JULY TERM, 1856. • HEMPSTEAD V. JOHNSTON. Where a deed of trust is -attacked for fraud, the party claiming under it makes a prima facie case, and puts. the onus probandi on the attacking pasty, by producing the securities recited in the deod, without showing the considerations upon whict they were based or executed. A debtor in failing circumstances may by deed Of trustprefer his own relations as well as othe. erect • itors; and although relationship between .he debtor and cestui que irtldf may be a circumstance to awaken suspicion, it is not, of itself, evidence of fraud. *The acts of the parties subsequent to the [4.124 execution of a trust deed cannot affect its validity. Where one of the beneficiaries in a deed of trust purchases a part of the trust property at a fair and regular sale, and permits the grantor to remain in possession, by renting the property to him, it is not an indication of fraud. Where a deposition contains facts competent and relevant to the issue, as well as incompetent matter, a motion to exclude the whole deposition, instead of the incompetent matter, should be overruled. Where one of the votes secured by a trust deed was for the benefit of a witiv-ss, who swears that he has no interest ie the result of the snit by the trustee for the trust ptoperty; that he had delivered the note . o a third per-on who w:■e security for the debt, who had givendlis owit note for the .athount, HEMPSTEAD who war solvent aod t . , whom aloite he looked fur payment—the witness is competeet. V.
The prodeetion of the note s- cured by a deed of JOHNSTON ET AL. trust, without tit oof that it had beet, in the hands A deed of trust, if v il d in other respe vests of the payee, made a prima facie ntsc for the trustee As, the title to the property it the trustee for the ben-in a ehaecery suit feethe trust property, and the or such of the n as burden of sheen/1g that the debt was fictitious or efit of all the cestuis que trust, think proper to avail thorns Ives of its p ovisions, simulated devolved up-n the defendant, who had hill it was though signed ouly by the grantor and trustee, and averred, by way of avoiding the deed, t not by the benefictarie,. con rived to defraud creditors. in his answer, by r he assent of the c-editors provided for in a deed A defendant having averred of tru-tt will be presum,,i where the priivisions of way of avoiding a deed of trust, that it was wade to the deed are beuelicial, an I not prejudicial to their hinder, delay and defraud creditors, aed was there• fore null and void, the onus probandi was upon hitt]. in e:ests. The provision ie a dee 1 of truv., that the prop - It is equally a rule in courts of law and courts of aril shall remain iu the possession of the grantor equity,thet fraud is not to be presumed; but it until default of p tyment, is uo evidence of fraud, in Utit be establish.A by proof. if under all the eircums ancei he time fixed for A deed of trust, or other conveyance is not neces-paymeot void sale be not unrea•onable—as where sarily void because its effect is to hinder and delay the deed was made in April, the time fixed for pay-creditors, unless it was a fraudulent contrivance ment or sale the 1st of Jattuary following, the prop-for that purpose, and the grantee or persan to be erty, in part, a nsgro man for whoie services dur-benefited by the conveyauce privy to the fraudu-ing the year a contract had been previously en-lent design. tered into with a third per,on. Appeal from the Circuit Court of Union Nor Is it a badge of fraud th it a deed of trust County in Chancery. should provide for the payment to the grantor of ane balance of the proceels of the trust property ON. THOMAS HUBBARD, Cir- that might rem:tin after paying all the trust debts. H The law would require t ae trustee to do so, with-cuit Judge. -out any provision in the deed. And credit irs Mr. Hempstead, for appellant. might file their bill to subject such excess to the payment of the:r debts. Marr, for the appellees.
