Bank of Marlinton v. McLaughlin
| Decision Date | 28 October 1941 |
| Docket Number | 9180. |
| Parties | BANK OF MARLINTON v. McLAUGHLIN et al. |
| Court | West Virginia Supreme Court |
Richard F. Currence, of Marlinton, and Cyrus S Kump, of Elkins, for appellant.
J E. Buckley, S. H. Sharp and A. E. Cooper, all of Marlinton for appellees.
assignee and liquidating agent of the Bank of Hillsboro filed its original and amended bills of complaint in the Circuit Court of Pocahontas County against L. P. McLaughlin A. W. McLaughlin, J. K. Marshall, and Julia B. McLaughlin, praying that a certain deed dated May 18, 1931, executed by L. P. McLaughlin to his wife, Julia B. McLaughlin, be set aside as voluntary and fraudulent as to creditors, including plaintiff, existent at the time of said conveyance. From a decree denying the relief prayed for and dismissing its bills of complaint, plaintiff prosecutes this appeal.
A demurrer having been sustained by the circuit court to the original bill of complaint, plaintiff filed its amended bill. The cause was then remanded and matured at rules, and Mrs. McLaughlin demurred to the amended bill of complaint, assigning as the principal ground of demurrer laches of the plaintiff allegedly disclosed by the amended bill. The circuit court sustained this demurrer and certified its ruling here. On the certificate, this Court reversed the action o f the circuit court, holding that the demurrer should have been overruled. Bank of Marlinton v. McLaughlin, 121 W.Va. 41, 1 S.E.2d 251. Mrs. McLaughlin and L. P. McLaughlin filed separate answers, and the First National Bank of Marlinton, on its petition, was made a party defendant to the suit and filed its answer.
In the circuit court Mrs. McLaughlin interposed three grounds of defense: (1) that she was a purchaser for value without notice; (2) that plaintiff was precluded because of laches; and (3) that she was entitled to be subrogated to the rights of the Greenbrier Joint Stock Land Bank, the Bank of Hillsboro, and the Bank of Marlinton, as assignee and liquidating agent of the Bank of Hillsboro, to the extent of the liens against the property in litigation, interest, cost of repairs, and taxes, which she claims to have paid.
In 1924, L. P. McLaughlin was the owner of the twenty-five acres of land in question. Prior to August 23, 1924, he and his wife, Julia B. McLaughlin, were indebted to the Bank of Hillsboro on several joint promissory notes, the latter being the accommodation maker. These notes were consolidated on August 23, 1924, in a note for $6,200. On August 15, 1926, L. P. McLaughlin, having obtained a loan of $4,000 from the Greenbrier Joint Stock Land Bank, executed his individual note in that amount payable to said bank, secured by a deed of trust on the twenty-five acres of land, in which Mrs. McLaughlin joined. On November 18, 1927, the $6,200 note was reduced to $4,400, by payment of $1,800 of the money obtained from the Greenbrier Joint Stock Land Bank loan. On December 19, 1927, the McLaughlins executed a deed of trust to secure the Bank of Hillsboro in the payment of the $4,400 note, subject, however, to the Greenbrier Joint Stock Land Bank's deed of trust, covering the twenty-five acres of land in litigation and an additional tract of 37.2 acres belonging to Mrs. McLaughlin, which had been conveyed to her in the partition of certain lands in Greenbrier County.
In June, 1926, the defendant, J. K. Marshall, then cashier of the Bank of Hillsboro, C. P. Brown, A. W. McLaughlin, the McLaughlins' son, and L. P. McLaughlin, joined in the formation of a corporation for the purpose of selling "Maytag" washing machines in Roanoke, Virginia. To finance this venture, they jointly executed a note, dated November 15, 1926, and payable on demand to the Bank of Hillsboro in the sum of $2,500. About January, 1927, L. P. McLaughlin and his son sold their interests in the corporation to Marshall and Brown, the consideration being the assumption by the latter two of the liability on the note. From that time until the Bank of Hillsboro closed in 1930, the McLaughlins testified they heard nothing of the note.
