Becker v. Becker

Decision Date03 June 1980
Docket NumberNo. 414-79,414-79
Citation416 A.2d 156,138 Vt. 372
PartiesJune BECKER v. Bennett BECKER.
CourtVermont Supreme Court

Frederick M. Reed, Williston, for plaintiff.

Donald Arbitblit and Peter F. Langrock of Langrock, Sperry, Parker & Stahl, Middlebury, for defendant.

Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.

BILLINGS, Justice.

This appeal concerns an action on a contract executed in 1974 in settlement of disputes arising out of a 1971 Connecticut divorce decree and for declaratory judgment. The trial court granted the plaintiff-appellant a judgment for $11,500, on the contract, but denied her request for a judgment setting aside a transfer by the defendant to himself and his present wife as tenants by the entirety as a fraudulent conveyance on the ground that the defendant's present wife, a necessary party, was not joined in the action. The plaintiff appeals claiming that she is entitled to the declaration on the basis of evidence adduced at trial and that the defendant's present wife was not an indispensable party, or if she was, that the trial court erred in denying plaintiff's post judgment motion for joinder.

The plaintiff contends that she is entitled to a declaration that the defendant fraudulently conveyed his fee interest in certain Ferrisburg, Vermont, real estate to himself and his second wife in hindrance of the plaintiff's ability to recover on the defendant's debt to her. To prevail the plaintiff must have established liability under 9 V.S.A. § 2281. This statute provides in relevant part:

Fraudulent and deceitful conveyances of houses, lands, tenements or hereditaments . . . made or had to avoid a right, debt or duty of another person, shall, as against the party only whose right, debt or duty is attempted to be avoided, his heirs, executors, administrators and assigns, be null and void.

This action is statutory, but it is subject to all the requirements of our case law since the enactment of the statute of 13 Elizabeth c. 5 (1570), from which the Vermont statute derives. McLane v. Johnson, 43 Vt. 48, 60-62 (1870); Carpenter v. McLure, 39 Vt. 9, 15 (1866); Brackett v. Wait, 4 Vt. 389, 399 (1832). The plaintiff must establish (1) that there existed a right, debt or duty owed to her by the defendant, which debt, in this case arose before or near the time of the defendant's conveyance; (2) that the defendant conveyed property which was subject to execution in satisfaction of the defendant's debt; (3) that the conveyance here was without adequate consideration, and (4) if the conveyance was without adequate consideration, as here alleged, that the defendant acted fraudulently to the hindrance of the plaintiff's rights against him.

The first element which the plaintiff must establish is the existence of a right, debt or duty owed to her, E. Corey & Co. v. Morrill, 71 Vt. 51, 59, 42 A. 976, 978 (1898); Green v. Adams, 59 Vt. 602, 608-10, 10 A. 742, 746-47 (1887); Fairbanks v. Benjamin, 50 Vt. 99, 102-03 (1877); Beach v. Boynton, 26 Vt. 725, 733 (1854), and, in this case, owed at the time of the conveyance in question, see Farmer's National Bank v. Thomson, 74 Vt. 442, 447, 52 A. 961, 963 (1902). The plaintiff contends that the relevant debt here is the alimony owed her pursuant to court decree. While such a debt, even prior to the decree, is sufficient for the purposes of the statute, Green v. Adams, supra; Foster v. Foster, 56 Vt. 540, 546 (1884), the debt upon which this action is based is not alimony, but a 1974 contractual obligation incurred by the defendant in settlement of certain disputes arising after the decree of divorce. We shall treat the allegation of indebtedness, therefore, as arising from the 1974 obligation. See Fair Haven Marble & Marbleized Slate Co. v. Owens, 69 Vt. 246, 247-48, 37 A. 749, 750 (1897). Under this contract the defendant was in arrears in the amount of $750 at the time of the conveyance in question, but he had a continuing obligation to pay the plaintiff $250 per month until her remarriage or death. Because the defendant's obligation is a continuing, indefinite one, he cannot claim that his indebtedness is limited to $750. It is not so indefinite, however, as to be unenforceable under the statutes, as a pauper's debt to a supporting town was found to have been in Fairbanks v. Benjamin, supra, 50 Vt. at 103. The duty here is clear, as it was not in Fairbanks, leaving only the amount owed indefinite. The contract, admitted below, is sufficient to show the existence of a debt for the purposes of the statute.

The second element the plaintiff must prove is that a conveyance of property subject to execution was made by the defendant near the time of or after incurring indebtedness to the plaintiff. The plaintiff has established that she was defendant's creditor under the contract for about one year prior to the 1975 conveyance, and hence, is in a position to allege a pre-existing debt. See Rose v. Morrell, 128 Vt. 110, 114, 259 A.2d 8, 11 (1969).

