Opinion
July Term, 1809.
Pending a suit against A as security of B, A, to defeat any recovery that might be made against him in said suit, conveys his property to C, by an absolute deed, purporting to be for a valuable consideration. And it was agreed between A and C, that C should reconvey the property to A whenever he should be requested. It appeared upon the trial of the suit against A that the debt claimed of him had been paid by B, for whom he was security, and judgment was rendered in favor of A, upon which he filed a bill to compel C to reconvey the property according to his agreement. Equity will not enforce this agreement, on account of its moral turpitude.
THE bill charged that Jackson, in order to the more convenient settlement of his estate at a future day, so as to answer the exigencies of his family, concluded to raise a trust in fee on his estate, and to make such divisions and provisions out of the same as a trust is capable of according to the rules of equity, and which an estate at common law is not. That to this end, he applied to one Benjamin Marshall, late of Halifax County, now deceased, and made known to him his designs, and requested him to permit complainant to make him a trustee for the said purposes; that Marshall consented thereto, and promised that he would, from time to time, make such conveyances as complainant should direct, and reconvey the property to complainant if ever requested to do so. That in pursuance of this agreement, complainant, in May, 1801, by deed duly executed, conveyed to Marshall two tracts of land lying in Halifax County, and by another deed executed about the same time he conveyed to Marshall all his stock of cattle, horses, hogs, and all his other property, including negroes Hercules and Lydia. The bill charged that the conveyances were upon trust, for the benefit of the complainant, and that the said trust was declared by Marshall at and after the execution of the conveyances; that all the said property was by express agreement to be at complainant's disposal, and he was to take the profits (324) and proceeds thereof, and Marshall was to convey the same at any time, as complainant should direct; that although a consideration was expressed in the conveyances, none was ever paid by Marshall for the property. That Marshall had since died, having duly executed his last will, and therein devised the lands aforesaid to his son, Howell Marshall, and the other property he directed in his will to be sold and the proceeds divided amongst his other children; that Jeremiah Marshall had caused the will to be proved, and administration with the will annexed to be granted to him; that he and the said Howell Marshall denied the trusts aforesaid, and pretended that the conveyances aforesaid were intended by the parties to be absolute and subject to no secret trust. The bill prayed that they might be compelled to answer, and be decreed to reconvey the lands and other property to complainant.
Cameron and Williams (Chatham) for complainants.
Browne and Norwood for defendants.
To this bill Jeremiah Marshall, the administrator, put in his answer, and therein alleged that he had no personal knowledge of the transactions charged in the bill, but believed, from every information which he had been able to acquire, that the conveyances were intended by the parties to be absolute; that a considerable part of the purchase money had been paid by Benjamin Marshall, previous to his death, and that complainant held his bonds for the balance.
This cause coming on to be heard in the Court of Equity for Halifax District, sundry issues were submitted to a jury, who found that the conveyances mentioned in the bill were upon trusts, and not intended to be absolute; that they were made to defeat any recovery that might be made in a suit then pending in Halifax Superior Court against complainant, as security for one Cofield, in which suit the plaintiff failed to recover, it appearing that the debt was paid by Cofield before the institution of said suit. The jury also found that complainant, at the time of executing the said conveyances, was (325) indebted to one Burt, and also one Hilliard, to a small amount, but that those debts bore a small proportion to the value of his estate, and that creditors were not intended to be defrauded by said conveyances or hindered or delayed thereby of the recovery of their debts.
The bill, answer and findings of the jury were sent to this Court for the opinion of the judges. This, with the preceding case of Vick v. Flowers, was argued by
It is rather a singular circumstance that claims such as the present bills set up are made at this day, and attempted to be enforced without the authority of a single adjudged case (329) to support them. That conveyances like those set forth, made under similar agreements, have before occurred, there can be little doubt; and it is equally certain that if these agreements had ever been considered as entitled to the assistance of a court of equity the diligence and industry of the complainant's counsel would have discovered the cases in which application to enforce them had been sustained, and relief granted. The silence of the books on the subject would seem of itself to afford strong presumptive evidence that the complainants are not entitled to the relief which they seek. But although such presumption exists, yet if they could have shown that under the influence of any of those principles which direct the decisions of our courts of equity they were entitled to relief, the Court would feel bound to grant it, notwithstanding it might seem to militate against the policy of the statutes which have been from time to time made for the protection and security of creditors. It is believed that so far from granting relief to the complainant, not only the statute against fraudulent conveyances, but every principle and rule which has been adopted and matured in courts of equity for the purpose of suppressing fraud and of inculcating a course of fair and honest dealing among men, directly forbid it. The complainant's counsel rested their arguments much on the nature of trusts in the civil law, from which they have been taken and adopted into our jurisprudence by the courts of equity; and cases were cited to show that by that law they were enforced, although they had originated in fraud on the part of the cestui que trust. To this it is a sufficient answer to say that although the courts of equity may have derived their idea of a trust from the civil law, yet that that law has no binding force or authoritative influence on these courts, which are guided altogether by a set of rules and principles peculiarly their own, that have grown out of the condition and positive institutions of the country where they have been established. The complainant's claim will derive very little weight from the (330) consideration that it would have been enforced by a Roman praetor, if it be opposed by any of these rules or