#### KELLY SPRINGFIELD TIRE COMPANY and F. E. WALKER v. W. P. LESTER and Wife, FLORENCE LESTER.

(Filed 4 November, 1925.)

1. Deeds and Conveyances — Fraud—Debtor and Creditor — Trusts.

Tbe principles of law that will avoid a deed to lands for fraud against tbe grantor’s creditors, does not apply to lands held by tbe grantor in a resulting trust.

*4122. Same — Evidence—Directing Verdict — Nonsuit—Appeal and Error.

Where in a suit to set aside a deed 'to lands brought by the creditors of the grantor, the evidence is conflicting as to whether or not he held the naked legal title, or in resulting trust for another, an instruction directing a verdict upon the evidence in plaintiff’s favor, is reversible error.

S.Trusts — Payment of Purchase Money — Title—Deeds and Conveyances.

Where a purchaser of lands furnishes the money therefor and has the naked legal title conveyed to another, the presumption is, except in conveyances from a husband to his wife, the creation of a resulting trust for the benefit of the one furnishing the purchase price.

4. Same — Husband and Wife.

With the proceeds of the sale from his wife’s land the husband bought another tract of land, and took title in himself, and thereafter conveyed the legal title to his wife. The creditors of the husband brought suit to set aside this conveyance as fraudulent against them, and the evidence was conflicting as to whether or not the husband held the title in trust for his wife: *Held,,*reversible error for the court to direct a verdict upon the evidence in favor of plaintiffs.

5. Trusts — Resulting Trusts.

A resulting trust arises: 1, when the purchaser pays the purchase money, but takes title in the name of another; 2, where a trustee or other fiduciary buys property in his own name with trust funds; 3, where the trusts of a conveyance are not declared, or are partially declared or fail; 4, where a conveyance is made without any consideration, and it appears from circumstances that.the grantee was not to take beneficially.

6. Same — Evidence — Quantum of Proof — Instructions — Questions for Jury.

In order to establish a resulting trust, the proof must be clear, cogent, and convincing, which is for the jury to determine upon the evidence under proper instructions from the court.

7. Same — Partnership—Principal and Agent.

In a suit by the creditors to set aside a deed to lands from the husband to his wife as fraudulent against them, it is competent when relevant for the husband to introduce and testify to a financial statement made by himself of a partnership of which he was a member at the time of the transaction complained of upon the question of whether he had retained property sufficient to pay his debts.

Appeal by defendants from Hoice Superior Court. *Grady, J.*

Action by plaintiffs, judgment creditors of *W.'*P. Lester, against defendants to set aside a deed from "W. P. Lester to Florence Lester, bis wife, under C. S., 1005, 13 Eliz., cb. 5, sec. 2. Prom a judgment in favor of plaintiffs on a directed verdict, tbe defendants appealed.

Tbe plaintiffs are creditors of "W. P. Lester, and bring tbis action to set aside a deed from *~W.*P. Lester to Florence Lester, dated 18 March, 1922, duly registered, and conveying some 190 acres of valuable land.

*413Tbe defendants allege tbat W. P. Lester, wbo was a partner witb T. B. Lester, as W. P. Lester & Company, knew nothing of tbe firm’s business, and tbat T. B. Lester made all contracts, and incurred all tbe firm debts, and tbat tbe deed in controversy was executed by bim to bis wife, Florence Lester, “upon tbe consideration and for tbe purpose of conveying to ber ber rightful interest in said property according to tbe amount of money expended by W. P. Lester for ber in tbe purchase of tbe lands conveyed,” and denied tbe fraud and other material allegations, but admitted tbe debts sued on.

Tbe defendants’ evidence tended to show tbat W. P. Lester was tbe husband of Florence Lester, and was connected witb W. P. Lester and Company as a partner, but bad nothing to do witb tbe management of tbe garage business and knew nothing of tbe company’s status, but admitted tbe execution of tbe deed to bis wife; tbat upon tbe death of Florence Lester’s father, she received $1,100.00, which she “let me have in reference to settling up some debts,” about 20 years ago; tbat this money was used in paying for tbe mortgage on tbe place on which they were then living in South Carolina; tbat tbe money used in buying land in controversy “belonged to my wife and myself. I thought she ought to have half of it. She was not liable for any of tbe indebtedness tbat I paid, tbe $1,400 mortgage. Tbat was not my individual indebtedness, but some tbat I stood for.” Tbat W. P. Lester did not own any property after be made tbe conveyance in controversy.

