Moffett v. Daniels

342 S.E.2d 925 (1986)

Patricia A. MOFFETT and PM & JD, Incorporated v. Joseph Mack DANIELS.

No. 8511SC1273.

Court of Appeals of North Carolina.

May 6, 1986.

*926 Narron, O'Hale, Whittington and Woodruff, P.A. by James W. Narron, Smithfield, for plaintiffs-appellants.

Patterson, Dilthey, Clay, Cranfill, Sumner & Hartzog by Ronald C. Dilthey and CD. Taylor Pace, Raleigh, for defendant-appellee.

WEBB, Judge.

The plaintiffs assign error to the denial of their motion for summary judgment and to the judgment which requires Patricia A. Moffett to convey the stock in the corporation to the defendant. We believe we are bound by Penland v. Wells, 201 N.C. 173, 159 S.E. 423 (1931) to sustain this assignment of error.

In Penland the plaintiff brought an action to obtain title and possession of real property he had conveyed to his daughter. He alleged that he had been threatened with litigation for alleged wrongs which he had never committed and in order to defeat such litigation and thereby preserve the property for his own use he conveyed it to his daughter by a deed absolute in form. He alleged further that his daughter was to hold the property for him as trustee and reconvey it to him at such time as he might designate. Our Supreme Court held that it *927 was error not to sustain a demurrer to a complaint based on these allegations. It said plaintiffs unclean hands prevented his bringing an action for equitable relief and stated:

Where both parties have united in a transaction to defraud another, or others, or the public, or the due administration of the law, or which is against public policy, or contra bonos mores, the courts will not enforce it in favor of either party.

201 N.C. at 175-176, 159 S.E. at 424. This Court followed Penland in Hood v. Hood, 46 N.C.App. 298, 264 S.E.2d 814 (1980).

At a summary judgment hearing if the forecast of evidence is such that it would entitle a party to a directed verdict if the evidence were offered at trial that party is entitled to have his motion for summary judgment allowed. See Moore v. Fieldcrest Mills, Inc., 296 N.C. 467, 251 S.E.2d 419 (1979). In this case all the evidence shows that the defendant conveyed the property to the plaintiff corporation which was owned by the plaintiff Moffett for the purpose of hindering the defendant's creditors. The Court will not under these facts impress a trust on the property or order the plaintiffs to convey it to the defendant. Patricia A. Moffett owns the corporation and the corporation owns the land and the contents of the store. The plaintiffs are entitled to a judgment removing the defendant from the property.

The defendant argues that the record does not show the requisite intent to defraud his creditors. He says that no suit was filed against him and that his intent as shown by his affidavit was to maintain the business so that he could pay his creditors. He argues that the record shows he had not violated G.S. 39-15 which declares void conveyances to defraud creditors. G.S. 39-15 has no application to this case. Under Penland it is not necessary that an action be filed by a creditor or that the person conveying the property intended not to pay his lawful debts. If a conveyance is made to a person with the intent that the grantee will hold the property so that creditors cannot reach it, the parties to the conveyance are in pari delicto and the law will not require the grantee to reconvey the property.

The defendant argues further that if the parties are in pari delicto the plaintiffs should receive no relief. The plaintiff corporation has the legal title to the property and Patricia A. Moffett owns the stock in the corporation. The defendant has asked for an equitable remedy. Equity will not give the defendant the relief for which he asks because of his unclean hands. The plaintiffs may enforce their legal rights.

For the reasons stated in this opinion we reverse and remand with an order that the plaintiffs be given the relief for which they prayed.

Reversed and remanded.

EAGLES and PARKER, JJ., concur.