principles. Some reading is also cited from Saunders on Uses, and Reeves' History of the English Law, to show that trusts originated in covin, and that on their first introduction they were applied to what might be deemed fraudulent purposes, that is, to avoid the statutes of mortmain. But it is to be observed that the clerical chancellors who presided in the courts of equity at that time did not consider these conveyances as dishonest or against conscience, and rather leaned in favor of them, and enforced the secret trusts which arose out of them, and which produced a variety of acts of Parliament that were deemed necessary: to prevent the fraudulent purposes to which they were act of 1715 is nearly a copy. The complainant's counsel, however, contend that, although the statute makes the conveyances to which it alludes void, yet that it does not give validity to anything, and hence an inference is drawn that when a debt is discharged, to delay the payment of which a conveyance or secret trust is made, the conveyance ceases to be binding, and the debtor becomes entitled to a reconveyance. But this argument is certainly unsound, for, although the statute does not validate anything in express terms, it does by a very strong implication. It declares, "that all and every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels," etc., made for the purposes or with the intent stated in the preamble, shall henceforward be deemed and taken "only as against that person or persons, his or their heirs, executors, administrators and assigns, and every of them, whose actions, suits, debts, accompts, damages, penalties and forfeitures shall release by such covinous or fraudulent devices and practices, as is aforesaid, or shall or might be in anywise disturbed, hindered, delayed or defrauded, to be clearly and utterly void, frustrate and of no effect; (331) any pretense, color, feigned consideration, expressing of use, or any matter or thing to the contrary notwithstanding." As to the parties themselves, therefore, it must mean that it shall be taken to be good; for that which would otherwise be good, and is declared void only as to a certain intent, remains good to all other intents; and that such has been the construction which the statute has heretofore received may be gathered not only from the opinion of elementary writers on the subject, but from adjudged cases in the English courts, and in our own. 2 Bac. Abr., 605; Fonblanque on Equity, 139; Roberts on Fraudulent Conveyances, 643; Cro. Jac., 270; 1 Ch. Ca., 59; Brady v. Ellison, 3 N.C. 348. In the case cited from Cro. Jac. the alienee was permitted to recover at law from the executors of the debtor, the property conveyed, on the ground that although the conveyance was void as to creditors (it being made to defraud them of their debts) yet that it was good as against the person making it and his representatives. But, supposing no adjudged case or elementary opinion could be found in support of such a construction, yet the object and spirit of the law would seem evidently to require it. The design and intention of the act was the protection and security of creditors; this can only be effected by destroying all confidence between the parties to secret agreements, by multiplying the difficulties which fraudulent debtors would have to encounter in attempting to defeat their claims, and denouncing every species of forfeiture and risk against such attempts which can be raised up against them in a court of equity. The act of Assembly, therefore, would seem a complete answer to the claims of the complainants. But, independent of the act, the claims are in direct opposition to some of the most fundamental maxims which direct and influence the conscience of a chancellor. He who hath done iniquity shall not have equity; he who requires the aid of a court of equity must disclose (332) a fair and honest transaction, are maxims which have never been departed from, and are in direct hostility to the claims of the complainants. It is true that Francis, in his exposition of the first maxim, says that the iniquity must be done to the defendant himself, and this exposition was much relied on by the complainants' counsel. But this exposition is certainly incorrect, nor does the case cited by Francis for the purpose prove it. He cites a case where a person, during the great rebellion, who, in order to avoid a sequestration by the usurper, had sworn, in an answer in chancery, that he had been satisfied for a debt, was permitted to recover by a chancellor sitting after the restoration; and who, no doubt, held that the opposition to the claim was more unconscientious than the means taken to avoid the sequestration. The true exposition of the maxim is to be found in 1 Fonbl., ch. 4, sec. 13, where, after stating it, he says: "But this must be understood where such person is plaintiff," etc. And the following adjudged cases illustrate it: 2 Vern., 602; 1 Ch. Ca., 202; 1 Vern., 475; 2 Ves., 156. Gale v. Lendo, 1 Vern., 475, was a case where the party against whom relief was sought was in no wise to be injuriously affected by the transaction, inasmuch as she had received the money for the bond which she had given to her brother on her marriage. The obligor, however, was not permitted to recover, because he had taken it with a fraudulent intention to operate against her husband, who had died; and although he was not affected by it, nor could his estate be made liable for it, yet as it was given originally for a fraudulent purpose, it was void as against all persons. This case is also an answer to the argument of the counsel, which went to show that although a fraud was contemplated, yet none was effected, and that therefore no forfeiture should attach against complainants. The fraud consists, not in the actual injury sustained by the person intended to be injured, but in the act itself, and the turpitude of the motive which influenced the party to its commission; and that which was once a fraud always remains a fraud. 1 (333) Vern., 475.
It would therefore seem, from this view of the cases, that so far from complainants being entitled to relief upon any ground of equity, they are opposed not only by the statute against fraudulent conveyances, but also by the maxim, that he who hath done iniquity shall not have equity; and by the principle, that no plaintiff is entitled to the aid of a court of equity to enforce a contract entered into with a fraudulent intention and for a fraudulent purpose. This renders it unnecessary to consider the other part of the cases, that is, whether parol proof should be admitted to prove the private agreement; for if this agreement had been reduced to writing with all possible solemnity it would not have received the aid of a court of equity for a specific performance. The bills must therefore be dismissed.
Cited: Vick v. Flowers, ante, 322; York v. Merritt, 80 N.C. 290; Pittman v. Pittman, 107 N.C. 162; Bank v. Adrian, 116 N.C. 543.