Opinion
(December Term, 1860.)
Where a debtor conveyed all his property with an intent to defraud his creditors, and then left the State, it was Held, that a creditor could not maintain a suit in equity to have his debt satisfied out of the property, under the statute, Rev. Code, ch. 7, s. 20, his remedy being at law.
CAUSE removed from the Court of Equity of MONTGOMERY.
Hiram Allen, one of the defendants in this case, was indebted to the plaintiffs in the sum of $175, due by note and account; and the said Allen, in the month of September, 1859, was seized of a tract of land in the county of Montgomery, and was also possessed of a valuable chattel property. Some time during that month, the defendant Hiram conveyed all his property to his brother, David Allen, and his brother-in-law, Martin Hunsucker, who are the other defendants in this suit, and then left the State.
The bill charges that this conveyance was intended to defraud creditors, and that there was a combination among the defendants for that purpose.
The prayer is for a discovery of the matters relating to this transaction, and that the payment of plaintiffs' debt may be (18) decreed, according to the statute, Revised Code, ch. 7, sec. 20, against the defendants, and for general relief. The defendants demurred to the bill, for the reason that the plaintiffs had a remedy by an attachment at law, and also for that the plaintiffs had not reduced their debt to a judgment. The cause being set for argument upon bill and demurrer, was transferred to this Court.
Mason and Jackson, for the plaintiffs.
McCorkle, for the defendants.
A debtor conveys all of his property with an intent to defraud his creditors, and then leaves the State. The question made by the pleading is, can a creditor maintain a bill to have his debt satisfied by what may be called "an attachment in equity," under the provisions of the statute, Rev. Code, ch. 7, sec. 20? We are of opinion that the case does not come within the provisions of the statute.
It is said the grantee holds the property upon a secret trust for the debtor, and the statute applies to any estate or effects in the hands of a "trustee" holding for the use of the debtor. It is clear that the debtor himself could not enforce such a trust, for the conveyance, although void by the statute of Elizabeth as to creditors, is good between the parties, and neither a Court of Law nor a Court of Equity will interfere at the instance of the debtor; in other words, the confidence reposed by him in the grantee is not recognized by the Courts as a trust fit to be enforced, and as the proceeding under the statute rests on the footing of enforcing a trust, it follows that a trust like that under consideration does not fall within the meaning.
It is settled that such a trust does not come within the meaning of the act of 1812, and can not be sold under an execution at law; Page v. Goodman, 43 N.C. 16.
So, it is settled such a trust can not be sold on the petition of an administrator, under the act of 1846; Rhem v. Tull, 35 N.C. 57, (19) and it is said the creditors may reach the property, not on the ground of a trust, but on the ground of fraud, which proves that the word "trustee," used in the statute under consideration does not embrace a case of this kind.
It was next insisted that the case is that of an absconding debtor, having "an estate in the hands of a third person, which can not be attached at law, or levied on under execution." Why may not this property and estate be attached at law? The conveyance is void as to creditors, so they may treat the property as if it still belonged to the debtor, and, in fact, it is his property for the satisfaction of debts.
This disposes of our case. Gentry v. Harper, 55 N.C. 177, referred to on the argument, is distinguishable from this, but may serve to illustrate the principle. There, the interest of the debtor could not be reached at law by a creditor, who had obtained a judgment, and it was subjected in equity, not on the ground of a trust, but on the broad ground "that it was against conscience for debtors to attempt, in any way, to withdraw property from the payment of their debts, and where a Court of Law can not reach it, a Court of Equity will."
In exercising this jurisdiction, the Courts of Equity require that the question of debt or no debt, being a legal one, should be settled by a judgment at law. To meet this, the statute under consideration was passed. It may be that a fraud like that in Gentry v. Harper is not provided for by it. But our case is expressly excluded, on the ground that the fraud is one which does not stand in the way of creditors, and they may have an attachment at law, and do not need the interference of a Court of Equity.
PER CURIAM. Demurrer sustained and bill dismissed.
Cited: Greer v. Cagle, 84 N.C. 389.
(20)