HEMPSTEAD v. JOHNSTON. VOL. 18 125'9 *ENGLISH, C. J. This was a and to indemnify them against liability bill filed on the chancery side of the or loss for or on account of the Union circuit court, on the 7th'of Oc-said Martha A. having become his se-tober, 1852, by James H. Johnston, curity on said notes, as also to secure the 126*] *of Union county, Martha A. payment of the said several sums due Langster, late Sheppard, and her hus-as aforesaid to complainants R. Rich-band, William Langster, of Haywood ards, R. W. Adams & Co. and Robert county, Tennessee, R. Richards, Robt. W. McCalpin, made, executed and W. Adams and John M: Lee, late delivered his certain deed of trust partners under the style of R. W. by which he the said Lee, in considera-Adams & Co., and Robt W. McCalpin tion of the existence of the said several of New Orleans, against Samuel H. debts, and of the liability of said Hempstead and others. Martha A., and her husband as security The allegations of the bill are in sub-for him as aforesaid, and of his de-stance as follows : *sire to indemnify them as [*127 That on the 25th of March, 1847, Wm. aforesaid, and for further consideration D. Lee executed a prommissory note to of one dollar paid to him by cornplain-Archer Phillips, guardian ofJ. C. Mar-ant James H. Johnston, granted, barley, $1,658.39, due one day after its gained, sold and conveyed to said date. Johnston, his heirs and assigns, etc., a On the same day, he executed an-negro man slave named Harry, about other note to said Phillips, as guardian 28 years of age, two tracts of land of M. H. Marley, for 81,280.32, due one situated in Union county, containing day after date. about 50 acres, and two blocks of That the complainant Martha A. ground in the town of El Dorado, Langster, who was then Martha A. which are described, etc. Sheppard and a femme sole, signed In trust nevertheless, and upon the both of said notes as the security of express agreement, by the terms of the Lee. deed, that Johnston, the trustee, On the 8th of April, 1852, and before should permit Lee to retain possession that time, Lee was, and still is, indebted of the slave Harry, and the real es-to complainant R. Richards, by note tate, conveyed by the deed, until the and account, in the sum of,S280. 1st of January, 1853; and upon the On and before the same day, be was further trust, that if said debts, or indebted to complainantsR. W. Adams either of them, or any part thereof, St Co., in the sum of $140 by open ac-should then remain unpaid, the trustee, count. upon receiving notice in writing from And to complainant McCalpin, by any one of the creditors aforesaid, to open account, in the sum of $120. close the trust, should forthwith adver-On the 8th of April, 1852, the said tise the trust property for sale to the several debts remaining wholly unpaid, highest bidder, for cash, at the court and the liability of complainant Martha house door in the town of E1 Dorado, A. Langster and her husband, as the by giving twenty days previous notice security of Lee, still subsisting except of such sale, by written advertise-as to the sum of about $800 previously ments posted up at three public places paid by her and her husband on the in the county of Union, etc.; and said notes signed by her as the security should appropriate the proceeds of the of Lee ; and Lee being then liable to resale to the payment or the several fund that sum to them ; and being de-trust debts; and if not sufficient to pay sirous to secure the payment thereof, them all, to distribute the proceeds
JULY TERM, 1856. HEMPSTEAD V. JOHNSTON. pro rata among the creditors; but if guardian of J. C. Marley; and $75 on any balance should remain in the the note to the guardian of M. H. Mar-hands of the trustee after discharging ley, and that with the exception of all the trust debts, he shonld pay over these payments, all the debts and lia-such balance according to the . order bilities recited in the deed of trust, re-and direction of said Win. D. Lee. mained unpaid. That the deed, on the day of its exe- That Johnston, the trustee, attended cution, was duly acknowldeged by Lee, the marshal's sale, publicly forbid the the grantor, and Johnston, the trustee, sale of the slave, exhibiting the deed of and on the 10th of April, 1852, filed for trust, and giving notice of the rights of registration in the recorder's office of complainants under it, etc. Union county, where the trust prop- That Hempstead would remove the erty was situated, and duly recorded, slave beyond the jurisdiction of the etc court: so that he could not be bad A copy of the deed is exhibited, and when required for the purpose of the its provisions are substantially as stated trust, unless restrained, etc. in the bill. Hempstead and Lee were made deft is further alleged in the bill, that fendants, and the bill prayed that on the 9th of August, 1852, the mar- Hempstead, etc., might he enjoined shal for the eastern district of Arkan- from removing the slave, etc., that an sas, by virtue of a fi. fa. issued from account be taken of the trust debts, the circuit court of the United States etc., and that