Case Name: HENRY I. TOOLE & AL. vs. WILLIAM A. DARDEN & AL.
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1849-12
Citations: 6 Ired. Eq. 394
Docket Number: 
Parties: HENRY I. TOOLE & AL. vs. WILLIAM A. DARDEN & AL.
Judges: 
Reporter: North Carolina Reports
Volume: 41
Pages: 394–397

Head Matter:
HENRY I. TOOLE & AL. vs. WILLIAM A. DARDEN & AL.
A purchaser for value from a fraudulent grantee, when there is actual fraud, gets a valid title, unless he has notice of an existing debt unpaid, or of'a debt subsequently contracted, before he makes the puichase.
The cases of Hoke v. Henderson, 3 Dev. 14, and of Martin v. Conley, 1 Dev. Bat. 30, cited and approved
Cause removed from the Court of Equity of Edgecombe County at the Fall Term 1849,
The bill alleges that the defendant, Eason, being indebted to one Pender, with the defendants Sugg and Robert Belcher as sureties, the said Eason, Sugg and Belcher entered into a fraudulent agreement, by which Eason was to execute to Sugg and Belcher, two notes for $500 each, to be held and appropriated by. them for his use, amd was then to convey the land described in the bill and his other property to one Lewis Belcher, in trust to sell and pay the said debt due to Pender and the said feigned notes of $500 each: That the two notes and deed of trust were accordingly executed on the 4th of January 1843. The bill avers that the two notes'were executed without consideration and were included in the deed of trust, for the secret benefit of Eason ; and that the notes and deed were made with the intent to create a secret trust for Eason and to defraud his creditors. The bill also alleges, that in January 1844, the trustee sold, and the defendants Eason, Sugg, and Robt. Belcher contrived to enable Sugg to buj, all the property for $2879 ; a sum much less than its .value, for the fraudulent purpose, that Sugg should hold it, for the secret use of Eason : that in March 1844, Sugg, having taken a deed from the trustee for all the property, sold the land to the defendants Darden and Beeman, “who had notice of the aforesaid fraudulent agreement, combination and understanding:” that in November 1846, the plaintiff' Toole, being a creditor, obtained a judgment against him for $113, with interest from the 20th of November 1846, and on which execution issued, and the land was levied on and sold and bought by the plaintiffs. The prayer is for a conveyance.
Biggs, for the plaintiffs.
B. F. Moore, for the .defendants;

Opinion:
Pearson, J.
The bill is filed upon the idea, that, as there was actual fraud in the deed of trust and the deed to Sugg, by reason of the fraudulent contrivance and understanding, that the .property was to be held for the secret use of Eason, the deeds are void as against Toole, a subsequent creditor, and the plaintiffs, having purchased under his execution, could follow the land in the hands of the defendants, who paid value, but had notice of the fraud.
When a subsequent creditor seeks to avoid a conveyance, upon the ground that it was voluntary, and void as to creditors, on account of fraud in law, as distinguished from actual fraud, he must be able to shew that there is some existing debt remaining unpaid; for. if all such debts were provided for and paid, or afterwards paid without being provided for, that fact repels the presumption of fraud, which the law makes from the'mere fact, that the conveyance was voluntary. The general expression in the case of Hoke v. Henderson, 3 Dev. 14, "that a conveyance void as to one creditor is void as to all creditors," is qualified by what immediately follows. The meaning is, there must be one existing creditor unpaid, as to whom the conveyance is void ; if so, that will let in all creditors and "bring the whole fund into subjection to general creditors."
In this case there was an actual fraud. The conveyance was colorable and in trust, for the debtor ; and being a continuing trust and a continuing fraud, a subsequent creditor can take advantage of it, without the aid of an existing creditor, whose debt is unpaid. The plaintiff could, without doubt, have reached the land in the hands of the trustee or of Sugg, but. I do not think, they can do so, in the hands of- the defendants, to whom it passed for value, more than two years before the creation of Toole's debt, although they had notice of the original fraud.
In Martin v. Conly, 1 Dev. & Bat. 30, it is held, that a purchaser from a fraudulent grantee without notice, can hold against an existing creditor. Here the creditor is a subsequent one, but the purchaser had notice of the original fraud, and the question is, what is the effect of the notice ?
Eason, the debtor, had no right to the land, as against the trustee or Sugg ; nor could he have compelled them to execute the fraudulent trust, being "in pari delicio" The defendants then, although they had notice, did him no wrong They did no wrong to any existing creditor, for there is none such unpaid ; and they could do no wrong to the creditor, Toole, for his debt was not then created ; and as a matter of course, the defendants could not have notice of it. The defendants, then, at the time they bought, did wrong to no one. And there is no reason why they were not at liberty to purchase. The plaintiffs have not the shadow of a right to complain, for the defendants took possession and have had possession ever since. And the plaintiff, Toole, cannot say that he trusted Eason on the credit of the land, nor does he venture to allege, that he had not full notice of the defendant's purchase, when he gave credit to Eason.
My conclusion is, that a purchaser from a fraudulent grantee, when there is actual fraud, gets a valid title, un > less he has notice of an existing debt, unpaid, or of a debt subsequently contracted, before he makes the purchase.
Per Curiam.
Bill dismissed with costs.