Case Name: R. Cox et al. vs. McBee & Henning
Court: South Carolina Court of Errors
Jurisdiction: South Carolina
Decision Date: 1842-11
Citations: 1 Speers 195
Docket Number: 
Parties: R. Cox et al. vs. McBee & Henning.
Judges: Johnson and Johnston, CC., and Richardson, J. concurred.
Reporter: South Carolina Law Reports
Volume: 28
Pages: 195–207

Head Matter:
R. Cox et al. vs. McBee & Henning.
1. H., in 1824, owed M. $5,000, and in consideration thereof conveyed to him, in fee simple, a tan-yard and some lots, in die village of Greenville, on which was a house used as a tavern, and some stables. H. continued in possession for fifteen years. This deed, the existence of which was known to but few persons, was proved and recorded in December, 1839. One of the subscribing witnesses to the deed stated tiiat it was understood to be a mere security for the debt, and that H. had a right to redeem on paying the money. M. at the time of the conveyance to him, executed a lease to H. for the property for one year, on which was endorsed, every year, a receipt for die rent, and a renewal of the lease, up to 1839, when M., by an endorsement on the deed, declared it a mortgage. About the same time, H. executed a bond and confessed judgment for the original consideration of the deed. The verdict of die jury having established, 1st, that the consideration of the deed was bona fide when it was executed in 1824; and 2d, that no conclusion of fraudulent intent was to be drawn from H. remaining inpossession, orfrom the secrecy of the transaction: held,, diat the judgment was bona fide, and could not be set aside, for want of consideration, at the instance of H’s. junior creditors.
2. By the common law, fraud was a thing to be proved, and by the statutes of Elizabeth, it is made a question of intention. The intent with which an act is done, is to be gathered from all the circumstances and facts, by the jury. There are cases where the existence of certain facts, when proved, make a case of fraud, which cannot be explained away; but these cases are few in number, anditis not the inclination of the courts, at this day, to enlarge them.
Before Evans, J., Greenville, Fall Term, 1841.
The following is the report of the presiding Judge:
On the 19th February, 1840, Henning confessed a judgment to McBee, for $465, on notes ; and again, on the 22d February, 1840, Henning confessed another judgment to McBee, for $5000. The plaintiffs were junior-judgment creditors of Henning, and had filed a suggestion, alleging that the two judgments confessed by Henning to M’Bee, were fraudulent, without consideration, and void as to the plaintiffs.
It appeared from the evidence, that on the 30th Decern her, 1824, Henning owed McBee five thousand dollars, and in consideration of the said sum, Henning conveyed to McBee, in fee simple, a tan-yard and some lots, in the village of Greenville, on which was a house used as a tavern, and some stables. This deed was proved and recorded on the 23d December, 1839. The existence of the deed was known to but few persons, though it was generally thought that McBee had some lien or claim on the property; and in the only, case wherein fie was applied' to, he gave the applicant correct information on the subject. One of the subscribing witnesses was examined in court, and he said, that although the deed was absolute, yet it was said and understood between the parties to be a mere security for the debt, and that Henning had a right to redeem, on paying the money.
On the same day, McBee executed a lease to Henning for the property for one year, at a rent of $315 a year. On this lease was endorsed regularly, every year, a receipt for the rent, and a renewal of the lease, up to 1839. The rent received at first was $315, but for several of the last years, the rent paid was $350.
It appeared that Henning had lived many years in Green-ville. He was an inn-keeper, with extensive patronage, in good credit, and was sheriff of the district. In the beginning of the year 1840, his affairs became desperate; he confessed judgments, and executed mortgages to his creditors, and it was said his debts were $40,000 above the value of his property.
