Davis v. Southern Distrib. Co

• Decision Date: 29 September 1927
• Citation: 139 S.E. 495
• Parties: DAVIS. v. SOUTHERN DISTRIBUTING CO. et al.
• Court: Virginia Supreme Court

139 S.E. 495

DAVIS.

v.SOUTHERN DISTRIBUTING CO. et al.

Special Court of Appeals of Virginia.

Sept. 29, 1927.

Christian, J., dissenting.

Appeal from Circuit Court, Lunenburg County.

Suit by the Southern Distributing Company and others against Fannie A. Davis, wife of C. T. Davis. Decree for complainants, and defendant appeals. Affirmed.

W. Moncure Gravatt, of Blackstone, for appellant.

W. E. Nelson, of Lunenburg, and Thos. W. Ozlin, of Kenbridge, for appellees.

McLEMORE, J. This suit is the result of a certain deed executed by C. T. Davis, the husband of Fannie A. Davis, the wife, on December 8, 1921, in which he conveyed a tract of land containing 72 acres in Lunenburg county in consideration of $1,000. At the time of this conveyance and for some considerable time prior thereto, he was indebted to certain of the complainants in the court below (who will be referred to as they were in that court), some of whom had been requesting payment before the deed of December 8, 1921, was drawn and executed.

As soon after this deed was placed on record as was praticable, complainants reduced their debts to judgments, and at the first June rules, 1922, filed their bill to have declared fraudulent and void the deed from C. T. Davis to his wife, and to subject the land to the payment of complainants' debts. Depositions were taken, and on December 11, 1925, a decree in accordance with the prayer of the bill declaring the deed of December 8, 1921, void and of no effect as to complainants, and directing certain inquiries to be made by a commissioner prior to a sale of the property.

Appellants base their defense upon two grounds, assigned as error:

"First, because the deed is not fraudulent and voluntary, but is based upon a good, valid and subsisting consideration in law, namely, debts due petitioner by her husband, C. T. Davis, which he promised to pay at the time same were contracted and which he owed her at the time the deed was made, which money loaned him by petitioner was the separate estate of Fannie A. Davis, and petitioner alleges that the court erred in declaring the deed void and liable to the judgments of complainants.

"Second, the court erred because it did not hold that the deed to C. T. Davis from his aunt was a resulting trust in favor of Fannie A. Davis, and that therefore when the deed from C. T. Davis to Fannie A. Davis was made, it was but the furtherance of said trust."

The legal principles involved in the first assignment have been so often the subject of judicial consideration that a reference to only a few of the more recent expressions of the courts would seem ample.

In Sledge v. Reed, 112 Va. 202, 70 S. E. 523, Judge Harrison, in a case strikingly like the one under consideration, says:

"It is well settled that transactions between husband and wife must be closely scrutinized to see that they are fair and honest, and not mere contrivances resorted to for the purpose of placing the husband's property beyond the reach of his creditors; and that, in a contest between the creditors of a husband and the wife, the burden of proof is upon her to show by clear and satisfactory evidence the bona fides of the transaction. In all such cases, the presumptions are in favor of the creditors, and not in favor of the title of the wife. The mere holding of a bond is not sufficient evidence that at the time the bond purports to have been given it was recognized as a debt, and that both husband and wife intended to occupy the relation to each other of debtor and creditor. The burden is upon the wife to show that the original transaction represented a loan by her to the husband, and a contemporaneous promise on his part to pay the debt; otherwise, what was originally a gift to aid the husband in business, and used by him as a basis of credit, could subsequently, when he became involved, be converted into a debt to his wife, and thus perpetrate a fraud upon his creditors with the utmost facility and impunity. Kline v. Kline, 103 Va. 263, 48 S. E. 882; Spence v. Repass, 94 Va. 716. 27 S. E. 583.

"The record shows that the wife was a practicing physician, in the country, and that she also conducted a small mercantile business, while the husband was engaged in farming. Itappears that the wife kept books of account, in which she had an account against her husband, consisting of items of cash charged to him at different times, and sundry other charges, such as cow, horse, mule, sow and pigs, buggy and harness, etc. This account of the wife against the husband was the basis of the alleged consideration of $700 stated on the face of the deed from her husband which is now assailed by the husband's creditors. The books containing the account were, over the objection of the appellants, introduced in evidence for the purpose of establishing the wife's claim that the purchase of the real estate by her from her husband was bona fide, and that a valuable consideration was paid for it.

