District-Realty Title Ins. Corp. v. Forman

• Decision Date: 15 December 1986
• Docket Number: No. 85-1006.,85-1006.
• Citation: 518 A.2d 1004
• Parties: DISTRICT-REALTY TITLE INSURANCE CORPORATION, Appellant, v. Edward FORMAN and Sallie Forman, Appellees.
• Court: D.C. Court of Appeals

518 A.2d 1004

DISTRICT-REALTY TITLE INSURANCE CORPORATION, Appellant, v. Edward FORMAN and Sallie Forman, Appellees.

No. 85-1006.

District of Columbia Court of Appeals.

Argued October 28, 1986.

Decided December 15, 1986.

Michael A. Schuchat, with whom Diane P. Burka, Washington, D.C., was on the brief, for appellant.

Kate A. Martin, with whom David N. Webster, Washington, D.C., was on the brief, for appellee Sallie Forman.

Edward Forman, Washington, D.C., pro se adopts and joins in the brief filed by appellee Sallie Forman.

Before PRYOR, Chief Judge, and NEBEKER and BELSON, Associate Judges.

PRYOR, Chief Judge:

This appeal involves two consolidated lawsuits brought by appellant District-Realty Title Insurance Corporation (District Title), a creditor of appellee Edward Forman. The suits requested that Mr. Forman's conveyance of the Forman family home and assignment of certain real estate commissions to his wife, Sallie Forman, should be set aside as fraudulent. District Title argued that both transactions were designed to hinder its collection of its debt from Mr. Forman. After a non-jury trial, the court found that District Title offered no evidence that it was a creditor whom the Formans intended to defraud, and that the transactions did not, in fact, defraud District Title because it extended credit to Mr. Forman several years after the transactions in question, with full knowledge of those transactions. The trial court then entered judgment for appellees Edward and Sallie Forman.

Appellant now contends that the trial court made errors of fact and law in arriving at its conclusions. It first asserts that the court erred in its factual determination that the conveyance of the Forman family residence merely effectuated the Formans' prenuptial intent to share Edward Forman's home. It also contends that the court further erred by failing to employ a presumption that any such transfers made without consideration and while Mr. Forman was insolvent were fraudulent. Finding the asserted errors of law unpersuasive, and perceiving no clearly erroneous factual finding on the part of the trial court, we affirm.

I Factual Background

Appellee Edward Forman, formerly an attorney in Alexandria, Virginia, conducted an extensive real estate settlement practice. From 1960 through 1981, Forman used escrow funds deposited for settlement purposes for his own use and that of his business, Alexandria Title Corporation (ATC). Shortages occurred, which were covered to some extent by payments received in subsequent settlements. In the years 1966 through 1978, however, ATC never had enough cash to meet its liability for escrow deposits held for settlement. District Title acted as Forman's settlement insurer and satisfied claims made by the escrow depositors. On February 2 and 6, 1981, Forman signed two promissory notes totalling $189,556.41 to the order of District Title as reimbursement for the payments made by District Title to the depositors. When Forman defaulted on his payments, District Title obtained summary judgment on June 2, 1982 for the amounts of the notes plus interest and costs.

Edward Forman was previously married to Delores Forman. She obtained an Alabama decree of divorce in 1960. On June 8, 1965, while unmarried, Edward Forman bought a home at 3131 N Street, N.W. and a deed was recorded solely in his name. On January 1, 1966, Edward Forman and Sallie Forman were married. On May 5, 1967, the N Street home was conveyed (through a straw party) from Edward Forman to Edward and Sallie Forman as tenants by the entirety. The deed was dated February 7, 1967. On March 10, 1967, Delores Forman filed suit in the Circuit Court of Fairfax, Virginia, to vacate the Alabama divorce on the grounds that the Alabama court lacked jurisdiction; but this suit was dismissed on May 5, 1970. On November 17, 1972, the N Street home was conveyed from Edward and Sallie Forman to Sallie Forman as sole owner by deed dated October 8, 1969. Subsequently, Delores Forman died in 1974.

On December 20, 1976, Edward Forman assigned his right to receive commissions for real estate transactions from Columbia Real Estate Title Insurance Corporation (Columbia Title) to Sallie Forman. Sallie Forman received approximately $113,543.00 from the assignment.