the trust property be sold for said district, in favor of Bern- under a decree of the court to satisfy heimer, Eusteen & Co., against said the same, and for general relief. Wm. D. Lee and Minton Utley, levied Hempstead answered the bill sub-1281 on the slave Harry, *as the prop- stantially as follows: erty of Lee, and advertised him to be That on the 12th April, 1852, Bern-sold at the court house door in El heimer, Eusteen & Co., of Pennsylva-Dorado, on the 20th Sept., 1852. That nia, recovered a judgment against Wm. Lee gave a delivery bond, and retaihed D. Lee and Minton Utley, of Union possession of the slave until the day of county, Arkansas, in the circuit court sale, when he delivered him to the of the U. S. for the eastern district of marshal, who, under instructions from Arkansas, for 8696.39 damages, and Samuel H. Hempstead, attorney for $31.78 costs. The judgment was for the plaintiffs in the execution, sold the balance due on a note executed by slave, and Quillin purchased him for Lee and Utley to the plaintiffs, Rith Hetnpstead at $200, and took posses- *May, 1849, for $1,281.30, due at [*129 sion of him. That Harry was worth twelve months, and upon which they about $1,500. paid $700, on the 1st Ma5 , 1851. That Hempstead caused the slave to On the 19th April, 1852, an execution be purchased for himself with a full issued upon the judgment, which was knowledge of the existence of the deed levied by the marshal . on the slave of trust, and of the rights of complain- Barry, as the property of Lee, on the ants thereunder, hoping to be able to 9th of August, and the slave was sold defeat the deed, etc. on the 2Pth September following, and That since the execution of the deed, purchased for respondent, by his agent the debt of McCalpin had been paid; Quillin, at $200. On the llth of Octo-the debt due tOR. W. Adams & Co., ber, 1852, the marshal executed to re-bad all been paid but about $62; and spondent a bill of sale for harry. 825 had been paid on the note to the Respondent could not answer as to,
HEMPSTEAD V. JOHNSTON. VOL. 18 the actual value of the slave; thought and that the deed was fraudulent, null it probable he was worth more than and void as against respondent as respondent gave for him; but he pur-purchaser under said execution. chased him at a public sale fairly con-Respondent submits that the com-ducted, at which everyone so disposed plainants had full and adequate rem-had an opportunity to bid; and if the edy at law in respect of the matters slave did not bring his full value, it complained of in the bill, and were not was owitig to the conduct of complain-entitled to any relief in equity as ants, or their agents, in casting a cloud against him; and claims the benefit of on the title, by setting up, as respond-this defense as if upon demurrer, etc. ent was informed and believed, a false With the answer is exhibited a tran-and fraudulent claim thereto, under script of the record of the proc,-,edings, the trust deed, of which wroeg they judgment, execution and return in the .could take no advantage. case of Bernheimer, Basteen & Co. v. • Respondent claims to be a bona fide Lee & Utley, under which Hempstead purchaser of the slave for a valuable purchased Harry, and also a copy of consideration. He admits that before the marshal's bill of sale to him for the the sale by the marshal, he had been slave. informed that Lee had made a deed in The case was heard at Decem ber which the slave was embraced, but was term, 1854, on bill and exhibits, answer not advised of its precise nature or ex-and exhibits, replication, depositions tent; and his informants stated to re-and agreement of counsel, and the spondent that such deed was believed court decreed, that the deed of trust to be fraudulent and void, and made to was not fraudulent and void as against defraud the creditors of said Lee; which the creditors, etc., of Lee, that the respondent believed and charges to be slave Harry be surrendered up to the true. trustee, and that Hempstead be per-That the note on which the above petually enjoined from setting up title judgment was obtained, *as in the to the slave under his purchase, etc. hands of respondent, as the attorney Hempstead appealed from the decree. for Bernheimer, Eusteeu & Co., long So much of the testimony as is beiore suit was instituted, of which deemed material will he stated in con-Lee was aware, and had received in-nection with the points discussed in dulgence thereon; and respondent was the progress of this opinion. informed; believed it to be time, and "Every conveyance or assignment, so charges, that the deed from Lee to etc., etc., made or contrived with the Johnston mentioned in the bill, was intent to hinder, delay or defraud cred-designed and intended to defraud, itors or other persons of their lawful hinder and delay the creditors of the actions, damages, forfeitures, debts or - said Lee, and especially the plaintiffs iu demands, as against creditors and pur-said judgment. That the debts men-chasers prior and subsequent, shall be tioned in the deed were merely pre-void." Digest, eh. 73, sec. 4. tended and simulated, and not bona "No such conveyance or charge shall fide. That the deed was made by Lee be deemed void in favor of an innocent to place his property beyond the reach subsequent purchaser, if the deed or 130*1 of the said judgment *and exe-conveyance shall have been duly ac-cution, and to prevent the plaintiffs knowledged or proven and recorded, therein from obtaining satisfaction of or the purchaser haN e actual no-their debt; and also to reserve and ob-tice thereof at the time of his tain an advantage to him . self thereby, purchase, unless it shall appear
