
    HARVEY BLAIR & CO. v. L. T. BROWN et al.
    
      Action to Set Aside Deed of Assignment — Frau,dulent Conveyance — Evidence—Declaration of Assignor, When Admissible — Conspiracy to Defraud.
    
    1. In order to make the declarations of the assignor after the assignment competent evidence in the trial of an action to set aside the deed as fraudulent, it must he shown by evidence outside of such declarations that the assignor and the assignee conspired to defraud the assignor’s creditors.
    
      2. In the trial of an action to set aside a deed of assignment, as fraudulent, the evidence showed that between the execution and delivery for registration of the deed, the debtor with the knowledge of the assignee purchased a large quantity of goods from parties with whom he had not formerly dealt, and during the same time the assignee represented to a mercantile agency that the debtor was solvent and was doing a large business ; that shortly before the assignment and while the assignee held unrecorded mortgages on the debtor’s property for a large amount, both the debtor and assignee represented to dealers that the debtor was solvent and prosperous. It also appeared that the indebtedness to the assignee was much less than that alleged in the deed of assignment, and that a large quantity of personal property had been conveyed to the debtor as exempt, although the deed provided that the assignee should pay him $500 in lieu of exemptions; Held, that such facts were sufficient evidence of a conspiracy to defraud the creditors to admit evidence of declarations of the debtor made after the assignment.
    3. Oral evidence of the contents of a telegram was properly excluded when the only evidence of its loss or destruction was the statement of the operator that he had “searched for it but could not find it;” that “some original telegrams are destroyed and some sent to headquartersand that no search had been made at headquarters for the missing one.
    4. It was not error to charge, in the trial of an action to set aside a deed of assignment as fraudulent, that the jury should find the deed to be fraudulent and void if any part of the debts preferred therein were fictitious and the fact was known to the assignor and assignee.
    5. In the trial of an action to set aside a deed of assignment as fraudulent, it was error to charge the jury that if they should find the deed to be fraudulent and void as to one creditor they should find it so as to all.
    6. In the trial of an action to set aside a deed of assignment as fraudulent, it was error to charge the jury that if they should find that the assignor excuted 'the deed with a view to contracting other debts, they should find it fraudulent and void.
    
      7. A provision in the deed of assignment that the assignee should sell the property conveyed and pay the assignor $500 as his personal property exemptions, was not, in itself, evidence of a fraudulent intent upon the part of the assignor, hut should be considered with the other evidence relating to such intent.
    DEFENDANT’S APPEAL.
    Civil aotioN, in the nature of a creditor’s bill, tried at December Term, 1894, of Moore Superior Court, before Armfield, Judge. On the 26tb of November, 1890, the defendant, L. T. Brown, a merchant residing in Moore County, executed a paper writing purporting to be an assignment of his goods, wares, credits, etc., to the defendant S. D. Jones, to secure the payment of a sum of $5,500 to the said S. D. Jones, and then all outstanding claims against the assignor, naming some of them. The debtor reserved to himself $500, as his personal property exemption, and provided for the expenses of executing the trust before any of the debts should be paid.
    This action is instituted by the unpreferred creditors for the recovery of judgments against the defendant Brown for their debts against them, and also to have the deed declared fraudulent and void. It is charged that the assignment was executed in pursuance of a conspiracy between the assignor and the assignee to hinder, delay and'defraud the plaintiffs, and that such was the intent of the assignor and that the assignee knew of it and participated in it at the time of its execution. The defendant Brown died after the action commenced and his administrator, J. E. Oaviness, has been made a party defendant. The answer denies the material allegations of the complaint, except his indebtedness to the plaintiffs. The following are the issues submitted to the j ury, and their responses thereto :
    1. Was the deed of assignment from Brown to Jones, assignee, executed with intent to hinder, defeat, delay or defraud the creditors of L. T. Brown? Ans. “Yes.”
    2. Is the defendant J. E. Caviness, administrator of L. T. Brown,indebted to the plaintiffs, if so, in what amount? Answer. “Yes, as alleged in the admissions filed.”
    The Court thereupon rendered judgment “Declaring the deed of assignment executed by L. T. Brown to S. D. Jones fraudulent and void as to the plaintiff creditors of L. T. Brown, and that said deed be set aside as to plaintiffs, and further adjudged that the plaintiffs recover of J. E. Oaviness, administrater of L. T. Brown, the several amounts alleged in the complaint as due to the creditors therein named, aggregating the sum of $5,331.49 and interest; and further adjudged that the plaintiffs recover of the defendants the costs of the action, to be taxed by the Clerk of the Court. His Honor further ordered and adjudged that upon the admissions in the pleadings that this cause be referred to Frank McNeill, referee, to ascei’tain and report to the next Term of this Court what property and effects of L. T. Brown, deceased, and the value thereof, came or should have come into the hands of S. D. Jones, trustee, by virtue of the said fraudulent-deed of assignment, and said referee was further directed to report any other facts which he might deem essential to a full adjustment of the matters in controversy, and this cause was retained for further orders and directions.
    The plaintiffs excepted to His Honor’s refusal to render judgment against the said S. D. Jones, trustee, and the sureties on the said undertaking, and for the error alleged the plaintiffs appealed.
    From the judgment rendered ujjon the verdict against the defendants, both parties appealed to this Court.
    
