had been conducted for some time, six or eight months, proved to be unprofitable, and the corporators wished to stop the business and sell out their shops and machinery, which had cost them $50,000; and advertised them for sale in the cities of New York, Philadelphia, Baltimore, and other places in the United States; and the President of the company made a visit to the Northern cities to look for purchasers, but failed to find one; that in conformity to the advertisements referred to, the premises sued for, and in addition thereto, the machinery and tools of the establishment, among which were two large lathes, which cost $3,000, were offered for sale, at public auction, in the town of Wilmington, on the the 18th of April, 1856, upon the following terms, to wit, $7,500 cash, $7,500 at ninety days, $7,500 at six months, and the balance at nine, twelve, eighteen, and twenty-one months.
    At this sale, the highest bona fide bid, was under $23,000. The corporators were willing to take $30,000, but at a meeting which they had the evening before the sale, it was stated that certain parties might be willing to give more than $30.-000 ; whereupon it was agreed that Parsley and Yan Bokkelen, two of the corporators should run the property up to that sum, and accordingly, on the next day, they continued to bid against each other after the price of $23,000 was reached, until they ran it up to $39,000, at which price it was knocked off to one of them; and Mr. Yan Bokkelen stated in his evidence, that this was done to prevent the price of the property from being injured in the market; that efforts for the sale of the property, were continued until the date of the deed of assignment; that the said deed conveyed all the property of the company which could be reached by an execution, and also, all the debts due to the company; that the usual terms of sale of valuable real estate in Wilmington, in 1856, were, upon a credit of one, two and three years, with interest from date, and the more valuable the property, the longer the credit; that the premises in dispute, would not have sold for more than $15,000 or $16,000 at a cash sale; that they were unfit for any ether purposes, than those for which they were constructed, and could not be used for any ether purpose without an expenditure of much money; that the provision in the deed of assignment, authorising the assignee to make a private sale of the premises before the first of November, 1856, upon such terms as might be agreed on by all the corporators, was inserted in the deed, because the corporators were unwilling to leave the price to the sole discretion of the trustee at private sale; they wanted the property sold for a fair price, and to that end, they wished to be consulted, and to exercise their own discretion ; that the corporators, at and before the making of the assignment, had full and frequent conferences with their counsel in reference to the making thereof, and were fully advised that they were individually liable to the creditors of the company to the extent of the balance uncalled for, and unpaid on their respective subscriptions to the capital stock-of the company; that their object, as stated to their counsel, in making the assignment, was that they considered certain of their cred- , itors more meritorious than the rest, and wished to prefer them in the order afterwards set forth in the deed; and also, because they wished to make the property bring a fair price, and prevent it from being sacrificed; that they were advised by their counsel that they had the right to make an assignment of the property, and estate of the company, for the benefit of the creditors of the company; and that the provisions of this deed were submitted to their counsel, and they were advised by him that there could be no objection to them; that they were fair and reasonable, and creditors could have no objection to them; that the debts referred to, and set forth in the assignment, embraced all the debts due by the corporation, except possibly some small bills which were not remembered ; that the property and estate conveyed by the deed of assignment, were, at the time of its execution, supposed to be worth more than the debts due by the company, but from bad debts and other casues, the trustee had failed to realize enough to pay all the debts; that the defendants, at the time of their subscription, and at any time since, could have raised ^30.000 each, the amount of their subscription ; that Van Bokkelen, at the time of his subscription, supposed himsejf to be worth $100,000, but became insolvent in the fall of 1855;, that Robert B. Drane was always a man, of very moderate means, and that Alexander MacRae, though possessed in June, 1856, of a considerable property, was thought to be considerably involved by reason of a large railroad contract in Florida, which afterwards turned out profitablethat the company liad not filed in the office of the clerk of New Hanover county court, any exhibit of its receipts and disbursements and liabilities and credits; that at the sale, by the sheriff', when' the lessor of the plaintiff purchased, the defendant, Parsley, was present, and forbid the sale; and that one Cassidy at that sale bid several thousand dollars as the agent of the defendants, said Parsely having requested him to bid', stating that his object in bidding, was to save any lawsuit about the property, if possible.
    The Judge charged the jury, that taking the' whole of the evidence in the case together, written and unwritten, there was a presumption of fraud ; and that there was no sufficient evidence to rebut that presumption; and that if the jury should find the facts according to this evidence, written and unwritten, then the law pronounced the deed fraudulent, and the plaintiff would be entitled to their verdict. Defendants excepted.
    Verdict for plaintiff. Judgment. Appeal by defendants.
    
      Person and Strange, for plaintiff.
    
      W. A. Wright and B. F. Moore, for defendants.
   Pearson, C. J.

The effect of every deed of trust, like that under consideration, is “ to hinder and delay” creditors, because it deprives them of a direct and prompt mode of collecting their debts bg fieri faeias and sheriff’s sale.

A debtor at any time before his creditors obtain a lien, has a right to make a preference in favor of some, to the exclusion of others.

In order to reconcile these two conflicting rights, the law, as established by the adjudications of onr courts, allows a debtor, who is in failing circumsiances, to make a deed of trust, and will not impute to him an intent to fraud ; provided, he does so, with a single eye to the exercise of his right to make a preference, and without any purpose, either directly or indirectly, to secure to himself anjr benefit or advantage; Palmer v. Ellis, in Equity, decided at this term, and reported in 5 Jones’ Eq. Rep. But to entitle himself to this indulgence, he must see "to it that there is no sinister design, with a view to his own interest.