It was admitted tbat, about 20 years ago, certain lands of Mrs. Lester were sold in South Carolina for $1,100 and this money was used by W. P. Lester in buying various tracts of land, upon which larger profits were made, and tbat this money was used in buying lands in controversy. No claim was made tbat any actual money was paid at tbe time of this last purchase by Mrs. Lester. '

Tbe defendants excepted to tbe admission of tbe financial statement given by W. P. Lester & Company through T. B. Lester, one of tbe partners, to R. J. Dun & Company, a mercantile agency, and to tbe refusal of tbe court to allow their motion for judgment as of nonsuit made in apt time.

Tbe court submitted tbe following issues:

“1. Was tbe deed from W. P. Lester to bis wife, Florence Lester, made in consideration of a preexisting debt, due by said W. P. Lester to bis said wife?

“2. Was there, at tbe time of said deed, any present valuable consideration moving from said Florence Lester, to W. P. Lester?

“3. At tbe time of tbe execution of said deed, did W. P. Lester reserve to himself property fully sufficient and available for tbe satisfaction of bis then creditors?”

*414There was evidence tending to show the contentions of the plaintiffs.

The court charged the jury that, if they found the facts to be true as testified to by all the witnesses, to answer the first issue “Yes,” the second issue “No,” the third issue “No.” Defendants excepted to these directions. The jury rendered a verdict as directed, and from a judgment declaring the deed void, the defendants excepted and appealed.

*H. W. B. Whitley and J. W. Currie for plaintiffs.*

*G. B. Rowland and Smith & McQueen for defendants.*

Vaesee, J.

The evidence tends to sustain the contentions of both plaintiffs and the defendants, and therefore appropriate issues must be submitted to the jury in order for the facts to be determined.

The principles relating to fraudulent conveyances are set out in *Aman v. Walker,*165 N. C., 227, by the late *Justice Allen,*as follows:

> “(1) If the conveyance is voluntary, and the grantor retains property fully sufficient and available to pay his debts then existing, and there is no actual intent to defraud, the conveyance is valid.

> “(2) If the conveyance is voluntary, and the grantor did not retain property fully sufficient and available to pay his debts then existing, it is invalid as to creditors; but it cannot be impeached by subsequent creditors without proof of the existence of a debt at the time of its execution, which is unpaid, and when this is established and the conveyance avoided, subsequent creditors are let in and the property is subjected to the payment of creditors generally.

> “(3) If the conveyance is voluntary and made with the actual intent upon the part of the grantor to defraud creditors, it is void, although this fraudulent intent is not participated in by the grantee, and although property sufficient and available to pay existing debts is retained.

> “(4) If the conveyance is upon a valuable consideration and made with the actual intent to defraud creditors upon the part of the grantor alone, not participated in by the grantee and of which intent he had no notice, it is valid.

> “(5) If the conveyance is upon a valuable consideration, but made with the actual intent to defraud creditors on the part of the grantor, participated in by the grantee or of which he has notice, it is void.”

These principles are approved in the following authorities: *Black v. Sanders,*46 N. C., 67; *Warren v. Makely,*85 N. C., 14; *Credle v. Carrawan,*64 N. C., 424; *Worthy v. Brady,*91 N. C., 268; *Savage v. Knight,*92 N. C., 498; *Clement v. Cozart,*112 N. C., 420; *Hobbs v. Cashwell,*152 N. C., 188; *Powell v. Lumber Co.,*153 N. C., 58; *Cox v.**415*Wall,*132 N. C., 730; *Morgan v. Bostic,*132 N. C., 743; *Michael v. Moore,*157 N. C., 462; *Pennell v. Robinson,*164 N. C., 257; *Smathers v. Hotel Co.,*168 N. C., 69, 70; *Garland v. Arrowood,*177 N. C., 371; *Bank v. Pack,*178 N. C., 391.

These principles, however, relate to fraudulent conveyances of land that is the property of the grantor therein, and do not apply to the conveyance of property held by a mere naked trust, for another who is, in equity, the real, or beneficial, or equitable owner.

The evidence in the case at bar is ample to sustain the verdict under a proper charge which submits to the jury the contentions in the complaint, and in the answer.

However, if there is a resulting trust in favor of the defendant, Florence Lester, by virtue of the payment of the purchase money out of *her*funds, then *W.*P. Lester has no such beneficial interest in the McNair lands as may be subjected to the payment of *W.*P. Lester’s debts.