"Without passing upon the question whether or not these books of account were admissible in evidence, it is sufficient to say that with the aid of the books the wife has wholly failed to establish her claim as required in such cases. There is no evidence to show that the original transactions out of which the several items of this account grew, represented a loan by her to the husband, and that there was a contemporaneous promise on his part to pay the debt. The burden is upon the wife to show that, with respect to the items of the account asserted by her, both she and her husband intended to occupy the relation to each other of debtor and creditor.

"In the light of these well-settled principles, which cannot be too consistently and firmly adhered to in this class of cases, it is clear, from the record, that the deed of October 16, 1903, from John H. Reed to his wife, Ina H. Reed, must be set aside as in fraud of the rights of the appellants."

The same general statements of the law were recognized and approved in the more recent case of Harris v. Carver, 139 Va. 676, 124 S. E. 206, in which Judge Holt says:

"Mr. Harris, we have seen, was insolvent, and Mrs. Harris had nothing with which to pay this purchase money save what she could raise from the farm, and, but for the temporary prosperity which she, in common with all tobacco growers, enjoyed for a time, probably would not have paid at all. The evidence shows that she paid the entire purchase price $2,000, and that she paid this with tobacco raised by herself and sons on the farm. Mr. Harris paid nothing thereon. It does appear that his wife turned over to him a small tract for cultivation, and that he used all that he made thereon in paying actual family expenses. It is also true that possession of this farm never went out of the Harris family.

" * * * He [the plaintiff] had taken no evidence and relies wholly upon presumptions of law. * * *

"Hence the presumption of the law is—and this presumption is not affected by the Married Woman's Act—that the husband is the owner of all the property, real and personal, of which the wife may be in possession during coverture, especially if they are living together as husband and wife; and to overcome this presumption, in a contest between the husband's creditors and the wife, she must show affirmatively that the property is her own, and that it was derived from a source other than her husband and in good faith, if he be insolvent, otherwise a wide door would be open to fraud." Yates v. Daw, 86 Va. 117, 9 S. E. 508.

In this case, it must be remembered that Mrs. Harris purchased the farm from a third party, and complainants endeavored by inference to show that the purchase money was furnished by the husband.

Battle v. Rock, 144 Va. 1, 131 S. E. 344, is also authority—perhaps the latest authority—on this general subject. Judge Burks here says:

"In a contest between the creditors of an insolvent husband and the wife over a conveyance from the husband to his wife, the presumptions are in favor of the creditors and not of the wife, and the burden is upon the wife to show by clear and satisfactory evidence the bona fides of the transaction."

From a careful reading of the evidence we think it may be fairly concluded that at the time of the conveyance from the husband to the wife he was indebted to sundry persons some of whom had placed their claims in the hands of attorneys for the purpose of forcing payment; that both C. T. Davis and Fannie A. Davis with several children were living in a home together in the usual and orderly way: that Mrs. Davis had title to another tract of land in the county which had also been conveyed to her by her husband for a consideration stated to be $2,500, this deed having been made about the year 1918; that the conveyance of the 72-acre tract carried a consideration of $1,000, but is claimed by Mrs. Davis to be in fact about $2,047, which is made up of sundry items advanced by the wife during the period from April 19, 1919, to December 8, 1921, and evidenced by canceled checks drawn by her and payable, some to C. T. Davis direct, others to individuals and firms with whom they dealt, merchants, fertilizer dealers, et cetera; that some of these checks had notations showing they were given in payment of C. T. Davis' account; others were checks made payable to C. T. Davis and without notations, while still others were to third parties and without written explanation; that at the time the several checks were drawn by the wife and paid for her husband's indebtedness or to him direct, there was no agreement between the parties that the several transactions should each or all constitute loans with a contemporaneous promise to pay back the amount borrowed.

If the above is a correct summary of the facts fairly established, then the learned chancellor in the court below was fully justified in entering the decree appealed from in so far as the first assignment of error is concerned.

An extract from the evidence of the defendant, Fannie A....