Fowlkes v. Tucker

• Decision Date: 13 June 1935
• Citation: 180 S.E. 302
• Parties: FOWLKES et al. v. TUCKER.
• Court: Virginia Supreme Court

180 S.E. 302

FOWLKES et al.

v.TUCKER.

Supreme Court of Appeals of Virginia.

June 13, 1935.

Appeal from Circuit Court, Lunenburg County.

Suit by G. H. Tucker, receiver, etc, against Maude M. Fowlkes and W. T. Fowlkes. From the decree, the defendants appeal.

Affirmed.

Argued before CAMPBELL, C. J, and HUDGINS, GREGORY, BROWNING, CHINN, and EGGLESTON, JJ.

George E. Allen, of Richmond, for appellants.

W. E. Nelson, of Lunenburg, and Black-well, Ozlin & Whitehead, of Kenbridge, for appellee.

EGGLESTON, Justice.

This is a suit brought by lien creditors of J. W. Fowlkes to set aside as fraudulent two deeds of trust executed by him to secure debts claimed to be due by him to his wife, Maude M. Fowlkes, and his brother, W. T. Fowlkes, respectively. From a decree setting aside both deeds, this appeal has been taken.

On December 21, 1931, J. W. Fowlkes and Maude M. Fowlkes, his wife, conveyed to W. T. Fowlkes, trustee, certain land and personal property in Lunenburg county in trust to secure an alleged debt of $3,125.30 with interest, due to the wife, Maude M. Fowlkes, and evidenced by two certain promissory notes made by J. W. Fowlkes, payable to the order of Maude M. Fowlkes.

On the same date J. W. Fowlkes and Maude M. Fowlkes, his wife, conveyed to A. B. Arvin, trustee, certain land and personal property in Lunenburg county in trust to secure an alleged indebtedness of $5,198.30 with interest, due by the said J. W. Fowlkes to his brother, W. T. Fowlkes, and evidenced by several notes.

On the same date, but subject to the aforesaid deeds, J. W. Fowlkes and Maude M. Fowlkes, his wife, executed a general deed of assignment to Peyton G. Jefferson and John M. Fowlkes, trustees, conveying all of his real estate, consisting of approximately 2, 500 acres of land, numerous town lots, and considerable per-sonal property, for the benefit of his creditors.

The first two deeds of trust were recorded on December 21, 1931, while the deed of assignment was recorded the following day.

At the time these deeds were executed and recorded, J. W. Fowlkes had become financially involved and his creditors were proceeding against him. Judgments had been obtained against him on October 23, 1931, November 4, 1931, November 5, 1931, and December 7, 1931. Shortly after these deeds were recorded, further claims were reduced to judgment on December 23, 1931, and January 26, 1932.

In October, 1933, G. H. Tucker, as receiver of the First National Bank of Victoria, First National Bank of Chase City, and Victoria Supply Company, Inc., suing for the benefit of himself and all other lien creditors of J. W. Fowlkes, filed a bill in chancery against J. W. Fowlkes, Maude M. Fowlkes, W. T. Fowlkes, the trustees in the several deeds, and others, for the purpose of setting aside the two deeds of trust and the deed of assignment. The bill attacked the deeds of trust in favor of Maude M. Fowlkes and W. T. Fowlkes, respectively, on the ground that neither was executed upon a consideration deemed valuable in law, and that both were made for the purpose of hindering, delaying, and defrauding the creditors of the said J. W. Fowlkes.

The deed of assignment was likewise attacked, on grounds not necessary to be mentioned, however, as the validity of that instrument is not here involved.

J. W. Fowlkes, Maude M. Fowlkes, W. T. Fowlkes, trustee, and W. T. Fowlkes filed their separate answers wherein it was asserted that the said conveyances for the benefit of Maude M. Fowlkes and W. T. Fowlkes, respectively, were both executed upon valuable considerations, in good faith, and for the purpose of securing the payment of actual loans made by the wife and brother, respectively, to the debtor, J. W. Fowlkes.

There was a reference to a commissioner in chancery who was required, among other things, to report whether or not the two deeds of trust were executed with intent to hinder, delay, and defraud the creditors of J. W. Fowlkes and whether or not they should be set aside as fraudulent.

The commissioner in chancery reported that the deed securing the debt alleged to be due to Maude M. Fowlkes, the wife of the debtor, was executed without consideration and with intent to hinder, delay, and defraud the creditors of J. W. Fowlkes, and recommended that it be set aside.

