Kesler v. Veal

• Decision Date: 24 November 1987
• Docket Number: No. 44534,44534
• Parties: KESLER et al. v. VEAL et al.
• Court: Georgia Supreme Court

Page 214

362 S.E.2d 214

257 Ga. 677

KESLER et al. v. VEAL et al.

No. 44534.

Supreme Court of Georgia.

Nov. 24, 1987.

Reconsideration Denied Dec. 16, 1987.

Edward E. Strain III, Cathey & Strain, Cornelia, Andrew J. Hill, Jr., Lavonia, for Jimmy Kesler et al.

A. Jack Kemp, Warner Robins, for Tori Veal et al.

SMITH, Justice.

We granted the writ of certiorari to the Court of Appeals in Kesler v. Veal, 182 Ga.App. 444, 356 S.E.2d 254 (1987), to decide if a conveyance which if found to be fraudulent in law under OCGA § 18-2-22 will support an award of damages. We hold that it will support the award of damages assessed against the debtor, but under the facts in this case, it will not support an award of damages against the taking party. We affirm in part and reverse in part.

H.V. Kesler paid $69,338.16 in legal fees and costs to the attorneys ^{1 1} who represented his brother, Jimmy, during his murder trial. Jimmy was convicted and sentenced to life imprisonment. Four days later, April 24, 1981, Jimmy conveyed six tracts of land worth $27,000 to H.V.

Sometime after the conveyances were made, a wrongful death action was filed against Jimmy and on May 25, 1982 a verdict was entered against him in the amount of $550,000. Subsequently this action filed on behalf of the victim's minor children to set aside the deeds to H.V. on the ground that the conveyances were fraudulent under OCGA § 18-2-22, was heard. The original complaint sought only to have the deeds set aside. In a later amendment the appellees sought $5,000 compensatory damages for injury to their peace, happiness, and feelings, and $550,000 punitive damages on the basis that the defendants "total actions in this matter have reflected bad faith and fraud entitling Plaintiffs to recover additional damages ..."

H.V. contended that the transfer of the property was a bona fide transaction made to partially repay him for the money he advanced for Jimmy's defense.

There was no evidence of actual fraud, Bacote v. Wyckoff, 251 Ga. 862, 865, 310 S.E.2d 520 (1984), on the part of H.V. and no charge was given on bad faith, actual fraud as explained in Bacote, supra, or conspiracy.

The jury's verdict set aside the deed, assessed $5,000 actual damages against both Keslers, and $65,000 punitive damages against each of them individually.

The Court of Appeals held that the awards of general and punitive damages as to both Keslers were permitted. We agree that the damages as to the debtor, Jimmy Kesler, are permissible, but not as to the taking party, H.V. Kesler.

The statute provides in pertinent part: "The following acts by debtors shall be fraudulent in law against creditors and others and as to them shall be null and void: ... (2) Every conveyance of real or personal estate ... had or made with intention to delay or defraud creditors, where such intention is known to the taking party; a bona fide transaction on a valuable consideration, where the taking party is without notice or ground for reasonable suspicion of said intent of the debtor, shall be valid; .." (Emphasis supplied.) OCGA § 18-2-22.

The legislature obviously did not intend the taking party to be liable for general and punitive damages under OCGA § 18-2-22 based solely upon the fraudulent conveyance without proof of bad faith, actual fraud, or conspiracy on his part. There are four factors that support this result. 1) The statute specifically states that the acts of the debtor shall be fraudulent in law. There is no mention in the statute that the acts of the taking party shall be fraudulent in law. If the legislature had intended for the acts of the taking party to be fraudulent in law it would have been simple to draft the bill to read, "The following acts by debtors and taking parties shall be fraudulent in law." 2) For the acts of the debtor to be fraudulent in law, the debtor must make the conveyance with the intention to delay or defraud the creditor. However, the taking party need not have an intention to delay or defraud. The fraud at law of the debtor can be based upon an extremely wide spectrum of mere notice attributable to the taking party. "The second element may be established either by proof of actual knowledge or by proof of circumstances sufficient to put [the taking party] on inquiry. [Cit.]" Stokes v. McRae, 247 Ga. 658, 659, 278 S.E.2d 393 (1981). The legislature would not subject a taking party to the same liability as a debtor based upon such a wide spectrum of circumstances which might merely put him "on inquiry," without any specific intent on his part. 3) Where the creditor can prove intent on the part of the debtor and also show that there were circumstances that were sufficient to put the taking party "on inquiry" the conveyance can be declared void as to the creditor "even though it was given on a valuable consideration." McLendon v. Reynolds Grocery Co. 160 Ga. 763, 766, 129 S.E. 65 (1925). If the taking party has given valuable consideration, as did H.V. in this case, loses his valuable consideration, has to pay damages, and is also responsible for punitive damages based solely upon the statute (without proof of bad faith, actual fraud, or conspiracy on his part) he is placed in the position of suffering greater consequences than the debtor who conveyed the property with the actual intention to defraud his creditors. The legislature never intended such an absurd and unequitable result. 4) The suggested form provided by the legislature OCGA § 9-11-113, indicates that the plaintiff may seek damages from the debtor, have the conveyance to the taking party set aside and the judgment declared a lien on the property, and have a judgment against both defendants for costs. Nothing in the form indicates that the taking party may, on the basis of the conveyance alone, be liable for general and punitive damages.

Based on the above, we hold that the damages as to H.V. Kesler are not allowed and we reverse in part.

Judgment affirmed in part and reversed in part.

All the Justices concur except MARSHALL, C.J. and WELTNER and HUNT, JJ., who dissent.

WELTNER, Justice, dissenting.

I respectfully dissent.

1. The majority correctly states that the...