      ' Messrs. Dotoglass <& Spencer and Shorn <& Scales, for plaintiffs.
    
      Messrs. Blaék <& Adams, for defendants.
   MONTGOMERY, J.

(after stating the facts as above): During the progress of the trial the plaintiffs introduced evidence tending to show that the deed of assignment from Brown to Jones was preferred and executed on the 21st day of November, 1890, and withheld from record till the morning of the 27th of November, 1890, and that after the execution of' said deed, and before the recording thereof, the assignor Brown executed and delivered' to one J. M. Monger the following power of attorney :

“This is to certify that John M. Monger is our agent to contract for us for the purchase of goods, collect all amounts due us, and generally to do and act for us in as full a manner as if we gave our consent to each individual act of his.
“November 21, 1890. L. T. Brown.”

That said Brown at the time of the execution of the deed of assignment and said power of attorney had on hand a large assortment of goods, the greater part of which he had purchased within the thirty days prior to the assignment, and that said J. M. Monger, immediately after the execution of the said power of attorney, went south, and in a section in which the said Brown had not heretofore purchased goods, and purchased goods for the said Brown on credit to the amount of $6,000, and that said Jones, assignee, knew of these transactions.

There was also evidence introduced by plaintiffs tending to show that one Terrell, agent for R. G. Dun’s Mercantile Agency, called on Jones, assignee, who was doing business in Sanford, N. C., and in the same town in which the said Brown was doing business, between the 21st and 27th of November, 1890, and informed Mm, Jones, of Ms agency, and that he was seeking information of tbe standing, etc., of the business men of Sanford for his firm, and that said Jones informed Mm that the said Brown was, in his opinion, worth about $5,000; that he (Brown) was doing a very good, straightforward business, and that his store was one of the largest in the town.

Plaintiffs also introduced evidence tending to show that one J. S. Plarper, traveling salesman of Harvey, Blair & Co., one of the plaintiffs, during the month of October, 1890, called on the defendant Jones for information as to the financial standing of the said Brown, and in response thereto Jones informed said Harper that Brown was worth about $.5,000, and that at said time, and at the time of the information given by Jones to Terrell as aforesaid, said Jones held unrecorded mortgages on all the real and personal property of said Brown to secure an alleged indebtedness of $5,500.

The defendant Jones testified upon cross-examination by the plaintiffs that a short time prior to November, 1890, 'he, Jones, had disposed of all of his property with intent to defraud one of his creditors.

There was also evidence tending to show that the true indebtedness from Brown to Jones, was not $5,500, the amount preferred in said deed of assignment, but was a sum much less thau that amount.

There was also evidence tending to show that a short time before the execution of the deed of assignment, and while the said Jones held the unrecorded mortgages on all the real and personal property of the said Brown, said Brown represented to Sweetzer, Pembroke & Co., of New York, that he was worth from $5,000 to $7,000 over and above all exemptions and liabilities, and that he purchased goods on a credit upon faith of these representations.

There was also evidence tending to show that thoughv the assignee Jones was authorized in said deed of assignment to pay Brown, assignee, $500 in money in lieu of his personal property exemptions, upon an execution issued against said Brown after the execution of the deed of assignment, said Brown demanded, selected and had allotted to him his personal property exemptions in property to a large extent not conveyed in the deed of assignment. ^

The plain tiffs then insisted that there was before the Court sufficient evidence of a combination and conspiracy between the assignor and the assignee to defraud the cred-' itors of the assignor, to admit the declarations of the assignor made subsequent to the deed of assignment. His Honor was of that opinion, and so ruled. Upon this, the plaintiffs introduced as a-,witness for themselves J. M. Brown, who testified as follows :

“ I am a brother of L. T. Brown. I had a talk with him at my house after the assignment, the next spring after it was made. He said the assignment was all a damned fraud, and that he would not come to Court because it would ruin him and injure Mr. Jones. He told me this a dozen times.” To all of which the defendants excepted.