As to the deed of trust securing the alleged indebtedness due W. T. Fowlkes, the brother of the debtor, the commissioner found that this was based on a valuable consideration, was not executed by J. W. Fowlkes with intent to hinder, delay, and defraud his creditors, and hence was a valid and subsisting lien.

Upon appropriate exceptions filed by the respective parties, the circuit court upheld the findings of the commissioner with reference to the deed securing Maude M. Fowlkes, the wife, but overturned the commissioner's report as to the deed securing W. T. Fowlkes, the brother of the debtor, and entered a decree setting aside both deeds as being without consideration, and having been executed by J. W. Fowlkes for the purpose of hindering, delaying, and defrauding his creditors.

Well-settled rules for testing the bona fides of similar transactions between husband and wife have been frequently laid down by this court.

In Brunswick Bank & Trust Co. v. Valentine, 158 Va. 512, 519, 164 S. E. 569, 571, Chief Justice Campbell, quoting from Robinson v. Bass' Adm'r, 100 Va. 190, 193, 40 S. E. 660, said: " 'They [the rules] are 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; 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, and in all such cases the presumptions are in favor of the creditors, and not in favor of the title of the wife. And the opinion further says: "Nor is the holding of a bond 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 con-temporaneous promise on his part to pay the debt; otherwise, what was originally a gift to 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 immunity." ' "

Tested by these principles, we think the court was right in holding that the wife has not borne the necessary burden of proof. While both she and her husband testified that the deed was given to secure money actually loaned by the wife to the husband, no part of which had been repaid, no vouchers, checks, or evidences of payment, other than the notes themselves, were produced.

A part of the wife's claim, amounting to $1,792.80, is represented by a note dated December 23, 1929, payable 12 months after date. The husband and wife claim that $1,400 of this represents principal and $392.80 accrued interest. They say the principal was derived by Mrs. Fowlkes from the sale of certain land in Buckingham county inherited by her from her grandfather. They are uncertain just when the land was sold. The. wife testified that the sale occurred 5 or 6 years after their marriage in 1896. The husband stated that it was "sometime after 1903, " and, later, that it must have been about December 23, 1918, when he gave his wife a written memorandum of his indebtedness to her, which, by the way, contains no promise to pay. Even assuming that the loan was made on December 23, 1918, the accrued interest on December 23, 1929, the date of the note, would have amounted to approximately $924 and not $392.80.

Furthermore, it is significant that during the intervening years from the date of the sale until the execution of the note the wife held no written promise of payment, and, in the meantime, the claim had been barred by the statute of limitations.

We think the evidence fails to prove that at the time of the alleged loan there was the necessary contemporaneous promise by the husband to pay the debt. Brunswick Bank & Trust Co. v. Valentine, 158 Va. 512, 519, 164 S. E. 569. Furthermore, the fact that no payments of interest were ever made by the husband to the wife, and that full interest is not even now claimed, shows that the parties did not regard this as an actual debt. Hutcheson v. Savings Bank, 129 Va. 281, 295, 105 S. E. 677.

Our conclusion, therefore, is that the wife has not borne the necessary burden with reference to this claim. See Sledge v. Reed, 112 Va. 202, 70 S. E. 523; Eason v. Lyons, 114 Va. 390, 76 S. E. 957; Hutcheson v. Savings Bank, 129 Va. 281, 105 S. E. 677; Davis v. Southern Distributing Co, 148 Va. 779, 139 S. E. 495.

We come to the next claim of the wife, based on a note for $1,332.50 dated May 16, 1931, payable 90 days after date. While the husband and wife claimed that this represents a loan of $1,300 from the wife to the husband, plus $32.50 accrued interest thereon, when the original evidence of indebtedness was produced it turned out to be notes signed by "The A. C. Jones Co.; Inc., by Jno. M. Fowlkes, Sec'y. and Treas, " payable to Mrs. Fowlkes. The notes do not bear the signature of J. W. Fowlkes either as comaker or indorser.

On cross-examination Mrs. Fowlkes admitted that this money was loaned, not to her husband, but to the A. C. Jones Company, Incorporated, of which her son, John M. Fowlkes, was the secretary and treasurer, and in which J. W. Fowlkes was the principal stockholder. Obviously there is...