In January, 1840, McBee was in Charleston, and in some conversation with Mr. Echard, was advised to take a new deed for the property, referring to and confirming the old one. He wrote to Mr. Perry, at Greenville, who took such a deed, dated the 16th January, 1840. He also consulted Mr. Petigru, professionally, on the subject, and on informing him the deed was always understood to be a mortgage, he was advised to state the truth by an endorsement on the deed to that effect. The object of the deed of confirmation was to remove a supposed defect of the first, arising from the want of recording. After McBee returned to Green-ville, he consulted Mr. Perry, and to him he made the same communication as to Mr. Petigru, and said he wanted only his debt, and by Mr. Perry’s advice, Henning executed a bond and confessed a judgment for the $5000, which Perry thought greatly for the benefit of the creditors, as the property included in the deed was worth much more than the sum McBee claimed. On the same day, an endorsement was made on the deed oí 1824, and on the deed of confirmation, that they were intended as mortgages to secure the payment of the debt. The foregoing, I believe, is a summary statement of the facts connected with the alleged fraudulent judgment. There was a great deal of evidence on both sides — but as all the grounds in the notice allege error in the charge of the Court, I have only stated so much as will enable the Appeal Court to understand the points made.
Since the foregoing statement was made, I have had notice of other grounds, for the understanding of which it is necessary some other matters should be stated. It appeared Henning, who was McBee’s nephew, had, before 1813, carried on in co-partnership with McBee, a business at Greenville, in saddlery. In December, 1813, on some settlement, it appeared from a paper produced of that date, that there was due to McBee three thousand dollars, which it was stipulated should remain in trade. The co-partnership continued until November, 1820. On the 20th November, 1820, Henning gave McBee a bond, in which he stipulated to pay all the partnership debts; and in this bond it was recited that he had given to McBee a bond for what was due to him — also, that Henning was to take the stock in trade.
I charged the jury, that the deed of 1824 was not void per se for want of recording, want of possession, or secrecy. These were evidences of fraud, but were capable of explanation.
2d. If the deed of 1824, although absolute on the face of it, was in fact understood by the parties and always regarded as a mortgage or security for the payment of the debt due, there was no legal impediment to prevent the carrying this into effect, by the endorsement of the deed, and a confession of judgment for the debt, and especially as it appeared from the evidence that this was a benefit to the other creditors, and so intended by the parties.
3d. I considered that the great question involved in the case was, whether the debt for which the judgment was confessed was bona fide due. If not, then the whole transaction was fraudulent and void; but if the debt was bona fide due, and the deed was a mere mortgage to secure the payment, and no fraud had been practised or intended by the confession of judgment, then I thought the verdict should be for the defendants. But if the jury were of a contrary opinion, then they should find for the plaintiffs. They found for the defendants.
It is objected in one of the grounds of appeal, that I did not charge the jury, that if the deed was absolute, the debt was extinguished, and could not afterwards be a sufficient consideration for the confession of judgment. I did not consider this as necessarily involved in the issue. The proof, I thought, was abundant, that the deed was understood to be a mere security for the debt. I did not then, nor do I now, see any reason why a deed absolute originally, might not, by a subsequent agreement, be converted into a mortgage, by such an endorsement as was made in this case. It would be binding between the parties, and none would have a right to complain, except those whose right might be prejudiced; and it was very clear the converting the absolute deed into a mortgate, was for the benefit of the plaintiffs, and the other creditors of Henning.
The plaintiffs appealed, on the following grounds:
Because his Honor should have charged the jury, that if the original deed was an absolute conveyance, and so regarded by defendants, it was an extinguishment of the debt, and that they could not, by any subsequent private agreement, change such absolute conveyance into a mortgage, or set up the original consideration as a debt, to the prejudice of creditors who had trusted Henning, on the faith of the property which he had in possession for fifteen years after the execution of the deed.
Because his Honor misapprehended the matter, and misdirected the jury, in stating to them that if the saddling business of McBee & Henning was prosperous, the debt, which was $3000 in 1813, must have been greater in 1820, when Henning agreed to pay the debts of the firm, and took the stock on hand.