The plaintiffs then introduced a witness, one N. B. McBride, by whom they proposed to prove a conversation that he had with the assignor after the execution of the deed of assignment. The defendants objected; objection overruled; defendants excepted.

This witness was then permitted to testily, as follows, to-wit:

“ I had a conversation with Brown, assignor, after the assignment. It was at Greensboro, jn April, 1892. He said he wanted to go home to see Jones, and if Jones would give him his house and his lot back he would let things go on as they were, and if they did not he would go on' the ■stand and burst it up, for it was a fraud from beginning to end; that he was due Jones $2,000, and that he made the assignment to pay that debt. Tie said to Mr. Douglass that if Jones did not come to terms he was going to employ some one to burst it up. Mr. Douglass told him to stop, when he began to talk, for he was employed on the other ■side.”

To this the defendants excepted.

The plaintiffs then introduced as a witness one M. B. Buchanan, by whom they proposed to prove similar declarations of Brown, the assignor, after the assignment. The defendants objected; objection overruled; defendants excepted.

The witness was then permitted to testify, as follows, to-wit: »

“I heard a talk between Brown and McDonald ; Brown ■said he owed Jones some money, but not so much as he •claimed, and if he did not give him back his house and some money he would go on the stand and break the infernal fraud; 'that he was strapped and had nothing. This was at Greensboro in the spring after the assignment.”

The defendants excepted to the ruling of His Honor on the sufficiecy of the testimony going to show the eonspir.acy ; and they also objected to the introduction of the declarations made by the assignor after the execution of the ■deed of assignment. The Court did not sustain the exception and overruled the objections to the testimony, and in so doing committed no error. “ In order to make the declarations of the assignor after the assignment competent ■evidence, it must be shown that the assignor and the assignee are combined in a common conspiracy to defraud the assignor’s creditors, and this common purpose must be established by evidence other than the declarations them■selves.” Burrill on Assignments, Sec. 362, and the cases there cited.

The defendant introduced as a witness J. G. Bynum who testified that on the 27th of November, 1890, and after said deed of assignment had been executed, to wit, on the night of the same day, he sent a telegram to one J. M. Monger.

The defendants then introduced one G. E. White, who testified as follows, to wit: “ I am agent of the railroad, and telegraph operator. I sent a telegram to Monger. It has been destroyed or burnt. I have searched for it and it cannot be found. Some are sent to headquarters and some are destroyed. I don’t know what became of this one. All commercial telegrams are sent to headquarters. No search has been made at headquarters.”

Upon this evidence the defendants offered to prove the contents of said telegram purporting to contain a declaration of said Brown, assignor, made to said Bynum subsequent to the execution of the said deed of assignment and in his own interest supporting said deed. The said J. M. Monger, to whom it was claimed said telegram was sent, was present in attendance upon the trial of this cause at the time the defendants offered to prove the contents of said telegram by said White, having been subpcened as a witness by both plaintiffs and defendants, and was not offered by the defendants to prove the receipt or contents of said telegram. The plaintiff's objected ; objection' sustained. Evidence excluded; defendants excepited.

His Honor committed no error in refusing to let the witness White testify as to the contents of the alleged telegram. He did not show its loss or destruction, and what he said about it was confused and conflicting. Secondary evidence of the contents of telegrams is admissible on the testimony of the clerk of the telegraph company that the original telegrams have been destroyed. 100 N. Y., 446; Smith v. Eastern, 54 Md., 138. In response to plaintiff’s prayer for instructions His Honor among other things charged the jury as follows :

1. If the jury shall find that the deed was not made to secure Iona fide debts, but for the mere purpose of giving ease to the debtors, it is fraudulent and void and the jury should so find.

2. That if the jury should believe from the evidence that any part of the debts preferred in the deed of assignment were fictitious and this fact was known to the assignor Brown and the assignee Jones, then the deed is fraudulent and void and the jury should so find.

3. If the jury should find that there was an agreement between said Brown and Jones that they or either of them should falsely represent said Brown to be solvent,-and upon this representation purchase goods so as to have a sufficient quantity on hand to save said Jones harmless by making the deed of assignment, and upon these representations the said Brown did purchase from the creditors herein, then the deed is fraudulent and void, and the jury should so find.

The defendants in apt time excepted to the foregoing instructions numbered 1, 2 and 3, and his Honor proceeded to instruct the jury, as follows, without objection or exception :

4. Every debtor in failing circumstances has the legal right to make an assignment of his property for the benefit of his creditors and has the legal right to prefer such of his creditors as he may wish to pay to the exclusion of the others.