JULY TERM, 1856. HEMPSTEAD V. JOHNSTON. that the grantee in such convey-Peter's 613. Wiswall v. Boss et al., 4 131'9 *ance, or person to be benefited Porter B. 321. Kinnard v. Thompson, by such charge, was party or privy to 12 Ala. 487. Mallory v. Stodder, 6 Id. the fraud intended." Id. sec. 5. 806.1 The several grounds upon which the It seems, however, that the assent of appellant insists that the deed in ques— the creditor will only be presumed in tion was fraudulent and void, under cases where the provisions of the deed the above statute, will be taken up in are . beneficial, and not prejudicial to his the order in which he has presented interest. Maudlin v. Armstead, and discussed them. 14 Ala. 709. Smith v. Leavitt, 10 Id. 1. .The first objection taken to the 104. Elmes *v. 1Sutherland,7 Id. P132 validity of the deed is, that the cred-266. Lockhart v. Wyatt, 10 Id. 234. itors for whose benefit it was made did Graham v. Lockhart 8 Id. 9. Hodge v. not sign, nor assent to it. Wyatt, 10 Id. 271. The deed was signed by Lee, the Mrs. Langster and her husband were grantor; and Johnston, the trustee : the principal beneficiaries in the deed. If valid in other respects, it vested the She was the security of Lee on two title to the property in the trustee for notes, and the deed indemnifies her and the benefit of all of the cestui que trusts, husband against loss on that. account. or such of them as thought proper to It was clearly for their benefit , and avail themselves of its provisions. It their assent to its provisions would be was not necessary for the creditors to presumed, if not expressly shown. But sign the deed. In Conway et al. Ex it appears from the agreement made by parte,4 Ark. I?. 360, Mr. Justice Lacy, counsel at the hearing, that imme-delivering opinion of the majority of diately after the deed was executed, this court said : "The law is that cred-they were advised of its execution, and itors are presumed to give their assent forthwith accepted the deed, and for-to the deed, as it is made for their warded the two notes upon which Mrs. benefit, unless they come in and Langster was security to the trustee by specially object to it. Deeds of trust letter. are often made for the benefit of persons It seems from the allegation of the who are absent, and even for persons bill, and the recitals in the deed, etc., not in being : whether they are for the that the claims of the other creditors payment of money, or for any other were due when the deed was made purpose, no expression of the assent of (8th April, 1852) ; and the time of pay-such person is necessary. And snch ment was postponed until the first of trust is always held to be ekecuted January following. If Lee had not upon the principle that the deed is been in failing circumstances at the complete when the trustees take upon time the deed was executed, inasmach themselves its performance. It is not as if put oil the payment of these debts even necessary to the validity of such for a period of about eight months, assignments that the creditors should perhaps the deed could not have been be consulted. Creditors are always regarded as beneficial to them, nor presumed to be willing to receive their their assent to its provisions presumed, debts from any hand that will pay in the absence of affirmative acts con-them." 1. That creditors are presumed to assent. See Substantially the same language was Carnall v. Duval, 22-136, 11 , ,lding that filing a mort-used by Ch. J. Marshall in Brooks V. gage is sufficient delivery to the party inde b ted to Marbury, 11 Wheat. 97. To the same be secured. McCain v. Pickens, 32-405, bolds that effect are Brashear v. West where there are conditions annexed, that his pre-et al.,7 sumption does not arise.
HEMPSTEAD V. JOHNSTON. VoL. 18 clueing to establish such assent. At the time the deed in question was But the proof sbows that Lee was in made, Lee was in failing circum-failing circumstances when the deed stances, and suits were pending against was made. The time fixed for the him and Utley. About the same time, payment of the debts, and sale of the he made two other deeds of trust, upon property on default, was perhaps not his individual property. By one of unreasonably remote. The answer to which, he secured the payment of all the bill does not put in issue directly his individual debts, which were not the assent of the creditors to the deed, embraced in the deed now before us; but avers that the debts recited in the and by the other, he secured two of deed was feigned and not real. When the creditors of Lee