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Cox v. WALL

of the bankrupt Act against fraudulent conveyances, and also in fraud of his creditors, and which is therefore condemned both by the bankrupt law and our statutes. The evidence in the case was voluminous and we will not attempt to set it out or review it in detail, as it will be quite sufficient for a decision of this appeal, in the view we take of the case, to refer to one of the prayers for instruction which the plaintiff requested the court to give and which the court refused to give to the jury, and also to the charge of the court with reference to the subject matter of that prayer. The issues submitted to the jury and the answers thereto were as follows:

1. Was the conveyance of the stock of goods from W. H. Gilbert to Wall & Huske made with the intent and purpose on his part to hinder, delay or defraud his creditors or any of them? Yes.

2. Was the sale of the goods to Wall & Huske by Gilbert made with the intent on the part of the said Gilbert to unlawfully prefer one or more of his creditors, as alleged in the complaint? No.

3. Did Wall & Huske purchase said stock of goods in good faith and for a present fair consideration? Yes.

4. Did the payment by Gilbert to Wall & Huske of the debt due by him to said Wall & Huske constitute an unlawful preference? No.

The plaintiff in apt time tendered an issue as follows: Did either of the defendants, J. D. Wall or D. W. Huske, have knowledge or notice of such fraudulent intent, on the part of the defendant Gilbert? The court refused to submit the issue and the plaintiff excepted.

At the close of the evidence, the defendants agreed that the jury should answer the first issue "Yes." With reference to the third issue submitted by the court, the plaintiff requested the court to charge the jury that, as the conveyance

Cox v. WALL.

was admitted to have been made by Gilbert with intent to hinder, delay and defraud his creditors, the burden was on the defendants to show not only that they purchased for value, but without notice of the said intent to defraud. The court not only refused to give this instruction, but on the contrary charged the jury that even if the conveyance was made with a fraudulent intent, yet if the jury found that the defendants paid a present fair consideration for the goods, the plaintiff must show by the preponderance of the evidence that the defendants were not purchasers in good faith, that is, that the defendants either participated in Gilbert's fraudulent or unlawful intent, or that they had notice thereof at the time of the purchase.

We will not stop to consider whether there is any essential or substantial difference between the third issue submitted by the court and the issue tendered by the plaintiffs in lieu thereof, that is, whether there is any difference in legal contemplation between a purchase without notice of the fraudulent intent of the debtor in conveying away his property, when a valuable consideration has been paid, and a purchase in good faith and for a present fair consideration. We shall treat the two issues as if they are in law substantially the


It is provided in the bankrupt Act, Sec. 67e, that fraudulent transfers of property made by an insolvent debtor at any time within four months prior to the filing of the petition against him which are null and void under the law of the State in which the property is situated, shall be void under said Act against his creditors, if he be adjudged a bankrupt, and shall pass to the trustee in bankruptcy, and all conveyances and transfers made within said time with intent to hinder, delay or defraud creditors shall likewise be void, except as to purchasers in good faith and for a present fair consideration, and all property so conveyed shall pass to his

Cox v. WALL.


By Section 70a of the Act, it is provided that the trustee of the estate of a bankrupt shall be vested by operation of law with the title to "all property transferred by him in fraud of his creditors;" and by Section 70e it is provided that the trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred from the person to whom it was transferred "unless he be a bona fide holder for value prior to the date of the adjudication.”

The plaintiff, therefore, is entitled to have the conveyance set aside and to recover the property transferred by Gilbert with an intent admittedly fraudulent, provided any creditor of Gilbert would be entitled to the same relief.

The provisions of the statute of 13th Elizabeth, with some modifications, have been enacted into law in this State and will be found in The Code, Sec. 1545. By that section, all conveyances made with intent to hinder, delay or defraud creditors are declared to be utterly void and of no effect; then follows Section 1546, which contains substantially the provision of 27 Elizabeth against conveyances made with intent to defraud purchasers. By Section 1547, voluntary conveyances are protected when the donor retains property sufficient and available for the satisfaction of his existing debts, but the indebtedness of the donor is declared to be evidence from which an intent to defraud may be inferred. These sections are followed by Section 1548, by which it is provided as follows: "Nothing contained in the preceding sections shall be construed to impeach or make void any conveyance, interest, limitation of use or uses, of or in any lands or tenements, goods or chattels, bona fide made, upon and for good consideration, to any person not having notice of such fraud."

We have recited these different provisions of the law in regard to fraudulent conveyances with the view of showing

Cox v. WALL.

the order of their enactment and the purpose of the Legislature that Section 1548 should constitute an independent provision, operating as a proviso to the other sections, and further for the purpose of showing that the matters therein stated were intended to be strictly of a defensive character, and are required to be averred and proved by the party who relies on their existence in order to validate a conveyance which the law has declared to be void, because made with a fraudulent intent. The rule is of general application that matter contained in a proviso, or constituting an exception to something which precedes, must be pleaded and proved by him who would take advantage of it. Wadsworth v. Stewart, 97 N. C., 116; Gorman v. Bellamy, 82 N. C., 496. When a deed is made with a fraudulent intent the law condemns it and pronounces it void and it remains void, of course, until it is shown for some reason to be valid. Nothing else appearing, it is void, and he who claims under it must aver and prove whatever is necessary to sustain its validity. The burden is on the purchaser therefore to show under the statute, that he purchased not only for value, but without notice.

It is said that the burden of proof by the decisions in some other jurisdictions, does not rest on the purchaser to show anything, save that he paid a fair price, and that this being shown the burden is shifted and the plaintiff must show a want of notice. We will not undertake to examine the decisions of other States, for it seems to us that it would be vain and useless to do so, as the question must be decided by the law as contained in our statutes and as declared in the decisions of this court.

It is also suggested that the rule requiring the plaintiff to take the burden of proving notice, when the purchaser or defendant has shown that a fair consideration was paid for the property, has been laid down by this court in Peeler v.

Cox v. WALL.

Peeler, 109 N. C., 628, and that there is no authority here to the contrary. We do not think that the question was pre

sented in the case of Peeler v. Peeler. That case involved the validity of a conveyance made by a husband to his wife and the court held that from the relation of the parties the law raised a presumption of fraud without any proof of fraud by the plaintiff, and that the burden was upon the wife to show that she paid value for the property conveyed to her by her husband, and when she had done this the burden shifted to the plaintiff-not to show that she purchased with notice, but to show that her husband had an actual intent to defraud. There was not an exception in the case that related to the burden of proof, nor does the court refer to it in its opinion. It appears from the charge to the jury, which is set out on page 629, that the burden was placed upon the defendant and the judgment of the court below was affirmed. The case is not in point and we think that there are authorities in this State which state the rule, under our statute to be that the burden is upon the purchaser to prove not only a valuable consideration, but want of notice. In Young v. Lathrop, 67 N. C., 63; 12 Am. Rep., 603, the court held that Section 1548 was a proviso to the preceding sections of the Chapter, and Pearson, C. J., in referring to it, uses this language: "The proviso can only be made operative by giving to it the scope and effect of purging the original conveyance of the fraud with which it was tainted, by allowing the bona fides and the full valuable consideration of the second conveyance to supply the want of these qualities to the first, so as to perfect the title to the bona fide purchaser, by carrying it back to the donor and claiming the title from him and thus prevent the title of the first purchaser from being 'impeached and made void,'" p. 72. This shows that the court was of the opinion that by Section 1548 the purchaser is required to aver and prove affirmatively that he

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