Because his Honor erred in saying that the secret lease made by McBee, at the date of the first deed, sufficiently explained the continuance of possession in the vendor, even although the secret conveyance was taken in satisfaction of a previous debt.
Because the possession remaining in the vendor, the secret trust that Henning might redeem, the long and careful concealment of all the papers until Henning’s failure — the exact credits of rent year by year upon the lien — the new deed of confirmation, and then the declaration in contradiction of the deeds, that both deeds constituted a mortgage, shewed such design to hinder, delay and defeat creditors, as rendered the whole transaction fraudulent.
Henry, for the motion,
contended that the deed was an extinguishment of the precedent debt. So far as the parties were concerned, an absolute deed may be turned into a mortgage; but that as to the rights of third persons, no such arrangement could be made. If Henning ever became able to buy, he was to be at liberty to do so. He had been in possession for fifteen years. Mr. Henry insisted that McBee’s acts shewed that the transaction was fraudulent.
Perry, contra,
cited the following authorities. Twyne’s case, 3 Coke, 80; 2 Bulstrode, 225; Prec. in Chan. 285; 1 Ves. Sen. 348; 1 Burrows, 467 ; 2 Cowper, 432; 2 Term Rep, 587; 1 Esp. 205; 1 Lord Ray. 724; 10 Ves. 144; 2 Kent, 410; Roberts on Fraudulent conveyances, 550, 553, 557; Croke’s James, 158; 4 Binney, 258; 4 Cruise Dig. 354; 5 Taunton, 212; 1 Eng. Com. Law Rep. 81; 2 Starkie, 359, Note (y;) Ibid, note (1;) 1 Shep. Touchstone, 67 ; 1 Atkyn’s, 168, 172; 2 Vernon, 726; 4 Greenleaf, 400; 5 Am. Dig. 296; 1 Bay, 304; 2 Ibid, 80, 251; 2 Hill Ch. Rep. 219; 1 Hill, 404, 22; 2Baily, 118; 1 Ibid, 587, 568, 575; 1 N. & McC. 334; 2 Starkie, 359, 358; 2 Stat. at Large, 137; 7 Ibid, 232 ; 5 Ibid, 127: 1 Baily’s Equity, 1; 1 McC. Ch. 113; 2 Fonblanque, 262, Note (h;) Prec. Ch. 526; 2 Eden’s Rep. 110; 5 Binney, 499; 1 John. Ch. R. 594 ; 7 Ibid, 40; 9 Serg. & Rawle, 434; 9 Wheaton, 489; 4 Mass. Rep. 443; 4 J. Ch. 167; 1 Fonb. 201; 2 Cowen, 324; 1 Day, 139; 1 Monroe, 73; 4 Bin. 451; 1 Dess. 155; 1 Wash. 14; 2 Atlcyn, 99; 3 Ibid, 389 ; 2 Story’s Equity, 287; 4 Kent, 136; 2 Tomlin] L. D. 577 ; 1 Paine, 525 ; 4 Kent, 149, 151, 186; 2 Fonb. 257, note; Rice Eq. 311; 2 New Hampshire R. 13; 1 McC. 265; Harper’s L. R. 295; 1 Peere Williams, 271; 2 Hill Ch. R. 325.
Burt, same side,
cited McMullan Eq. 27; 2 Hill Ch. 636; 7 Am. C. L. Rep. 58 — 9; 4 Hen. and Mun. 101; 15 J. R. 555; 7 Serg’t & Rawle, 70; 5 Binney, 499 ; McMullan’s Equity, 451.
Young, in reply,
cited 3 Starkie on Ev. 1000 — 2; 4 K. Com. 142; 6 J. C. Rep. 429; 1 Cowp. 47; 1 Hill Rep. 227; Rice Equity, 300.

Opinion:
Curia, per
Evans, J.
