1. Fraud--fraudulent conveyances of property--guarantor of loan
The trial court did not err by granting summary judgment to plaintiff bank as to defendant
guarantor's fraudulent transfers under deeds one and three of the interests in land in tracts one,
two, four, and five, because: (1) the guarantor's conveyance of deed one under N.C.G.S. § 39-15
(conveyance before 1 October 1997) to a family member was voluntary, without consideration,
and the guarantor did not retain property fully sufficient and available to pay her existing debts;
(2) the guarantor's conveyance of deed three under N.C.G.S. § 39-23 (conveyance after 1
October 1997) was to a family member, the guarantor retained control and income of the
property after the transfer, the transfers were made after a suit had been threatened or initiated,
almost all of guarantor's assets were transferred, and the guarantor received less than reasonably
equivalent value for deeded property; and (3) the language in the subject guaranty agreement
made defendant guarantor primarily liable for the debt.
2. Appeal and Error--appealability--interlocutory order--denial of summary judgment
Although defendants contend the trial court erred by denying defendants' motion for
summary judgment with respect to the conveyance of deed number three, this assignment of error
is dismissed because: (1) the denial of a motion for summary judgment is interlocutory and not
immediately appealable unless it affects a substantial right; and (2) defendants have not asserted
a substantial right, nor did the Court of Appeals find one.
Fields & Cooper, P.L.L.C., by John S. Williford, Jr., for
plaintiff-appellee Triangle Bank.
Warren, Perry & Anthony, P.L.L.C., by Michael Perry and Fred
B. Amos, II, for defendant-appellants, Bexley J. and Lettie A.
Eatmon and Brenda E. and Larry C. Dorsett.
Gay, Stroud & Jackson, L.L.P., by Andy W. Gay, for defendant-
appellant, Margaret P. Eatmon.
Narron & Holdford, P.A., by I. Joe Ivey, for defendants
William L. Price, Jr., R.W. Harrison, Jr. and Thomas J.
Rhodes.
WYNN, Judge.
This is another appeal regarding the ill-fated loans that
Triangle Bank (successor to Unity Bank and Trust Company) made to
Bennie J. Eatmon which were guaranteed by his mother, Margaret P.
Eatmon. In the previous appeal, we upheld the trial court's grant
of summary judgment against Mrs. Eatmon. The facts supporting the
grant of summary judgment against her showed that two loans were
made to Bennie J. Eatmon for substantial amounts in 1995. In
addition to a security interest in farm equipment, the loans were
guaranteed by Mrs. Eatmon. When the loans were not paid in January
1998, Triangle Bank brought an action against the Eatmons to
recover payments. Ultimately, the trial court granted summary
judgment against Mrs. Eatmon for the uncollected loan payments and
we upheld that judgment.
The present appeal stems from another action brought by
Triangle Bank to set aside as fraudulent conveyances, three deeds
executed by Mrs. Eatmon conveying all of her real property to her
children and their spouses:
1. Deed from Margaret P. Eatmon, GRANTOR, to Bexley J.
Eatmon, GRANTEE, dated 28 October 1996, recorded 20
February 1997 conveying five tracts--60 acres, 59.8
acres, 30 acres, 1 acre, and 29.5 acres less two parcels,
reserving a life estate for Margaret P. Eatmon.
2. Deed from Margaret P. Eatmon, Bexley J. Eatmon and
wife, Lettie A. Eatmon, GRANTORS, to Bexley J. Eatmon and
wife, Lettie A. Eatmon--a one-half undivided interest as
tenants-in-common, and Brenda Dorsett and husband Larry
C. Dorsett--a one-half undivided interest as tenants-in-
common, GRANTEES, dated 30 January 1998 and recorded 2
February 1998 conveying a 30-acre tract.
3. Deed from Margaret P. Eatmon, GRANTOR, to Bexley J.
Eatmon, GRANTEE, dated 3 February 1998, recorded 19
February 1998 conveying six tracts--60 acres, 59.8 acres,30 acres, 1 acre, and 29.5 acres less two parcels, and
40,000 square feet.
Following a hearing, the trial court granted summary judgment
in favor of Triangle Bank on its claim that the transfers under
deeds one and three constituted fraudulent conveyances. However,
the trial court denied motions of both parties for summary judgment
as to the conveyances under deed two. The defendants appealed to
this Court.
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[1]On appeal, the defendants contend that the trial court
erred granting summary judgment to Triangle Bank as to the
transfers under deeds one and three of the interests in tracts one,
two, four and five.
(See footnote 1)
They argue that Mrs. Eatmon was not indebted
to Triangle Bank at the time of the conveyances and that there was
no evidence in the record that the conveyances were fraudulent. We
disagree.