The property must be subject to execution to prove fraudulent conveyance. Morse v. Andrews, 112 Vt. 456, 457, 28 A.2d 393, 394 (1942); Darling v. Ricker, 68 Vt. 471, 473, 35 A. 376, 377 (1896); Prout v. Vaughn, 52 Vt. 451, 459 (1880); Foster v. McGregor, 11 Vt. 595, 596 (1839). There was no evidence introduced below showing that the property in question is exempt from execution, as in Abbadessa v. Tegu, 122 Vt. 338, 340, 173 A.2d 153, 154-55 (1961). However, the burden of establishing that the property is subject to execution lies with the plaintiff, Darling v. Ricker, supra, 68 Vt. at 474, 35 A. at 377, and she has not met it by mere inference from the defendant's failure to show exemption.

The third element of fraudulent conveyance is proof of the nature of any consideration passing in respect of the debtor's conveyance. Our law has long distinguished between the proof necessary where the property passes for adequate consideration, and where the transfer is "voluntary" or without such consideration. Ludlow Savings Bank & Trust Co. v. Knight, 92 Vt. 171, 172-73, 102 A. 51, 51-52 (1917); Lynch's Administrator v. Murray, 86 Vt. 1, 9, 83 A. 746, 748-49 (1912); Fair Haven Marble & Marbleized Slate Co. v. Owens, supra, 69 Vt. at 249, 37 A. at 750; Wilson v. Spear, 68 Vt. 145, 148, 34 A. 429, 430 (1895).

Where the transfer is for consideration, the creditor must show that the grantor-debtor and the grantee knowingly participated in the fraudulent conveyance. Rose v. Morrell, supra, and cases cited therein. On the other hand, where the conveyance is without adequate consideration, the creditor may avoid the transfer with proof of the grantor's fraud alone. Farmer's National Bank v. Thomson, supra ; E. Corey & Co. v. Morrill, supra, 71 Vt. at 56, 42 A. at 977-78; Wilson v. Spear, supra, and cases cited there.

The plaintiff asserts that she has established that the defendant's transfer was without consideration and, therefore, voluntary. Her proof below consisted of the introduction into evidence of the property transfer tax return filed with the deed of conveyance, showing only that the transfer was a "corrective deed" and therefore exempt from the tax. Relying upon the case of McKinstry v. Collins, 74 Vt. 147, 154, 52 A. 438, 440 (1902), the plaintiff maintains that this proof raises a presumption that the transfer was without consideration. Unlike the recital of consideration in deeds, which often may be other than the amount actually passing, Brackett v. Wait, 6 Vt. 411, 426 (1834), the information contained on the tax return is made under oath on the personal knowledge of the signatory, and hence deserving of the presumptive accuracy accorded death certificates in the McKinstry case. The presumption raised by the tax return information on the issue of consideration may be fairly rebutted, but no such evidence has been brought to this Court's attention. The plaintiff has the burden of establishing that the transfer was voluntary. See Vilas v. Seith, 108 Vt. 18, 22, 183 A. 854, 856 (1936). She has met it with the proof here offered as the tax return indicates that consideration did not pass between the parties. 32 V.S.A. § 9603(4) and (5).

The fourth element which the plaintiff must establish is the defendant's fraud. The plaintiff asserts that proof of a pre-existing debt and a voluntary transfer is sufficient to raise a presumption that the transfer was fraudulent. She has mistakenly relied upon certain dicta in Jones v. Williams, 94 Vt. 175, 180, 109 A. 803, 805 (1920), in which the Court stated on the authority of foreign cases the following:

It is very generally held that a voluntary conveyance by one indebted is presumptively fraudulent as against existing creditors, and that the burden is on those who seek to sustain it as a valid transfer to prove that the grantor retained other property or means adequate to pay his debts and discharge his obligations.

However, the Court expressly reserved decision on this issue in Jones. Id. at 180-81, 109 A. at 805.

The fraud of a voluntary grantor may be an actual fraudulent purpose, or the fraud which the law imputes to him from the condition of his estate and the necessary consequence of his act. . . . It is only in cases where no actual fraud appears that the conveyance can be sustained on the ground that the grantor retained sufficient property to satisfy his debts.

Wilson v. Spear, supra. No evidence is shown which indicates an actual fraudulent purpose here. Therefore, "(t)he question here is whether, on the facts . . . the law will impute fraud to . . . (the defendant) from the condition of his estate, and the necessary consequence of his act, regardless of any actual fraudulent intent or purpose on his part," Vilas v. Seith, 108 Vt. 526, 529, 189 A. 862, 863 (1937), "since the law in no case presumes fraud." Vilas v. Seith, supra, 108 Vt. at 22, 183 A. at 856.

In Vilas v. Seith, supra, ...

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