To the proper understanding of the views which I propose to submit on this case, it will be necessary to bear in mind that the question between these parties is, whether a certain judgment, confessed by Henning to McBee, be without consideration and fraudulent, as to these plaintiffs, who are junior creditors. If a stranger had heard the argument, without having read the brief, he would have supposed the sole question was as to the validity of a certain deed, absolute originally, but afterwards converted into a mortgage, by a defeasance on the back of it: whereas, the validity of this paper is no otherwise important than as it goes to shew the consideration of the judgment, and to rebut any argument of fraud arising out of the facts of the case. Such a stranger, if he were familiar with legal principles, might have been startled at the idea, that a deed absolute on its face had been converted into and set up as a mortgage by parol evidence in a court of law; whereas, the change in the instrument had been in writing, by the parties themselves, and the evidence was admitted for no other purpose .than to shew that, in so doing, they had acted bona fide, and in pursuance of a contract (by parol) between the parties, made fourteen years before, when Henning, so far as appeared, was free from debt, and when there could not have existed any design to defraud these plaintiffs, whose debts had all been contracted within 4 years. The plaintiffs, in order to attack the consideration of the judgment, served McBee with a notice to produce his deed. It was accordingly produced, and offered in evidence by them. It was dated in 1824, with a defea sanee endorsed in 1839, declaring it to be a mortgage to secure the payment of money. As a deed, it was liable to exceptions, which it was supposed would not apply to it as a mortgage ; among others, that Henning had remained in possession, which, to a deed, being inconsistent with the title, and unexplained, might be a fatal objection ; but if it was a mortgage, this objection could not apply, as by our law the mortgagor is the owner of the land, and the possession of Henning would not have been inconsistent with the title. Hence the inference that this was an attempt to give effect to the paper as a mortgage, which might be void as a deed absolute ; and hence the necessity the defendant McBee was under to shew that this was bona fide, being in pursuance of the original understanding, and not a new-hatched scheme to defraud Henning's creditors. In this point of view, it seems to me, the evidence was wholly unexceptionable.
Having thus disposed of this preliminary question, I will proceed to consider the questions made in the brief and the argument. Before doing this, I take occasion to say, that until this deed was changed into a mortgage,- (which I shall hereafter attempt to shew the parties might do, bona fide,) it was liable to all the exceptions which usually apply to deeds. It would, if not recorded, be postponed, according to the Act of 1785, in favor of purchasers and such creditors as come within the provisions of that Act. 2d. If there was any fraudulent design to cheat, hinder or delay creditors, of which the secrecy observed in relation to the deed, and Henning's remaining in possession, if unexplained, are evidences, it would be wholly void; and if void for fraud, it was wholly vitiated, and could not be the consideration of any new act of the parties, to give it effect. With this admission, I proceed now to enquire what are the facts, as settled by the verdict of the jury, and what are the legal principles upon which the judgment of the court is to be pronounced. From the brief, I think it clear the jury have decided these two facts: lrt, that the debt of $5,000, which was the consideration of the deed, was bona fide due by Henning to McBee, when the deed was executed in 1824. 2d, that no conclusion of fraudulent intent' is to be drawn from Henning's remaining in possession, or from the secre cy of the transaction. The case, then, stands thus: In 1824, Henning owed McBee $5,000. To secure the payment, or in satisfaction of it, he executed an absolute deed for certain lands. This deed, I assume, because the jury have so found, is unimpeachable on the ground of fraud. In 1839, McBee, in pursuance of an agreement cotempoxaneous with the deed, executed a defeasance on the back of it, declaring it to be a mortgage to secure the payment of $5,000, the consideration expressed in the deed; and at or about the same time, Henning-gave McBee a bond for $5,000, and confessed a judgment for that sum. Now, is there any thing in the law of the land which will vacate the judgment in favor of the plaintiffs ? I suppose it will hardly be questioned, that parties may vacate, alter or modify their contracts at pleasure, and that such rescission, alteration or modification would be binding upon themselves, if done according to the forms of law. Nor do I suppose it will be doubted, that if it was the. understanding of the parties that the deed was a security for the payment of money, they might carry out that intention by an endorsement upon it to that effect. If Henning had filed his bill, alleging that fact, and McBee's answer had confessed it, would it not have been decreed in equity? And why may not the parties do that by their own act which equity would have decreed to be done? Indeed, this is so obvious, that it was conceded by one of the counsel, that as between themselves, Henning and McBee might change the instrument as they have done. Who, then, has a right to complain? The plaintiffs, unquestionably, if there was fraud, or they had been hindered or delayed by it. But the question of fraudrdent intent has been settled by the jury, and it is very manifest from the evidence, that the converting of this absolute deed into a mortgage, increased the general fund of Henning's assets liable to his creditors, and the plaintiffs among them.