Rule 56 of the North Carolina Rules of Civil Procedure permits
summary judgment upon the showing that there is no genuine issue as
to any material fact, and that one party is entitled to judgment as
a matter of law. See N.C. Gen. Stat. § 1A-1, Rule 56 (1990);
Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 266 S.E.2d 610
(1980). Summary judgment is proper when "the pleadings,
depositions, answers to interrogatories and admissions on file,
together with the affidavits, if any, show that there is no genuineissue as to any material fact and that any party is entitled to
judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c)
(1990). To prevail against a summary judgment motion, the opposing
party “must set forth specific facts showing that there is a
genuine issue [of material fact] for trial.” Nasco Equip. Co. v.
Mason, 291 N.C. 145, 149, 229 S.E.2d 278, 281 (1976)(quoting Rule
56(e)).
In this case, N.C. Gen. Stat. § 39-15 (1984) governed the
transfer under deed one of the remainder interests of tracts one,
two, four and five recorded on 20 February 1997.
(See footnote 2)
That statute
provided in part that “feigned, covinous and fraudulent . . .
conveyances . . . shall be deemed . . . utterly void and of no
effect.”
In Aman v. Walker, 165 N.C. 224, 81 S.E. 162 (1914), our
Supreme Court set forth five scenarios for the finding of a
fraudulent conveyance. The second principle for establishing a
fraudulent conveyance applies to this case:
(2) If the conveyance is voluntary and the
grantor does 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.
Id. at 226, 81 S.E. 162, 164 (emphasis added). Applying this Aman principle to the facts of this case
, we
first observe that the conveyance under deed one was voluntary. A
conveyance is voluntary “when it is not for value, i.e., when the
purchaser does not pay a reasonably fair price such as would
indicate unfair dealing and be suggestive of fraud.” Nytco
Leasing, Inc. v. Southeastern Motels, Inc., 40 N.C. App. 120, 128,
252 S.E.2d 826, 832 (1979); see also Michael v. Moore, 157 N.C.
462, 465, 73 S.E. 104, 105 (1911) (In order to divest her of title
to the properties fraudulently conveyed to her it need not be shown
that she either participated in or even had knowledge of the fraud;
for "[i]t is a principle of the common law, as old as the law
itself ... that [a debtor] shall be just to his creditors before he
is generous to his family.").
Here, the record shows that the disputed conveyances under
deed one were “voluntary”, i.e., without adequate consideration.
Indeed, Mrs. Eatmon's sworn testimony establishes the conveyance
was without consideration. Her testimony was corroborated by her
son's sworn statement that he gave no consideration for the
property.
Second, the record in this case shows that Mrs. Eatmon did not
retain property fully sufficient and available to pay her existing
debts. Fraudulent intent may be established by circumstances, and
a close family relationship coupled with less than reasonable
consideration and outstanding debts that the debtor is unable to
pay is strong evidence of fraud. N.C. Gen. Stat. § 8C-1, Rule 833
(1999); Nytco Leasing, Inc. v. Southeastern Motels, Inc., 40 N.C.App. at 130, 252 S.E.2d at 833; see also Kirkhart v. Saieed,
107
N.C. App. 293, 294, 419 S.E.2d 580 (1992) (holding that a creditor
is entitled to protection from fraudulent transfers even though a
debtor transfers the assets prior to the creditor obtaining
judgment against the debtor).
Here, the record shows that at the time of the conveyances
under deed one, Mrs. Eatmon did not retain properties sufficient to
cover the existing debt to Triangle Bank. Moreover, at the time
that Bennie J. Eatmon applied to the bank for the loans, Mrs.
Eatmon's financial statement disclosed a net worth of $413,328,
which consisted primarily of unencumbered real estate. As in
Nytco, her fraudulent intent in conveying that unencumbered real
estate is established by the circumstances which include a transfer
of property to her son without consideration in the face of
outstanding debts that she was unable to pay. Thus, the trial
court properly found that the conveyances under deed one were
fraudulent under N.C. Gen. Stat. § 39-15.
As to the conveyances under deed three, N.C. Gen. Stat. § 39-
23 (1997), the Uniform Fraudulent Transfer Act governs since the
conveyance occurred after 1 October 1997. N.C. Gen. Stat. § 39-
23.4(a)(1) establishes as fraudulent, a transfer with intent to
hinder, delay, or defraud a creditor. N.C. Gen. Stat. § 39-23.4(b)
sets out thirteen factors to be considered, among others in
determining whether the transferor possessed actual fraudulent
intent. These factors include: A transfer to an insider; a
transferor retaining possession or control of the property aftertransfer; a suit being filed or threatened against the transferor
prior to transfer; a transfer being substantially all of the
transferor's assets; and receipt of less than the reasonably
equivalent value for the deeded property. N.C. Gen. Stat. § 39-
23.4(b). The payment of consideration is only one of the several
factors to be considered by the court determining intent. N.C.