About 1928, Mrs. McLaughlin agreed orally with her husband to pay the notes due the Greenbrier Joint Stock Land Bank and the Bank of Hillsboro, respectively, secured by the deeds of trust on the twenty-five acre tract of land, in consideration of his conveyance to her of said tract. Pursuant to this agreement, on October 17, 1928, she borrowed $2,000 from her sister, and applied the same on the $4,400 note of the Bank of Hillsboro, thus reducing it to $2,400. This note was carried by the Bank of Hillsboro until it was closed in November, 1930, and its assets taken over by plaintiff, as assignee and liquidating agent. Later this $2,400 note was paid by Mrs. McLaughlin, and the deed of trust securing it was released on May 11, 1936.
On April 20, 1931, an action was brought on the $2,500 Maytag note, and service had on all the makers, except Brown. L. P. McLaughlin, on May 18, 1931, executed the deed conveying to his wife the twenty-five acres in controversy. This deed was recorded a few days later. Thereafter, on October 19, 1931, judgment was obtained on the Maytag note in the amount of $2,767.17. No execution was ever issued thereon. On December 17, 1937, Mrs. McLaughlin borrowed $3,150 from the First National Bank of Marlinton, secured by deed of trust on the twenty-five acres involved in this suit, with which she paid the balance of the indebtedness owed to the Greenbrier Joint Stock Land Bank, and obtained a release of the latter's deed of trust. In addition to the $2,000 borrowed from her sister and the loan of $3,150 from the First National Bank, the record discloses that Mrs. McLaughlin also obtained and applied on the indebtedness assumed, $662.72, the amount of an additional loan obtained from that bank, $1,150 or $1,200 derived from her father's estate, and small sums of money obtained from rooming and boarding children in her home.
The First National Bank's deed of trust was deposited for recordation in the county clerk's office of Pocahontas County on December 28, 1937. It was withdrawn from the clerk's office on January 19, 1938, and refiled on March 22d of the same year. At the time of its withdrawal it carried the following indorsement: . It later appeared that this paper was not actually spread upon any book provided for the recordation of deeds of trust; hence its refiling. The abstract of the Maytag judgment was recorded in the clerk's office on February 16, 1938. On February 23, 1938, this suit was brought and pendente lite on May 30, 1939, L. P. McLaughlin died. In addition to the principal indebtedness assumed, Mrs. McLaughlin paid interest thereon and certain claimed items of taxes accruing and cost of repairs incurred after the conveyance in question was made.
The circuit court dismissed the bills of complaint on the ground that Mrs. McLaughlin was a purchaser for value without notice of any fraud on her husband's part. Code, 40-1-1, provides in part that, Under this section Mrs. McLaughlin will not be entitled to prevail if she did not give a valuable consideration for the conveyance in question, or if she had notice that her husband executed the deed with the fraudulent intent to evade the Maytag note. We say this because, when both the agreement and deed were made, Mr. McLaughlin was evidently insolvent, a fact of which his wife, living in the same house with him and assuming, as she did, the financial affairs of the family, must have been aware. If McLaughlin had no notice that the Maytag obligation was outstanding at the time the agreement was made, that fact was certainly brought to his attention before the execution of the deed by service of process in the action brought thereon by the plaintiff herein. Evidently he executed the deed with the fraudulent intent to defeat the Maytag claim. That of itself, however, does not render the conveyance vulnerable as against Mrs. McLaughlin.
In this jurisdiction a wife acting in good faith, free of fraudulent intent as to her husband's creditors, and without notice of such intent on his part, may take a transfer of property from him in consideration of the payment of all of his debts, or of specified debts, which he asserted and she believed were all he owed. Casto v. Fry, 33 W.Va. 449, 10 S.E. 799; Wood v. Harmison, 41 W.Va. 376, 23 S.E. 560.
Much evidence was adduced to the effect that neither Mrs McLaughlin nor her husband had any notice that the Maytag note remained the latter's obligation. Both of the McLaughlins and their son, A. W. McLaughlin, so testified. Mrs. McLaughlin also testified that when she made the final payment on the Bank of Hillsboro indebtedness, and on the other occasion when she obtained a loan in the amount of $662.72 from the First National Bank of Marlinton in May, 1936, A. P. Edgar, attorney for the Bank of Marlinton, and attorney for the Bank of Hillsboro before its closing, both employments being of a limited nature, told her that the property in question would not be subject to any lien on account of the Maytag note. In this...
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