'A trust for the sole benefit of another does not support dower for the trustee’s widow *(Hendren v. Hendren,*153 N. C., 505; *Pridgen v. Pridgen, ante,*102), and the trustee has no such interest in the land as may be subjected to the payment of *his*debts. Mordecai’s Law Lectures, 312, 314, 316, 787, 987, 997; *Thurber v. LaRoque,*105 N. C., 301; *Arrington v. Arrington,*114 N. C., 116; *Evans v. Cullens,*122 N. C., 55.

If a resulting trust is established the McNair land is, *ab initio,*the estate, the interest, the property of Florence Lester, and is liable for her debts, as provided by law, and’ subject to her right of alienation. Mordecai’s Law Lectures, 997, 998, *et seq.; Holmes v. Holmes,*86 N. C., 205, 208; *Bank v. Clapp,*76 N. C., 482; *Miller v. Bingham,*36 N. C., 423; *Rouse v. Rouse,*167 N. C., 211; *Harris v. Harris,*42 N. C., 116; *Carson v. Carson,*62 N. C., 58; *Cheatham v. Rowland,*92 N. C., 344; *Hollowell v. Manly,*179 N. C., 264; *Whichard v. Whitehurst,*181 N. C., 80; *Bond v. Moore,*90 N. C., 242; *Dover v. Rhea,*108 N. C., 92; *Fulbright v. Yoder,*113 N. C., 457; *Clark v. Cox,*115 N. C., 96; *Helms v. Austin,*116 N. C., 753; *Wilson v. Leary,*120 N. C., 91; *Allen v. Baskerville,*123 N. C., 127; *Johnson v. Blake,*124 N. C., 109, 111; *Smith v. Proctor,*139 N. C., 319; *Gaylord v. Gaylord,*150 N. C., 237.

Hence there arises the inquiry whether, upon any view of the evidence, taken in its most favorable light for the defendant, Florence Lester, a resulting trust arises. *We*are of the opinion that, when so considered, it does arise. *Lord Chief Baron Eyre*in *Dyer v. Dyer,*2 Cox, ch. 93, gives the nature of resulting trusts of the kind invoked *416as follows: “The clear result of all tbe cases, without a single exception, is that the trust of a legal estate, whether taken in the name of the purchaser, and others jointly or in the names of others without the purchaser, whether in one or several, whether jointly or successive, results to the man who advances the purchase money.”

The classes of resulting trusts may be stated thus:

(1) Where a purchaser pays the purchase money, but takes the title-in the name of another; (2) where a trustee or other fiduciary buys property in his own name, but with trust fund; (3) where the trusts of a conveyance are not declared, or are only.partially declared, or fail; and (4) where a conveyance is made without- any consideration, and it appears from circumstances that the grantee was not intended to take beneficially. *Williams v. Williams,*108 Iowa, 91; *Avery v. Stewart,*136 N. C., 426; Bispham’s Equity (9 ed.), 146.

The first class of resulting trusts as defined by *Lord Chief Baron Eyre*is the kind of trust set up by defendant. It is in force in this State, as well as in the other courts of this country, except where modified by statutory enactment. *Cobb v. Edwards,*117 N. C., 246; *Sherrod v. Dixon,*120 N. C., 63; *Gorrell v. Alspaugh,*120 N. C., 367; *Hughes v. Pritchard,*122 N. C., 61; *Owens v. Williams,*130 N. C., 168; *Sykes v. Boone,*132 N. C., 203; *Gaylord v. Gaylord,*150 N. C., 227; *Lehew v. Hewett,*138 N. C., 11; *Ferguson v. Haas,*64 N. C., 776; *Shields v. Whitaker,*82 N. C., 520; *Holden v. Strickland,*116 N. C., 191.