tt Utley, of Phila-the slave was offered for sale by the delphia, who had not sued upon their marshal, the trustee interposed on be-claims, nor been paid any part of them. half of the creditors, and after sale they The property conveyed by these deeds filed their bill to enforce the provisions was under the control of the creditors of the deed. Upon all the facts of the secured thereby. case, we think the assent of the bene-All of the goods and chattels of the ficiaries sufficiently shown. firm of Lee & Utley, were duly levied 2. The second objection to the va-upon, and sold at judicial sales. lidity of the deed is that it does not Before the execution of the deed in appear that Johnston, the trustee, was question, Lee had made a contract with solvent, or a proper person in other re-one Wallar, by which he had engaged spects to be a trustee. to him the services of the boy Harry, 1331 "'This objection, like the one as a striker in a smith-shop, carried on just disposed of, is made in the argu-by Lee & Wallar, during the year 1852, ment here, and not in the answer to etc. the bill. The solvency of Johnston, A debtor in failing circumStances, by or his fitness to become a trustee, was assignment of his estate in trust, made not questioned by the answer, nor was in good faith, may prefer one creditor it made to appear by any proof in the to another, when no bankrupt or other cause, that he was insolvent, or unfit law prohibits such preference, and no to act as trustee. legal lien, binding on the property as-3. It is next insisted that the deed signed, exists. This is a well settled was absolutely void because it provi-principle in the English and American ded upon its face that Lee might re-law, and *admitted by numer- [*134 tain the possession of the -trust prop-ous authorities. 2 Kent's Corn. 532, and erty until the first of January, 1853, cases cited in note b at page 701, Sth the time limited for the payment of edition. the debts. • It was held in Tape's case, 3 Coke R. Several facts agreed •upon by the 80, that where a vendor made au abso-counsel, must be considered in connec-lute_sale of chattels, for a valuable con-tion with this proyision of the deed. sideration, to a creditor, but continued It seems that. trom the fall • of 1847, in possession, and exercised acts of until the year 1851, Lee and Utley were ownership over the goods, it was fraud-engaged as partners in merchandising ulent and void as against other credit-at El Dorado, and did .a very consid-ors Within the statute.of the 13th Eliz-erable business. In the last named abeth. year, they dissolved; and Utley turned This is a leading case on "the subject - over to Lee the whole of the partner-of the effect of the vendor continuing ship effects. Utley was insolvent. in possession after an -absolute sale of
JULY TERH, 1856. HEMPSTEAD V. JOHNSTON. goods. It has been followed by nu-son v. Cunningham, 1 Id. 258. Conard merous cases both in the courts of v. Atlantic Ins. Co., 1 Peters 449. Phet-England, and of our own country. But teplace v. Styles, 4 Mason 321. Hund-a controversy has prevailed in the de-ley v. Webb,3 J. J. Marsh, 653. Head, cisions, as to whether the vendor re-Hobbs et al. v. Ward, et al. 1 Id. 280. taining possession in such case, is to be Ash v. Savage, 5 New Hamp. 545, 6 considered as only a badge or evidence Ala. 356, 8 Id. 694, 7 Yerg. 440. of fraud to be submitted to the jury, Merrill v. Dawson, et al., Hempstead's under the direction of the court, and C. O. R. 603. subject to be rebutted by counter testi-The same doctrine was to some ex-mony, or whether it is to be regarded tent recognized -in New York, until as such a circumstance per se, as makes the adoption of the revised statutes, by the transaction fraudulent in law. The which absolute sales and mortgages decisions on this subject are collected are put upon the same footing. Ran-in 1 Smith's Leading cases, by Hare & dall v. Cook, 17 Rend. 53. Several of Wallace, p. 1 to 74. 2 Kent's Corn. 515 the cases relied on by appellant are o 536, and notes, 8th Ed. 1 Parsons on founded upon this statute, and have Cont. 442, note (v). Land v. Jeffries, 5 no application in this state, there be-Rand. 268, and opinion of Judge Cabel ing no such statute here. in same case, in appendix. But there are cases in which it has This court has adopted the rule that been held that the provision in the possession by the vendor subsequent to deed, that the grantor should retain the sale does not amount to fraud per the possession and use of the property ee, but is merely prima facie evidence until default of payment, was fraudu-of fraud, subject to be explained. Field lent. (1 Smith's Leading Cases, 11.) 