#### BANK OF VANCE, Receiver of Farmers and Merchants Bank, v. ETHEL D. CROWDER, R. B. CROWDER, Her Husband, and J. C. KITTRELL, Trustee for the Commissioners of Vance County.

(Filed 5 October, 1927.)

1. Trusts — Implied Trusts — Fraud—Equity—Husband and Wile — Banks and Banking.

Where tbe cashier of a bank has wrongfully appropriated the bank’s money and buys lands, taking title to his wife, a trust is imposed upon the title in equity, by reason of the fraud, which may be followed by the bank into its converted form by suit for the purpose.

3. Husband and Wife — Deeds and Conveyances — Gifts—Presumptions— Evidence — Instructions.

While there is a presumption of a gift where the husband uses his money for the purchase of lands and takes title in his wife, it may be *313rebutted by showing that the money belonged to the separate estate of the wife, or was derived from other sources, and when the evidence is conflicting it is reversible error for the trial judge to charge the jury that there was a presumption of a gift without fully charging the law arising thereon.

Appeal by defendants from *&rady, J.,*at June Term, 1927, of YaNCE.

Tbis was a suit in equity to establish a trust in land conveyed to Ethel D. Crowder, the *feme*defendant — the trust when declared to be subject to the deed of trust held by the defendant Kittrell as trustee. The real controversy is between the plaintiff and Mrs. Crowder. In 1912 the Farmers and Merchants Bank was organized as a banking institution under the laws of North Carolina and conducted a banking business until 16 April, 1924, when its doors were closed. Its principal place of business was in Henderson, the defendant, E. B. Crowder, serving as its cashier during the time of its business activity. On 31 October, 1922, *W.*P. Gholson and his wife conveyed to the *feme*defendant a. lot in the town of Henderson at the agreed price of $5,500. Of this sum $3,000 was paid to E. B. Crowder by Melville Dorsey for the benefit of the grantee, who is his daughter, and was applied by Crowder in part payment of the purchase price. The remainder ($2,500) was paid in this way: James Plummer had executed his promissory note to the Farmers and Merchants Bank in the sum of $2,500, bearing interest at 6 per cent until paid, and the defendant, E. B. Crowder, then cashier, discounted the note and credited the amount to his individual account. On 10 November, 1922, he gave his personal check on the Farmers and Merchants Bank for $5,500 in full payment of the amount due for the lot. The plaintiff’s most material allegations are that E. B. Crowder fraudulently discounted the Plummer note for his own benefit and fraudulently used the amount thereof in the purchase of the land, the title to which was conveyed to his wife; that she was not a bona fide purchaser for value; that the money has not been repaid, and that the bank is entitled to have a constructive trust impressed upon the property, to secure return to the bank of the amount thus misappropriated by Crowder.

Separate answers were filed by Ethel D. Crowder and her husband. She alleged that she was a bona fide purchaser for value; that she had no knowledge of her husband’s alleged malfeasance until some time after the whole amount of the purchase money had been paid by her father for her benefit; that the full amount of the note discounted by her husband had been returned to the bank. She alleged also that she had made valuable improvements upon the premises.

*314In bis answer E. B. Crowder alleged tbat in discounting tbe Plummer note be bad no fraudulent intent; tbat Mrs. Crowder bad no knowledge of tbe discount, and tbat tbe amount bad been paid back to tbe bank.

Issues were submitted to tbe jury and answered as follows:

1. Were tbe lands described in tbe complaint paid for in whole or in part by E. B. Crowder out of tbe moneys derived from tbe discounting of tbe James Plummer note, as alleged in tbe complaint? Answer: Yes.

2. If so, wbat amount of money belonging to said Farmers and Merchants Bank was invested in said lands by E. B. Crowder? Answer: $2,500.

3. If such moneys were invested in said lands, as alleged, has tbe same been repaid by tbe defendants or either of them? Answer: No.

4. Is tbe plaintiff’s cause of action barred by tbe statute of limitations? Answer: No.

It was adjudged upon tbe verdict tbat tbe defendant, Ethel D. Crowder, is tbe bolder of tbe legal title of a five-elevenths undivided interest in tbe land conveyed to her for tbe use and benefit of tbe plaintiff and tbat this interest be sold by commissioners. Tbe defendants excepted and appealed upon errors assigned.

*J. P. & J. H. Zollicoffer, Perry & Xittrell atnd Xittrell & Xittrell for plaintiff.*

*8. P. McDuffee and Thomas M. Pittman for defendants.*

Adams, J.