5. The test as to whether a conveyance is fraudulent is not whether in fact it hinders or delays a creditor in the collection of his claim, but whether or not it was made with intent to so hinder or defraud his creditors. If there be no such intent in the mind of the assignor at tbe time tbe conveyance is executed, it matters not what effect tbe execution of tbe conveyance may have.

6. Although tbe jury should believe that, tbe assignor Brown made false representation to sundry parties in the fall of 1.890 for the purpose of obtaining goods, this is not sufficient to vitiate tbe assignment, and should not be considered by tbe jury, except as a circumstance to assist them in discovering the assignor’s intent at the date of the assignment.

7. The fraudulent intent must-have existed in the assign- or’s mind when the deed was executed and delivered, and although he may have previously intended to assign his property to defraud his creditors, still if the deed was Tyona fide, and no such intent existed in the assignor’s mind at the time of its execution and delivery, the deed would not be fraudulent, and the plaintiffs would not be entitled to recover.

8. If the jury should find that the execution of the deed of assignment operated to the ease, comfort or benefit of the .assignor Brown and to the injury of creditors, this would not make the deed fraudulent or void unless made with that intent on the part of Brown that it should so operate.

9. If the jury should find that the assignor Brown or the assignee Jones, before the date of assignment, made false representations to various parties with a view of obtaining goods to enable said Brown to continue his business, or for any other legal or legitimate purpose, and not for the purpose of hindering, delaying or defrauding creditors, the deed of assignment is not for that reason void.

In further response to the plaintiffs’ prayers for instructions the Judge instructed the jury as follows:

10. If the jury shall find that said deed is fraudulent as to one creditor, th.ey should find that the deed is fraudulent and void as to all.

11. If the jury should find that L. T. Brown executed the deed with the view of becoming indebted, said deed would be fraudulent and void, and the jury should so find.

12. If the evidence is sufficient to produce a belief in the minds of the jury, and the jury should believe it andaré satisfied that the deed of assignment was executed with intent to defraud, defeat, delay or hinder the criditors of L. T. Brown, then they should find in favor of the plaintiffs, and answer the issue “Yes.”

13. In cases where fraud is alleged the jury are to consider circumstances connected therewith and to give each its proper weight, and if upon the whole testimony the jury believes that the deed of assignment was executed with intent to defraud any one of his creditors, then they should find in favor of the plaintiffs and answer “Yes” to the first issue.

To the foregoing instructions, numbered respectively 10, 11, 12 and 13, the defendants excepted in apt time.

The defendants prayed the following instructions :

1. Although the jury should believe that the defendant 'S. D. Jones endorsed for his assignor Brown or loaned him money, and said Brown promised to save him from loss on account of said loan or endorsement, and in his deed of trust, and in fulfillment of said promise preferred said Jones for the amount of said indebtedness, this transaction would not make the conveyance fraudulent per se — (nor is it evidence of fraud to be submitted to the jury).

So much of said prayer as is included in the parenthesis was included. Defendants excepted.

2. If the, jury believe that the deed of assignment was drawn November 21,1890, retained by the assignor and not delivered till November 26,1890, this per se is no evidence of fraud on the part of tlie assignor Brown.

His Honor refused to so instruct the jury, but instructed them that this was a circumstance which they might consider with its surroundings. To this the defendants excepted.

3. The fact that the assignor did not include all of his property in the deed of assignment is not per se evidence of fraud.

His Honor refused to so instruct the jury, but directed them to consider this circumstance with its surroundings and weigh it with the other evidence in the case.

4. The fact that the deed of assignment requires the assignee to sell the property conveyed and pay the assignor $500 as his personal property exemption, does not render the assignment fraudulent or void upon its face — (nor is it per se evidence of a fraudulent intent upon the part of the assignor).

His Honor refused to charge the clause enclosed in parenthesis, and defendants excepted.

His Honor then proceeded to instruct the jury that they might consider the fact that the assignor required the assignee to sell the property conveyed and pay him, assignor, $500, his personal property exemptions, with the other evidence in the case bearing thereon, and give it such weight, as in their judgment it was entitled bearing upon the question of the fraudulent intent of the assignor at the time he executed the deed of assignment.

5. If the jury should find that some of the debts named in the deed of assignment were feigned and fictitious, and the others good and valid, it is the duty of the jury to sustain the deed as to the valid debts in any event. Refused, and the defendants excepted.