27. Simco, 7 Ark. 275, note 1 ; Danley v. As where the nature of the property was Rector, 10 Id. 224. such that it would be necessarily con-But this rule does not apply to mort-sumed in its use. Darwin v. Hun dley, gages and deeds of trust, where the 3 Yerger 503. Elmes v. Suiherland, 7 , grantor, by the term of the deed, is Ala. 267. Robbins v. Parker, 3 Metcalf permitted to retain possession of the 119. Summerville v • Horton, 4 Yerger property until default of payment, be-541. Shutleff v. Williard,19 Pick. 212; cause in such transfers, the possession Green et al. v. Wade et al., 3 Humph. is consistent with the deed, and fur-547. nishes no evidence of fraud. The deed So where the deed postpones the day being upon the public records, no one of payment for an unreasonable length need be deceived as to the title of the of time after the maturity of the debts property, by its remaining in posses-secured by it, and provides that the sion of the grantor. 1 Smith's Lead-grantor shall retain the possession and ing Cases, by Hare & Wallace, p. 1 to use of the property until . default of pay-74. 2 Kent's Corn. 515, et. seqr. Hund-ment, a fraudulent intent to cover up ley v. Buckner, 6 Sm. & Marsh. 77. the property for the use of the grantor, Forbes v. Parker, 16 Pia:. 460. Glass and hinder and delay creditors may be v. Batton, 6 Rand. 78. Land v. Jeffries, inferred. Hafner v. Irwin, 1 Iredell L. 5 Id. 268. United States v. Hooe et al., Rep. 496. Harder v. Skinner, 9 Id. 191. 3 Cranch R. 89. Meek et al. v. Wil-Cannon v. Peebles, 2 Id. 453. Mitchell son, 1 Gallison R. 1 422. Thorn-v. Beal, 8 Yerger. 134. 5 Humph. 612- 135 4 *ton v, Davenport, et al., 1 Scam. 618. 298. Powers v. Green, 14 R. 389. But it would seem from these author-Magee v. Carpenter, 4 Ala. 474. John-ities, that if the time fixed for pay-
HEMPSTEAD V. JONHSTniC. VOL. 18 ment and sale, etc., upon default, be was really an excess of property m-reasonable, under all the circumstances, braced in the deed, over and above fraud is not to be inferred. See Mitch-what was necessary to secure the pay-ell v. Beal, 8 Yerger 134, Bennett v. ment of the trust debts, any judgment Union Bank, 5 Humph. R. 612. creditor of Lee, not otherwise provided In the case at bar, the deed was made for, could not have filed a bill to sub-130*] 8th of April : the debts *were ject such excess to the payment of his then due, and the debtor was allowed debt. Austin v. Jones, 7 Yerger 191. until the first of January following to Johnson v. Cunningham, 1 Ala. R. 249. pay them. It does not appear that the Graham v. Lockheart, 8 Id. 9. Hind-value of the property embraced in the man v. Dill, 11 Id. 689. Burgin v. deed exceeded the amount of the Burgin, 1 Ired. Law R. 458. Moore v. debts secured thereby. Lee has been Collins, 3 Dev. 146. Wright v. Hender-engaged in a considerable mercantile son, 7 How. Miss. R. 539. business, selling, perhaps, on credit, in The answer avers that the debts an agricultural district, where the an-recited in the deed were merely simu-nual products of the soil, realized lated, and not real. In support of this about the close of the year, are the allegation, the appellant seems to have principal resources for meeting debts : produced no evidence whatever, and it is not unreasonable to infer that *but relies on any defect there [1'137 these considerations furnished some in-may be in the proof of the appellees to ducement for the stipulation in the sustain the fairness of the deed by deed, fixing the 1st of January, as the showing the debts to be genuine. time for the payment of the debts. It has been held that where the deed Moreover, it seems that before the exe-is attacked for fraud, the party claim-cution of the deed, Lee had made a ing under it makes a prima facie case, contract with Wallar, by which he had and puts the onus probandi on the at-engaged the services of the boy Harry tacking party, by producing the secu-during the year. rities recited in the deed, as judgmentst Upon all these facts of the case, we bonds, bills, notes, etc., without show-do not feel warranted to declare that ing the considerations upon which they the provision in the deed fixing the were based or executed. .Firmerster v. first of January as the time for the McRoie, 12 Iredell Law R. 289. Hund-payment of the debts, and allowing ley v. Buckner, 6 Stn. & Marsh. 772 Lee to hold possession of the property At the hearing in the case, the com-until default, was unreasonable and a plainants produced in evidence the two badge of fraud. notes executed by Lee to Phillips, as 4. It is insisted that the provision in guardian of the Marleys, recited in the the deed, that any balance of the pro-*deed. Also, a note executed by Lee to ceesls of the trust property that might R. Richards, for $225.02, bearing date remain after paying all the debts, 15th October, 1849, and due one day should be paid over according to the after date. As to these debts, the production of order and direction of Lee, is a badge these securities, in connection with the of fraud.' recitals of the deed, made a prima fa-But in the absence of any such pro-cie case for the complainants in sup-vision in the deed, the law would port of the deed. make it the duty of the trustee to re-2. The burden of establishing fraud is upon the turn to Lee, or pay over to his order, attacking party. Clinton v. Estes, 20-216; Beecher v. Brookfield, 33-259; Holt v. Moore, '37-146; any surplus that might remain after Stephens v. Oppenheimer, 45-492. See Dardenke v. paying the trust debts. And if there Hardwick, 9-485, note 1.