Tbe action is prosecuted by tbe plaintiff for tbe purpose of impressing a trust, for its benefit as receiver, upon tbe town lot described in tbe deed from Gholson to Mrs. Crowder. Tbe equitable doctrine upon which tbe relief is sought is not questioned. If E. B. Crowder held tbe proceeds of tbe discounted note as a trustee for tbe Farmers and Merchants Bank a trust resulted by operation of law for tbe benefit of tbe bank and under tbe doctrine of implied trusts tbe fund could be followed into any property into which it was converted or invested unless affected by tbe rights of a bona fide purchaser for value, without notice. If, on tbe other band, be discounted tbe note with fraudulent intent be was a trustee *ex maleficio,*and against bis fraud a court of equity would afford relief. “In such cases,” says Bispham, “tbe interference of courts of equity is called into play by fraud as a distinct bead of jurisdiction; and tbe complainant’s right to relief is based upon tbat ground, tbe defendant being treated as a trustee merely for tbe purpose of working out tbe equity of tbe complainant.” Principles of Equity, 149. In *Massey v. Alston,*173 N. C., 215, it is said: “A court of equity is not bound to wrest tbe property *315from tbe wrongdoer by a rescission, but may mould its decree to tbe particular and controlling equity of tbe case and tbe real and substantial rights of tbe parties. . . . Equity makes use of tbe machinery of a trust for tbe purpose of affording redress in cases of fraud, and will follow tbe property obtained by a fraud in order to remedy tbe wrong, and only stops tbe pursuit when tbe means of ascertainment fails or tbe rights of bona fide purchasers for value, without notice of tbe fraud or trust, have intervened.” *Campbell v. Drake,*39 N. C., 94; *Edwards v. Culberson,*111 N. C., *342; Mfg. Co. v. Summers,*143 N. C., 102; *Bank v. Waggoner,*185 N. C., 297.

While not contesting this equitable doctrine, tbe defendants say that Mrs. Crowder was an innocent purchaser of tbe property for value, without notice of any fraud or trust. It was some time after she bad endorsed and delivered to her husband tbe check for $2,500 that she first beard of bis alleged malfeasance. Indeed, bis Honor plainly told tbe jury that there was neither allegation nor contention that she knew her husband bad misappropriated tbe bank’s money by investing it in her land. He gave tbe additional instruction that in no view of tbe law could Mrs. Crowder be an innocent purchaser for value “so far as tbe $2,500 is concerned”; tbat according to ber admission ber busband bad paid $2,500 as a part of tbe price of tbe land, and tbat in contemplation of law tbe payment was a gift. Their relation raised tbe presumption of a gift *pro tanto*when be purchased tbe land and bad tbe title conveyed to bis wife; but this is a presumption of fact which is not conclusive, but rebuttable. *Arrington v. Arrington,*114 N. C., 116; *Sherrod v. Dixon,*120 N. C., 60; *Evans v. Cullens,*122 N. C., 55; *Singleton v. Cherry,*168 N. C., 402; *Nelson v. Nelson,*176 N. C., 191; *Anderson v. Anderson, 177*N. C., 401; *Tire Co. v. Lester,*190 N. C., 411, 416.

Tbe instruction complained of was evidently given upon tbe principle tbat there was no evidence to rebut tbe presumption tbat tbe money was a gift. Though tbe testimony upon which tbe defendants rely as tending to repel tbe presumption of a gift was not full or comprehensive, we cannot bold as a matter of law tbat it should not have been submitted to tbe jury. Mrs. Crowder testified: “I have seen this check for $2,500 before; it was given to me to pay on tbe Southerland Stables, by my father, Melville Dorsey. I endorsed tbe check and gave it to Mr. E. B. Crowder to pay $2,500 on tbe Southerland Stables. At tbe time tbe lot was bought in November, 1922, my father paid $3,000 on tbe purchase price, and this was to pay tbe balance of $2,500 to complete tbe $5,500 purchase price. I was to return to E. B. Crowder tbe $2,500 tbat be bad paid on tbe property at tbe time it was purchased.”

*316And her father said: “The reason I did not furnish the entire $5,500 at that time instead of only $3,000 was because I could not do it . . . I paid for it in the final. . . . The reason I did not pay for it earlier was because I had a very sick daughter in the hospital, and was under a great deal of expense, and had my taxes to pay for two years, and it was using all of the ready money I had, and as soon as I found out that I had money ahead, I paid it. The reason I was paying this was for it to be my daughter’s separate estate.”

In our opinion this testimony, together with other circumstances, is some evidence that it was understood between the parties that the money advanced by R. B. Crowder should be treated as a loan and not as a gift. For this reason there must be a

New trial.