Mercantile Nat. Bank v. Aldridge

• Decision Date: 18 November 1974
• Docket Number: No. 29221,29221
• Citation: 210 S.E.2d 791,233 Ga. 318
• Parties: MERCANTILE NATIONAL BANK v. Janet R. ALDRIDGE et al.
• Court: Georgia Supreme Court

Page 791

210 S.E.2d 791

233 Ga. 318

MERCANTILE NATIONAL BANK v. Janet R. ALDRIDGE et al.

No. 29221.

Supreme Court of Georgia.

Nov. 18, 1974.

Rehearing Denied Dec. 3, 1974.

Haas, Holland, Levison & Gibert, Harold D. Corlew, Robert L. Schwind, Atlanta, for appellant.

Lefkoff & Hanes, George M. Fox, Paul L. Hanes, Atlanta, for appellees.

Syllabus Opinion by the Court

UNDERCOFLER, Justice.

Mercantile National Bank brought this action against Dan A. Aldridge and against his wife Janet R. Aldridge seeking to impress a trust upon certain property transferred to her by her husband. The complainant has outstanding judgments of $133,710 against Dan A. Aldridge. The complainant also sought to enjoin further transfers of the husband's assets to his wife in fraud of his creditors.

Dan A. Aldridge was president, director and a stockholder of Insurance Industries, Inc. for a period of about two years beginning about May 14, 1970, he guaranteed the corporation's notes with the complainant bank. He also guaranteed the notes of Ernest Harris. During the course of his dealing with the bank, Aldridge executed three financial statements to the bank to induce them to extend credit on the security of his guarantees. Listed on these financial statements were stocks of a substantial value and the home of Aldridge in which he owned a one-half undivided interest. As the notes matured, they were extended, renewed or increased from time to time. The last three renewal notes were due in November and December 1971. During 1971 Aldridge began selling his stocks. Some of the proceeds of the stock were used to pay other indebtedness and some were deposited to the account of his wife in another bank. Prior to May 1972, Aldridge and his wife had maintained a joint checking account but the joint account was closed and another account opened in the name of the wife alone. Other money was also deposited in the wife's account. On November 29, 1971, Aldridge conveyed to his wife his one-half undivided interest in their home for a consideration of $10 and other valuable consideration. The home was subsequently sold for $180,000 and the net proceeds from the sale were $141,159. These proceeds were used to purchase another home in her individual name for $150,000. Aldridge and his wife testified that the consideration for the conveyance of the home was his love and affection for his wife and, because of Aldridge's health, for estate planning purposes.

The trial court granted the motion of the wife for summary judgment. The bank appeals. Held:

1. Code § 28-201(2) declares in part that the following acts shall be fraudulent in law: 'Every conveyance . . . made with intention to delay or defraud creditors, and such intention known to the party taking. A bona fide transaction on a valuable consideration, and without notice or ground for reasonable suspicion, shall be valid.'

Under paragraph two of this section a deed may be set aside where it was made with the design and intention to hinder, delay, or defraud creditors, and such an intention may be found to have existed even though the grantor was not and is not insolvent. Beasley v. Smith, 144 Ga. 377, 87 S.E. 293; Betton v. Avery, 183 Ga. 559, 561, 188 S.E. 901; Cothran v. Forsyth, 68 Ga. 560; Baker v. Lyman, 53 Ga. 339; King v. Poole, 61 Ga. 373; Westmoreland v. Powell, 59 Ga. 256; Cohen v. Parish,100 Ga. 335, 28 S.E. 122; Ernest v. Merritt, 107 Ga. 61, 32 S.E. 898; Keeter v. Bank of Ellijay, 190 Ga. 525, 528, 9 S.E.2d 761; Pharr v. Pharr,206 Ga. 354, 358, 57 S.E.2d 177.

' A married woman may make contracts with other persons; but when a transaction between husband and wife shall be attacked for fraud by the creditors of either, the onus shall be on the husband and wife to show that the transaction was fair.' Code § 53-505; Dwight v. Acme Lumber & Supply Co., 189 Ga. 473(3), 6 S.E.2d 586. The testimony of Mrs. Aldridge in this case simply denied any knowledge of her husband's business affairs. '(I)t was for the jury to say whether she had made the proof of good faith required of her by the Code § 53-505, by simply denying knowledge of such business affairs of her husband.' Arrington v. Awbrey, 190 Ga. 193, 197, 8 S.E.2d 648, 651.

It was also a jury question as to whether the grantee is chargeable with notice or ground for reasonable suspicion of his intention to delay or defraud creditors. Lane v. Newton, 145 Ga. 810, 89 S.E. 1083; Gardner v. Day, 182 Ga. 113, 116, 184 S.E. 710. Questions of fraud and bad faith are ordinarily for a jury. Bloodworth v. Bloodworth, 225 Ga. 379, 391, 169 S.E.2d 150; Nixon v. Brown, 225 Ga. 811, 813, 171 S.E.2d 512; Crowder v. Electro-Kinetics Corp., 228 Ga. 610(2), 187 S.E.2d 249.

2. 'The Code declares that certain specified acts of debtors shall be fraudulent in law against creditors and as to them null and void, among which acts is 'Every voluntary deed or conveyance, not for a valuable consideration, made by a debtor insolvent at the time of such conveyance.' Code § 28-201(3). This rule of law is mandatory, and is based upon the moral and legal principle that one should be just before he is generous. Cohen v. Parish, 105 Ga. 339, 347, 31 S.E. 205. While under the Code, § 28-201(2), a fraudulent intent by the debtor is necessary to cancellation, it need not be shown where a voluntary conveyance is rendered void under the Code, § 28-201(3)'. Neal v. Stapleton, 203 Ga. 236, 243, 46 S.E.2d 130, 134.

Under this section, the only facts necessary to be shown in order to render the deed from Aldridge to his wife fraudulent in law, are the indebtedness, the...