Gen. Stat. § 29-23.4(b)(8).
The record indicates evidence of the following statutory
factors in Mrs. Eatmon's transactions: Transferring the property
to insiders; retaining control and income of the property after the
transfer; making the transfers after a suit had been threatened or
initiated; transferring almost all of the transferor's assets; and
receiving less than reasonably equivalent value for deeded
property.
Applying the N.C. Gen. Stat. § 39-23.4(b) factors to this
case, we find that Mrs. Eatmon transferred the property to an
insider, her son, Bexley J. Eatmon. See N.C. Gen. Stat. § 39-23.1
(7) and (11) (setting forth that insiders include relatives within
the third degree). The record also shows that Mrs. Eatmon retained
possession and control over the property. While the deed on its
face conveyed the remainder interest to her son, Bexley J. Eatmon,
the record shows that Mrs. Eatmon and Bexley J. Eatmon agreed that
upon Mrs. Eatmon's death, he would deed certain portions of the
property to his sister, Brenda E. Dorsett and brother, Bennie J.
Eatmon and retain a certain portion for himself. He further agreed
to divide the property as specified by Mrs. Eatmon's will.
Moreover, the record shows that Mrs. Eatmon made thesetransfers after suit had been threatened and filed. On 4 Dec
ember
1996, an attorney writing on behalf of the bank demanded payment
from Mrs. Eatmon. Subsequently, she was personally served with a
complaint. Mrs. Eatmon testified that she gave away all of her
assets with her net worth being reduced to “nothing.” The record
also indicates that the grantee, Bexley J. Eatmon, did not pay any
consideration for the transfer. Thus, the trial court properly
found that the conveyances under deed three were fraudulent under
the Uniform Fraudulent Transfer Act.
Nonetheless, the defendants argue that Triangle Bank was not
a creditor of Mrs. Eatmon for fraudulent conveyance law purposes
because at the time Mrs. Eatmon transferred the land, she was only
a guarantor and not a maker of the promissory notes. However, this
Court rejected a similar argument in North Carolina National Bank
v. Johnson Furniture Company of Mount Airy, Inc., 34 N.C. App. 134,
237 S.E.2d 313 (1977). In that case, the guarantor conveyed her
property to herself and her husband to create a tenancy by the
entirety. On appeal, the guarantor argued since she was a
guarantor and not a debtor, the bank could not establish any
fraudulent intent to defraud creditors. Id. at 134, 237 S.E.2d
314. We rejected that argument by examining the language of the
guaranty agreement and holding that the guaranty language made the
guarantor primarily liable for the debt. See North Carolina
National Bank.
Likewise, the guaranties signed by Mrs. Eatmon stated that her
liability was “direct and immediate and not conditional orcontingent upon either the pursuit of any remedies against the
Debtor or any other person or foreclosure of any security interests
or liens available to the Bank.” See Jennings Communication Corp.
v. PCG Golden Strand, Inc., 126 N.C. App. 637, 641, 486 S.E.2d 229,
231 (1997) (“The nature and extent of the liability of a guarantor
depends on the terms of the contract as construed by the general
rules of construction.”). Id. As in Johnson, we hold that the
language in the subject guaranty agreement made Mrs. Eatmon
primarily liable for the debt. See also Graebur v. Sides, 151 N.C.
596, 66 S.E. 600 (1909).
We uphold the trial court's grant of summary judgment in favor
of Triangle Bank on this issue.
[2]In their final argument, the defendants contend that the
trial court committed reversible error by not granting their motion
for summary judgment in respect to the conveyance of deed number
three. However, the denial of a motion for summary judgment is
interlocutory, and not immediately appealable unless it affects a
substantial right. N.C. Gen. Stat. §§ 1-277(a) (1996) and 7A-
27(d)(1)(1995); N.C. Coastal Motor Line, Inc. v. Everette Truck
Line, Inc., 77 N.C. App. 149, 153, 334 S.E.2d 499, 502 (1985), rev.
denied, 315 N.C. 391, 338 S.E.2d 880 (1986). The defendants have
not asserted such an affected substantial right and we have found
none. Accordingly, this assignment of error is dismissed.
Affirmed in part, dismissed in part.
Judges McGEE and THOMAS concur.
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