Liberty Bank & Trust Co. v. Davis

• Decision Date: 15 December 1939
• Citation: 134 S.W.2d 988,281 Ky. 51
• Parties: LIBERTY BANK & TRUST CO. et al. v. DAVIS et al.
• Court: Kentucky Court of Appeals

134 S.W.2d 988

281 Ky. 51

LIBERTY BANK & TRUST CO. et al. v. DAVIS et al.

Court of Appeals of Kentucky

December 15, 1939

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division; Churchill Humphrey, Judge.

Action by the Liberty Bank & Trust Company and another against Henry Davis and wife to recover on two notes and set aside two deeds from named defendant to defendant wife. From a part of the judgment rendered dismissing the petition so far as it sought to set aside the deeds, plaintiffs appeal.

Affirmed.

Eugene Mosley, Jr., of Louisville, for appellant.

Malcolm Crawford, of Louisville, for appellee.

SIMS Commissioner.

In this opinion appellants, Liberty Bank & Trust Company and Liberty Fire Insurance Company, will be referred to respectively as the Bank and as the Insurance Company. The appellants plaintiffs below, instituted this action to recover personal judgment against Henry Davis on a note he executed to the Bank for $1,000, and on a note he executed the Insurance Company for $9,000, the latter being secured by 200 shares of the capital stock of the Bank pledged as collateral. Appellants further sought in this action to set aside two deeds that Davis had executed to his wife, averring they were not supported by any valuable consideration. Davis filed no answer but Mrs. Davis answered traversing the allegations of the petition.

After proof was taken the case was submitted to the chancellor who rendered personal judgment against Davis on the notes directed the collateral sold which secured the $9,000 note but dismissed the petition insofar as it sought to set aside the conveyances Davis had executed to his wife. This appeal is prosecuted from that part of the judgment which refused to set aside the conveyances, and appellants seek a reversal on the ground that the relation of husband and wife, accompanied with badges of fraud, shifts the burden upon Mrs. Davis to establish the bona fides of the transactions and that these conveyances were executed to her for a valuable consideration which burden appellants claim she failed to meet.

No question is raised on this appeal as to whether there was a misjoinder of parties. Therefore, it will not be discussed in the opinion.

Appellees agree appellants are correct in their contention that the marital relation existing between Davis and his wife and the suspicious circumstances surrounding this transaction are sufficient to place the burden on Mrs. Davis to prove the conveyances were supported by a valuable consideration, and to prove the bona fides of the transactions. Magic City Coal & Feed Company v. Lewis, 164 Ky. 454, 175 S.W. 992; Stix v. Calender, 155 Ky. 806, 160 S.W. 514; Dance v. Zumalt, 279 Ky. 41, 129 S.W.2d 989. Thus it becomes necessary to review the evidence, and we will bear in mind the law closely scrutinizes a conveyance between husband and wife. Stix v. Calender, supra; Farmers' Bank of Fountain Run v. Hagan, 242, Ky. 535, 46 S.W.2d 1084.

Mrs. Davis' parents were wealthy and her father at his death in 1921 devised her $25,000. Some years later Mrs. Davis' mother entertained her children at dinner and on that occasion she gave each child $20,000. Mrs. Davis testified that on another occasion her mother made her a gift of $12,000 and followed this with two gifts of $6,000 each. The uncontradicted testimony of Mrs. Davis is that she received from her parents an aggregate of $69,000, all of which she turned over to her husband to invest for her. Davis was engaged in the real estate business in Louisville and invested his wife's money in property, taking the title in the name of his firm, Myer-Davis Realty Company, and a later firm of Henry Davis Realty Company, which latter firm conveyed the property to Henry Davis in 1925, in whose name the title remained until 1931, when Davis conveyed it to his wife.

Appellants contend Mrs. Davis' testimony is suspicious because she did not support it by other members of her family and by Myers, a former partner of her husband; because she could not remember the dates of the last gifts made her by her mother; because she turned this money over to her husband without depositing it in a bank. It is not denied that her parents were wealthy. She testified she received the rents from, and paid the taxes on, this real estate, giving the name of the agent who had charge of the rentals, and it would have been an easy matter for appellants to have contradicted Mrs. Davis had her testimony been incorrect. It is not necessary for us to accept Mrs. Davis' statement that she turned this money over to her husband as her trustee, because whether he acted in that capacity is a legal question concerning which Mrs. Davis, perhaps, was not qualified to testify. But the record convinces us, as it did the chancellor, that she did receive these large sums from her parents and that she did turn them over to her husband who became indebted to her for them; and we will presently see that this indebtedness was sufficient consideration to support the deeds Davis made his wife.

Davis had been a successful business man and had borrowed considerable sums from the Bank which he secured with collateral. The $1,000 note sued on was a remnant of a $5,050 note he executed to the Bank on May 8, 1930, upon which he made payments at times of renewal until it had been reduced to $1,000 on the last renewal on September 5, 1932. The $9,000 note the insurance company sued on was a remnant of a $13,025 note Davis executed to the Bank January 27, 1929, and was secured by 200 shares of the capital stock of the Bank. Although the Bank and Insurance Company were separate...