To rid onr case of any unnecessary complication, we concede,.at the outset, the position assumed by the counsel of the defendant, i. e., a corporation has the same right to make a deed of trust that an individual has, and in making this concession, we assume that it follows, a corporation, in the exercise of this right, is subject to the same limitations and restrictions as -when it is exercised by an individual. It is unnecessary to refer to the many authorities cited on the argument ; such is th'e conclusion fairly to be deduced from them.

Suppose one, with ample resources to pay all his debts (with money enough in bank if you please) some ten daj'S before a creditor obtains judgment, should make a deed conveying all of his property, which is subject to execution, to a trustee, for the payment of all his creditors, arranged in classes, one, two, three, four, would this deed be made with a single eye to the exercise of his right of making a preference among creditors ? that is the question. Certainly not, for there was no occasion to-make a perforen ce, as he was able to pay all; so there could be no doubt, his object was to secure an advantage for himself; he wished to have the privilege of paying his debts when it suited him, and to use his money for other purposes ; he did not choose to have his property sacrificed at sheriff’s sale, but intended to sell ujdoii his own terms, and for that purpose he put his property out of the reach of an execution. It follows, there is nothing to relieve the deed from, the imputation of being made with a fraudulent intent. This conclusion is so palpable, that a mere statement is the only argument that can be made about it.

Such is the case now before us for consideration. Besides the land, buildings, machinery, and debts due, “ the Clarendon Iron Works company” had a fund of $250,000, unpaid stock, from which it could, b,y a call upon the share-holders, have realised an amount, which, in addition to its resources above set out, would have been much more than enough to pay off all its liabilities. Admit that Yan Bokkelen had failed, and could only answer the call to the amount of the debt due to him ; that McRae was not, at the time, reliable ; that but little could have been paid in by Drane; there were the defendants, Parsley and Latimer, bound for $26,000 each, and amply able to pay. So, the purpose of the deed of trust, wms not to prefer creditors, but to hold them off, at arms length, until the property could be disposed of and the other resources of the company be made available, and in that way secure a benefit to the share-holders by not calling on them for the portion of their subscription remaining unpaid ! thus perverting an indulgence which the hvw extends to debtors, under certain circumstances, and making it a pretext in order to effect an object for the benefit of the debtor, which the law cannot tolerate. The debts were due ; it was the duty of the company to pay them, and, although the creditors were at liberty to give further time, the debtor had no right to exact it, in the manner attempted. The conclusion that a deed of trust made by a corporation, or an individual, for the purpose of gaining time, at the expense of creditors, in order to dispose of property to advantage, and prevent a sacrifice by a sale for cash, when the company or individual, has the means and resources from which enough might be realised to pay all of the debts, is fraudulent and void as against creditors, is clearly deducible from principle, and we are glad to find, upon an examination of the authorities, that it is fully supported by them. See “ Burrill on Assignments,” 2d Ed. pages 38,39, and 40, where the cases are collected and referred to ; Planck v. Schermerhorn, 3 Barbour’s Ch. Rep. 644; Ogden v. Peters, 15 Barbour’s Supreme Court Rep. 560, and many others, all to- the same effect. For the purpose of rebutting the imputation of fraud, the- defendants on the trial below, and in. the argument before us, relied on the fact, that the corporators had agreed among themselves, as the business was new, to commence operations on $50,000, and if upon trial, it proved profitable, other portions of the subscription could be- called for. If the company had confined its operations within tins limit, it would have-been well enough, but, unfortunately, the agreement was not observed ; for the operations were extended on credit to a large amount, based on its unpaid! stock; and when a creditor called for payment, it was no answer to tell him, “ we had agreed among themselves to make a trial on $50,000 ;” the reply is: “ true ; but that was not clone ; and honesty requires that you should meet this extended credit by calling for unpaid subscriptions to an amount sufficient to pay your debts.” Aw individual, under sne-b circumstances, would hardly have the face to say to a creditor, “ when I commenced this bnemess, I determined with myself, as it is new, only to trade on a limited sum; true, I stretched my credit, bat I do not feel hound to resort to my other resources to meet your debt, so yon must wait until I can see what can be done for you out of the sum appropriated tothe business!’’

In Palmer v. Giles, the fraud was apparent on the face of the deed, and the jury had nothing to do with k;. in this case it was necessary for the jury to find the facts upon which the law pronounced the- deed to be fraudulent; bnt, notwithstanding that difference, the principle involved is the same, and this Court concurs with his Honor in the conclusion, that if the evidence was believed, there- was a presumption, of fraud, and there was no evidence to rebut it; and, we also approve of the “fair and square manner” in which his Honor met the point, and submitted- the ease to the jury; for in-cases, where, as in this, there was no- actual fraud, and- the deed is void against creditors, only by intendment of law, upon tbe facts disclosed by the evid’en-ce-, the due-administration of justice requires that the Judge should “ take the- responsibility of announcing the law in a manner so plain and direct, that juries cannot misunderstand tbe instructions.

Per Curiam,

Judgment affirmed.  