JULY TERM, 1856. HEMPSTEAD V. JOHNSTON-No proof seems-to have been madaas Langster had made several payments to the account recited in the deed as on these notes. He certainly was un-being due from Lee -to . McCalpin and der high moral t.nd legal obligations to R. W. Adams & Co. The bill alleges secure the payment of these debts, and that after the execution of the deed, to save his sister harmless in the prem-the whole of the claim due to the ises. Being in failing circumstances, former, and all but $62 of the debt due it seems that he secured the payment to the latter, had been paid by Lee. of all his individual debts, and a por-If it be assumed, by reason of the tion of the partnership debts of Lee Sz failure of proof to establish the gen-Utley, by several deeds upon his indi-uineness of these accounts, that they vidual property, and surrendered the were simulated, the deed of trust would partnership effects to be sold under ex-nevertheless be valid as to the other ecutions. We have seen that the law beneficiaries, unless it had been shown allowed him to prefer creditors, if he that they were privy to the insertion of did it in good faith, and we do not the simulated claims for fraudulent know of any rule of law which com-purposes. And there is no proof that pels a debtor to violate his natural in-they had any knowledge of the matter. stincts, and secure others, from the Anderson v. Rooks, 9 Ala. R. 704. Ta-wreck of his sinking fortune, in prefer-tum v. Hunter, 14 Id. 557. ence to his relations, where he is hon-6. The proof shows that Mrs. Lang-estly indebted to them, and more es-ster was the sister of Lee, and that the pecially minors and females.' wards of Phillips, the two Marleys, 7. It appears from thc agreement of were nephew and niece to Lee; and the counsel, that on tlje 25th of May, 1853, notes to Phillip's, upon which Mrs. and after the bill was filed, the trustee, Langster was sccurity, being the prin-in pursuance of the provisions of the cipal debts secured by the deed, it is trust deed, made a public sale of the insisted that the making of the deed in real estate embraced therein, and it favor of the near relatives of Lee wan a was purchased for Langster by his at-badge of fraud. torney, at $365. Lee's residence was 13811 *It has been held that the rela-upon a portion of this property, and tionship between the parties, though the agent of Langster had permitted a circumstance to awaken suspicion, him to &intinue in possession thereof seeing fraudulent conveyances are most after the sale, upon an agreement for usually made to kindred, is, of itself, rent, for which Lee gave his notes. no evidence of fraud. Bumpas et al. v. The appellant insists that Lang-Dotson et al., 7 Humph. B.317. ster being the brother-in-law But any suspicion that nrfay attach of Lee, the permitting him to to the transaction in this case, by rea-continife in possession of the rest-son of the relationship of the parties, is 5 dence after the trust sale, etc., [.139 removed by the proof in the cause. It was an indication that the transaction appears that while Lee resided in Ten-was fraudulent.4 nessee,.and before he removed to Ark-If this were true, being a matter oc-ansas, he was the guardian of the Mar-curring subsequent to the execution of leys; that Phillips succeeded him in the the trust deed, it could not affect it guardianship, and Lee executed to him validity. the two notes recited in the deed, with 3. Mrs. Langster (then Sheppard) as se-See Mandel v. Peay, 20-329; Doswell v. Ad-ler, 28-84; Reeves v. Sherwood, 45-520; Ringgold V. curity,-for balance due from Lee to his Waggoner, 14-75, notkl. wards, on settlement; and that Mrs. 4. See Field v. Simon, 7-276, note 1.
HEMPSTEAD V. JOHNSTON. VOL. 18 Moreover, if the trustee executed a was of age, Lee's note was turned over deed to Langster for the lots, and it to him by Phillips. That on the mar-was put upon the public records, where riage of his sister,Phillips*turned [a140 the community generally look for ev- over to her husband the other note idences of title to real property, no one note, and witness purchased it of him. could be deceived as to the real owner- At the request of Langster witness de-ship of the lots by Lee's possession os livered both notes to him to be sent to them. The rule that the grantor re- Arkansas for collection, Mrs. Langster maining in possession after an absolute being security thereon. After this, on sale of personal property is a badge of the ith July, 1853, Langster gave wit-fraud, does not apply with the same ness his note for the balance due on force to real estate, because creditors both notes (01,531.22), Mrs. Langster and purchasers look to the public having made several payments upon records rather than the possession to them. That Langster was good for the ascertain who is the real owner of such debt, and witness looked alone to him property. Pheitiplace v. Sayles, 4 Ma-for payment. If this statement be true, son 312. It does not appear that there and there is no showing to the con-was anything unfair or irregular in the trary, the witness was competent. If trustsale, and Langster's agent could it may be supposed that this arrange-as well rent to Lee as any other person. ment was made for the purpose of re-8. It appears from a bill of exceptions moving the interest of the witness in taken by the appellant, that at the the trust deed, in order that his depo-hearing, he moved to exclude and sup-sition might be taken, it would go to press the depositions of Isaac M. Steel his credibility, and not to his compe-and J. C. Marley, offered on behalf of tency. the appellees, but the court overruled 9. It is also insisted by the appellanq