Since 1977, Samuel Gillman has been the President of District Title. In 1980, Gillman, a long-time friend and business associate of Mr. Forman, asked him to do business with District Title because of Mr. Forman's large client base. Previously, from 1968 through 1977, Mr. Gillman was President of Columbia Title. In 1976, Mr. Gillman personally accepted the assignment of commissions from Mr. Forman to Sallie Forman on behalf of Columbia Title. In 1967, he also helped to prepare and record the deed transferring ownership of the N Street home to the Formans as tenants by the entirety while he was President of American Real Title Corporation (American Title).

II Findings of the Trial Court

The court found as fact that the 1967 conveyance of the N Street home was not made with fraudulent intent but was merely the effectuation of a tacit understanding between Edward and Sallie Forman to share Mr. Forman's house once they were married. The court supported this conclusion by noting that Edward Forman owned other real estate solely in his name at the time of his marriage to Sallie Forman but did not convey it to himself and her as tenants by the entirety as he might have done if his motivation was to place his property beyond the reach of Delores Forman or his creditors.

The court, however, found the conveyance dated October 8, 1969 and recorded November 17, 1972, which transferred ownership of the N Street home from Mr. and Mrs. Forman to Sallie Forman as sole owner, to have been made with the intent to hinder Delores Forman should she prevail in her suit to vacate the divorce. The trial court concluded that this transfer was made to protect the asset from claims of Delores Forman which would arise if her divorce was set aside and Edward Forman's marriage to Sallie Forman voided, thereby dissolving the tenancy by the entirety.

The court also found that the December 20, 1976 assignment of Columbia Title commissions to Sallie Forman was made with the primary intent to hinder the depositors of escrow funds in the event they discovered that Edward Forman was using their settlement funds for his personal use. The court found that since Mr. Gillman personally participated in both the conveyance of the N Street home and the assignment of commissions while acting as head of American Title and Columbia Title, District Title had imputed knowledge that these assets were unavailable to them as security when it extended credit to Mr. Forman in 1981. The court, therefore, found that District Title was neither misled nor induced to rely on Edward Forman's ownership of the N Street home or the Columbia Title commissions when he executed the promissory notes. The court lastly found that District Title otherwise offered no evidence that Mr. Forman intended to hinder or defraud it by the conveyances or assignment.

III

Since this case was tried without a jury, the trial court's judgment both as to facts and law may not be set aside except for errors of law, unless it appears that judgment is plainly wrong or without evidence to support it. D.C.Code § 17-305(a) (1981); see, e.g., Cahn v. Antioch University, 482 A.2d 120, 128 (D.C. 1984). This means that a trial court's findings of fact will not be set aside unless they are clearly erroneous. See, e.g., Auxier v. Kraisel, 466 A.2d 416, 417 (D.C. 1983).

The trial court first concluded that the 1967 conveyance of the N Street home to Sallie Forman was not fraudulent but was merely the execution of a prenuptial understanding between Edward and Sallie Forman that they would share the property after their marriage. Testimony at trial indicated that Sallie Forman moved her own furniture to the N Street home pursuant to the couple's agreement that Sallie would contribute to the furnishing, maintenance, and renovation of the home. This evidence, as well as the existence of other real estate holdings that Mr. Forman owned but did not similarly transfer, support the trial court's factual finding that the conveyance of the N Street home was not made with fraudulent intent but was merely the delayed fulfillment of the prenuptial understanding to share the property as the marital abode.

Appellant also contests the trial court's finding that it did not suffer fraud in fact as a result of the transactions. The trial court found that District Title was neither misled nor induced to rely on Edward Forman's ownership of the N Street home or the commissions when it executed the promissory notes. Its basis for this finding was that District Title's President, Mr. Gillman, had actual knowledge of both of the transactions before District Title extended credit to Mr. Forman. This conclusion is amply supported in the record. Evidence indicates that Mr. Gillman, as President of American Title, was aware of and personally participated in the 1967 conveyances. Evidence also indicates that Mr. Gillman, as President of Columbia Title, personally signed his acceptance on behalf of Columbia Title to the assignment of the commissions it was obligated to pay to Mr. Forman. Given this evidence, the trial court could reasonably find that District Title, with Mr. Gillman as its President, had knowledge of these transfers before it extended credit to Mr. Forman in 1981.¹

We conclude that these findings are supported by the record and are not clearly erroneous.

IV

Appellant also contends that the trial court committed errors of law in arriving at its conclusions that District Title was not defrauded by the transfers. It asserts that the trial court failed to apply the presumption set forth in Edwards v. Entwisle, 13 D.C. (2 Mackey) 43, 55-56 (1882), that an insolvent debtor's intent to defraud...