6. The law presumes the deed of assignment valid. The burden of showing that it is fraudulent rests upon the plaintiffs — (who must satisfy the jury by strong, clear and convincing proofs that it is fraudulent; otherwise, it is the duty of the jury to sustain the assignment as valid).

The clause enclosed in parenthesis is refused and the following was given instead thereof: “who must satisfy the jury fully, clearly and completely that it is fraudulent; otherwise, it is the duty of the jury to sustain the assignment as valid,” and defendants excepted.

There is nothing in defendant’s exception to Number 2 of plaintiff’s prayer for instructions which was given by the Court; and while Number 1 and 3 might have been fuller on the points they touched, yet there is no error in them when taken in connection with the rest of the charge.

There is error in the Court’s having given the plaintiff’s prayer number 10. The doctrine laid down in Stone v. Marshall, 7 Jones, 300, was overruled by Morris v. Pearson, 79 N. C., 253. There is error also in His Honor’s having given No. 11 of plaintiff’s prayer for instruction.

/We are also of the opinion that number 4 of defendant’s prayer should have been given with the explanation and limitation which followed that part of it which His Honor did give. Number 5 should also have been given with the qualification that such would not be the law if there was a conspiracy between the assignor and the assignee to hinder, delay and defraud the creditors of the assignor at the time of the execution of the deed of assignment. There is error in the particulars set out in this opinion, and the defendants must have a new trial.

PLAINTIFF’S APPEAL IN SAME CASE.

MONTGOMERY, J.:

There is no error in that part of the judgment from which the plaintiffs appealed. “After the institution of the action the plaintiffs, on or about the 16th day of February, 1891, applied to Judge Armfield, then bolding the Courts \of the 7th District, at Chambers, in Rockingham, N. C., on affidavits filed, for an injunction and appointment of a receiver therein; and upon the hearing His Honor made the following order:

“ It is adjudged that the prayer for an injunction be refused, the restraining order heretofore granted be dissolved, and the petition for the appointment of a receiver bé denied, upon the defendant S. D. Jones, Trustee, filing an undertaking in the sum of $5,000, conditioned as required by law, to be approved by the Court.”

In pursuance of said order the defendant S. D. Jones, Trustee, then and there executed, delivered and filed an undertaking with sureties in which the obligors undertook “pursuant to the statute ( chapter 94, Laws of 1885,) that the said S. D. Jones shall pay to the plaintiffs in this action all such amounts as may be recovered and adjudged against him upon the final determination of this action, not to exceed $5,000.”

Among other things in the complaint the plaintiffs alleged “that the plaintiffs applied for an injunction and receiver in this cause, upon the trustee S. D. Jones executing an undertakieg in the sum of $5,000, conditioned to pay any judgment that the plaintiffs may recover in this action, which said undertaking was duly executed by S. D. Jones, Trustee, with D. N. Mel ver, John W. Scott and J. R. Jones as sureties thereto; that said S. D. Jones accepted the aforesaid trust and has collected a large'sum of money and other property from the assets of his assignors, amounting in all to the value of over $5,000.”

- The defendant trustee and the sureties to said undertaking, who were preferred creditors in said deed of assignment and defendants in this action, admitted in their answers filed the said allegations.

One of the plaintiffs’ prayers in their complaint was for judgment against L. T. Brown and S. I). Jones, Trustee, and the sureties on the aforesaid bond for the sum mentioned therein.

At December Term, 1894, this cause came on to be tried before His Honor, B. F. Armfteld, Judge, and a jury, upon the following issues submitted to the jury :

1. “Was the deed of assignment from L. T. Brown to Jones, assignee, executed by Brown with intent to hinder, defeat, delay or defraud the creditors of L. T. Brown ?”

The jury responded to said issue, “ Yes.” *

2. “Is the defendant indebted to the plaintiffs, if so in wliat amount ? ”

To which the jury responded, “ Yes, as alleged in admissions filed.”

Which admitted indebtedness of L. T. Brown to the creditors amounted to the sum of $5,331.40, and interest.

Upon the verdict of the jury (as set out in defendant’s appeal), the allegations in the complaint and the admissions thereof by the defendants in their answers, the plaintiffs asked for judgment against said Jones and sureties upon said undertaking in the sum of $5,000. The Court refused to give judgment as requested, to which the plaintiffs excepted.

The allegation that the defendant -assignee Jones had received of the assets of the assignor Brown more in value than the amount of the assignee’s bond, to-wit, $5,000, is denied by the defendants in their answer: and an account would be necessary to discover the true amount for which the assignee would be liable. But as a new trial has been granted to the defendants, the reference cannot be proceeded with, and the plaintiffs’ appeal is dismissed.  