But there is another objection, which is not so free from difficulty, which I proceed to consider: it is that this deed, being absolute oh the face of it, extinguished the debt. This, according to the view which I take of the case, may be conceded. The debt was extinguished, but what was there to prevent the revival of it ? Why could not Hen ning buy back the land, and give a confession of judgment for the price, or McBee consent, in consideration of a bond and confession of judgment, to convert a deed absolute into a deed conditional or mortgage ? Such contract would be good between themselves, and the creditors could not impeach it for fraud, where none is intended or effected. A debt is extinguished in law when it is paid, or some equivalent has been accepted in satisfaction; but if that which has been accepted in satisfaction should fail, may .not the parties revive the debt'? Suppose the deed had been void for the want of two witnesses, the purchaser might not be able to recover his money back in a court of law, although equity might compel the execution of a sufficient deed; but could not the parties rescind the contract, and would not the confession of a judgment be binding on all 1 Suppose a purchaser, by inadvertence or ignorance, should omit to record his deed, and thereby it should become void as to a subsequent purchaser or creditor, and he has received 'no equivalent for the money he paid, or the debt he cancelled. In such case, if set aside on account of a subsequent purchaser, the seller has received the price twice, and ought to refund ; if set aside in favor of creditors, he may also have the benefit of it again, by the application of it to his debts. In such case, there would be no legal obligation on the seller to pay; neither is there any obligation on the part of an infant to pay his bond, or a feme sole to pay a debt contracted whilst she was covert, or of a debtor to pay a debt barred by the statute of limitations; yet, if the infant, after he is of age, or the woman, after she is sole, or the debtor whose debt is barred, confess a judgment for what they owe in conscience, can another creditor come in and set aside the judgment, on the ground that the debt is not one of legal, but only of moral, obligation 1 Such a distinction, I am sure, is no where to be found.
It will be perceived, that in the course of this discussion, I have treated the question of fraud as one belonging to, and as having been decided by, the jury. By the common law, fraud was a thing to be proved, and by the statutes of Elizabeth it is made a question of intention. The intent with which an act is done, is to be gathered from all the circumstances and facts, by the jury. I very well know that there are cases where the courts have said that the existence of certain facts, when proved, make a case of fraud which cannot be explained away; but those cases are few in number, and it is not the inclination of the courts at this day to enlarge them. So far as they go, I subscribe to them, but am not disposed to go beyond them. It may be that the prominent facts in this case, presented as they are in the last ground in the brief, and presented in strong relief as they were at the argument, are calculated to excite a suspicion that the existence and nature of Henning's deed to McBee had been kept secret for the purpose of giving to Henning a more extensive credit, and that some of these plaintiffs may have been seduced into a credit of Henning on the faith of this property: yet when these prominent facts were connected with the other circumstances of the case, as proved on the trial, they made no such impression on my mind. I am, therefore, satisfied with the verdict on the facts, and I do not perceive, on a careiul review, any error in my first impressions of the law as applicable to the case. I am of opinion the verdict should stand ; and a majority of the court concurring in this opinion, the motion is dismissed.
Johnson and Johnston, CC., and Richardson, J. concurred.