The payment of the purchase money raises a resulting trust in favor of him who “furnishes” or “pays” or “owns” the purchase money, unless a contrary intention, or a contrary presumption of law, prevents. *Holden v. Strickland, supra; Leggett v. Leggett,*88 N. C., 108; *Thurber v. LaRoque, supra; Cobb v. Edwards, supra; Henderson v. Hoke,*21 N. C., 119; *Moseley v. Moseley,*87 N. C., 69; *Norton v. McDevit,*122 N. C., 755; Perry on Trusts and Trustees (6 ed.), 184, sec. 125 *et seq.;*Bispham’s Equity, *supra; Rush, v. McPherson,*176 N. C., 562; *Harris v. Harris,*178 N. C., 7. This trust arises between husband and wife, in favor of the wife, when land was deeded to both husband and wife. *Deese v. Deese,*176 N. C., 527; *Ross v. Hendrix,*110 N. C., 403; *Houck v. Somers,*118 N. C., 607; *Ricks v. Wilson,*154 N. C., 282; *Ray v. Long,*128 N. C., 90; *Cunningham v. Bell,*83 N. C., 328; 6 L. R. A. (N. S.), 383, citing many cases in this, and other states, in which this same rule has been held to apply. Consent that title be made in another’s name did not prevent a resulting trust in *Summers v. Moore,*113 N. C., 394.

The contrary rule applies to the husband because the law presumes he made the deed to his wife as a gift. *Nelson v. Nelson,*176 N. C., 191; *Singleton v. Cherry,*168 N. C., 402.

*417Even wben a part payment is made tbe trust results *pro tanto*in favor of tbe owner of tbe funds. *McWhirter v. McWhirter*155 N. C., 145; *Keaton v. Cobb,*16 N. C., 439.

Tbe doctrine of resulting trusts is plainly set forth by *Mr. Justice Adams*in *Tyndall v. Tyndall,*186 N. C., 272.

In order to establish a resulting trust, tbe proof must be clear, cogent and convincing. *Harris v. Harris, supra; Glenn v. Glenn,*169 N. C., 729; *Summers v. Moore, supra; McWhirter v. McWhirter,*155 N. C., 145; *Hendren v. Hendren,*153 N. C., 505; *Wilson v. Brown,*134 N. C., 400.

Wben properly submitted to tbe jury they determine whether tbe proof measures up to this test. *McWhirter v. McWhirter, supra; Lehew v. Hewett,*130 N. C., 22; *Cobb v. Edwards, supra; Hemphill v. Hemphill,*99 N. C., 436; *Earnhardt v. Clement,*137 N. C., 95; *Ray v. Long,*132 N. C., 894; *Jones v. Warren,*134 N. C., 392; *Avery v. Stewart,*136 N. C., 431; *Davis v. Kerr,*141 N. C., 19; *Taylor v. Wahab,*154 N. C., 219; *Cuthbertson v. Morgan,*149 N. C., 76; *Archer v. McClure,*166 N. C., 140, 148; *Lefkowitz v. Silver,*182 N. C., 349; *Cunningham v. Bell, supra.*

Applying tbe foregoing principles; and viewing tbe evidence as we are required to do in a case of directed verdicts and involuntary non-suits, we are constrained to bold that there was error in directing a verdict in favor of tbe plaintiffs on tbe first issue, but there is no error in directing a verdict in favor of tbe plaintiffs on tbe second and third issues. Tbe defendant, Florence Lester, is entitled to have an issue submitted to tbe jury to determine whether she is tbe owner of tbe lands in controversy by virtue of a resulting trust arising from tbe payment of tbe purchase money out of her funds, in whole or in part.

This disposes of tbe defendants’ exceptions, save tbe competency of tbe financial statement given by tbe firm of W. P. Lester & Company, through T. B. Lester, which was offered in evidence. This evidence, in our opinion, was competent, upon plaintiffs’ contentions that this transaction was a voluntary conveyance by tbe defendant, W. P. Lester, óf bis only property to bis wife, Florence Lester, to binder, delay and defraud creditors. *Bank v. Odom,*188 N. C., 672 ; 2 Wigmore on Evidence (2 ed.), sec. 1077, p. 584. Tbe partnership relations were ample and sufficient to authorize T. B. Lester to make financial statements with reference to -their business and tbe credit status of tbe firm and *pro hac vice*T. B. Lester was tbe agent of W. P. Lester and, therefore, tbe maxim *qui per odium facit per se*applies.

Mrs. Lester’s objection to the competency of this statement cannot avail, for that, if tbe facts come within tbe principles announced in *Aman v. Walker, supra,*and she paid no valuable consideration for the *418conveyance of her husband's property to her, she is affected by W. P. Lester’s acts, however innocent she may be of any knowledge of them. If, however, the resulting trust in her favor is established, she is not affected by W. P. Lester’s acts with reference to creditors, and judgment will be entered in her favor.

To the end that a new trial may be had on the first issue and on the plea of resulting trust, the judgment is reversed.

New trial.