the motion. The particular objections that the court below erred in permit-taken to these depositions do not ap-ting the appellees to read in evidence pear in the bill of exceptions, but are the note of Lee to R. Richards hereto-stated in the argument here. fore referred to—that it does not appear To the deposition of Steel it is ob-ever to have been in the possession of jected that it contains incompetent the payee, and might have been drawn matter, which is perhaps true; but it up by Lee for the occasion. also contains facts which are compe-The note is dated at New Orleans, tent and relevant to the issue, and the where, it appears, Richards resided. motion to exclude extending to the The signature of Lee was admitted to whole deposition, was properly over-be genuine. The note was produced at ruled by the court. the hearing, and offered in evidence In making up our judgment, how-by the solicitor of the appellees. This ever, upon the whole record, we have surely made a prima facie case for disregarded, as we must presume the them, and the burthen of showing that court below did, such portions of Steel's it was fictitious or simulated, devolved deposition, as aredeemed incompetent. upon the appellant, who had affirm-The objection to Marley's deposition atively averred in his answer, by way is, that he was incompetent by reason of avoiding the deed, that it was con-of interest in the result of the suit, one trived to defraud the creditors of Lee. of the notes to Phillips, secured by the 10. It is also insisted by the appel-trust deed, being for his benefit. The lant that the proof shows that payments witness swears that he has no interest have been made on the two notes to in the result of the suit. That after he Phillips, which were not mentioned in
JULY TERM, 1856. HEMPSTEAD V. JOHNSTON. the trust deed, and thereby the deed courts of law would not always deem bore the false face of having been made sufficient proof to justify a verdict at to secure a larger amount than was law. 1 Story's Eq. gee: 190. Dardenne really due. But it also appears that v. .Hardwiek, 9 Ark., 485, note 1. these payments were made by Mrs. (c.) A deed of trust, or other con-Langster, and that the deed was ex-veyance, is not necessarily void because ecuted for the double purpose of secur-its effect is to hinder aud delay the ing the balance due on the notes, and creditors of the grantor in the collec-of indemnifying her and her husband tion of their claims. But such must against loss in the premises. The whole be its object. It must be a fraudulent of the two notes was really due from contrivance for that purpose; and the Lee, and was properly made a charge grantee, or person to be benefited by upon the property. At the time the the conveyance, must be party privy deed was executed, it appears that the to the fraudulent design5. 141 1 ] *notes were in Tennessee, where, The above propositions are sustained also Mrs. Langster,, the secu-by the authorities to which we have rity, resided, and it is not shown that referred in the progress of this opin-Lee knew at the time the full amount ion. of the sums which had been paid by There are some features in this case her upon the notes. which often present themselves in 11. In determining the issue in-fraudulent conveyances. Lee was in volved ' in this ease, we have kept in failing circumstances when the deed of view several general principles of law, trust was made; suits were pending which it may be well to mention. against him; and some of the benefi-(a.) The appellant having averred ciaries were his near *relatives. V142 in his answer, by way of avoiding the But all these facts may, and do exist in relief sought by the bill, that the deed many cases, consistently with the hy-of trust was made to hinder, delay pothesis that the conveyance was and defraud the creditors of Lee, and made in good faith to secure preferred was therefore null and void, the onus creditors whose demands are just. probandi was upon him. - Upon all the facts of this case, as pre-(b.) It is equally a rule in courts of sented in the record before us, we can-law and courts of equity, that fraud is not conclude that the appellant has not to be presumed: but it must be sustained the affirmative allegation of established by proofs. Circumstances his answer, that the deed was a con-of mere suspicion, leading to no certain, trivance to hinder, delay aud defraud creditors, &c., and was therefore void. results, will not, in either of these' The decree of the couit below is af-courts, be deemed a sufficient ground firmed. to establish fraud. On the other hand, Absent, Hon. T. B. Hanly. neither of these courts insists upon pos-Ct ted: —18-520-181; 20-329; 22-143-156; 20-216; itive and express proof of fraud; but 23-123-264-494; 20-23; 2S-84; 31-167-551; 30-477; 33- each deduces them from circumstances 259; 32-405; 37-145; 41-325; 43-434; 45-493; 46-551; 50- affording strong presumptions. But 293. courts of equity will act upon circum-5. If there is fraud the grantee must he privy to it or receive property without making any ply-stances, as presumptions of fraud, ment. Cornish V. Dews. 18-181; Chriitian V. where courts of law would not deem Greenwood, 23-204; Bertrand v. Elder, 23-494; Cox them satisfactory. In other words, v. Fraley, 20-23; or at a grossly inadequate price. courts of equity will grant relief upon Galbreath v. Cook, 30-417; Massie v. Enyart, 32-231 Reevie v. Sherwood, 45-520; Hersby v. Latham and the ground of fraud, established by cares cited, 46-557; Catchings v. Harcrow, 4948. presumptive evidence, which evidence, See Dardenne v. Hardwick, 9-455; note L 29 Rep.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.