Nat'l Valley Bank Of Staunton v. Roudabush

• Decision Date: 08 June 1938
• Citation: 197 S.E. 484
• Parties: NATIONAL VALLEY BANK OF STAUNTON. v. ROUDABUSH et al.
• Court: Virginia Supreme Court

197 S.E. 484

NATIONAL VALLEY BANK OF STAUNTON.

v.ROUDABUSH et al.

Supreme Court of Appeals of Virginia.

June 8, 1938.

Appeal from Corporation Court of Staunton; Richard S. Ker, Judge.

Suit by the National Valley Bank of Staunton against M. Alice Roudabush and others to declare a deed invalid as having been executed without valuable consideration and with intent to hinder, delay, and defraud creditors. From a decree of dismissal, plaintiffs appeal.

Reversed and remanded, with directions.

Argued before HUDGINS, GREGORY, BROWNING, EGGLESTON, and SPRATLEY, JJ.

J. H. May and J. M. Perry, both of Staunton, for appellant.

George D. Conrad, of Harrisonburg, and W. Terrell Sheehan, of Staunton, for appellees.

HUDGINS, Justice.

The National Valley Bank of Staunton filed its bill alleging that M. Alice Roudabush and her husband, J. W. Roudabush, were indebted to it in the sum of $4550, and that on December 15, 1932, without valuable consideration and with intent to hinder, delay and defraud creditors, they executed a deed purporting to convey 186 acres of land and all their personal property, including "farming equipment, machinery, live stock" and certain household articles owned by the grantors and situated on the farm, to their three children, Waldo W. Roudabush, Mary Sue Roudabush and Virginia Shreve. The respondents filed joint and separate answers denying the material allegations of the bill, and alleging that they had paid adequate consideration for the property described in the deed. The chancellor held the deed valid and dismissed the suit. The National Valley Bank of Staunton obtained this appeal from that decree.

The conceded facts are that in 1922 Mr. and Mrs. Roudabush sold the farm in controversy, including the live stock and implements then on the place, for $38,000. As a part of the purchase price a house and lot in Staunton, referred to in the evidence as the Kalorama street residence, valued in the trade at $18,000, was conveyed to Mr. Roudabush. Mrs. Roudabush was given, or took, as her interest in the land, $15,000 in bonds secured by a deed of trust on the farm. The purchaser failed to pay these bonds at maturity, and in May, 1928, Mrs. Roudabush, at public sale held under the deed of trust, purchased the farm for $16,800. In order to pay the expenses of sale and other bonds secured by the deed of trust in the hands of a third party, Mr. Roudabush borrowed from appellant, on his note, with his wife as endorser, the sum of $4000. This note was renewed from time to time, and on the date of the conveyance the $4000 debt, with some other smaller obligations was still due the bank. Judgment was obtained on these notes at the October term, 1933, of the Circuit Court of Augusta county.

The farm and the personal property described in the deed were all the assets owned by Mrs. Roudabush. Her husband owned the Kalorama street residence, subject to a lien of $3000 that he and his wife had executed in February, 1932, to secure other creditors of the husband. In 1933, at a sale held under this deed of trust, the residence brought $3600, not more than sufficient to pay the expenses of sale and the debts secured.

The general principles applicable to transfers of property from parents to children under these circumstances are well settled, and are stated in the following excerpts from a few opinions of this court.

The relationship of the parties (father and son) and the insolvency of the grantor, do not of themselves constitute badges of fraud and relieve the creditors from proving the charges of fraud set up in their pleadings. Johnson v. Lucas, 103 Va. 36, 48 S.E. 497; Lipman v. Norman Packing Co., 146 Va. 461, 467, 131 S.E. 797.

"While fraud must be clearly proved by him who alleges it, it is not necessary that it should be expressly shown. It is rare that it can be. The participants are not apt to discuss it, but actions speaklouder than words, and the transaction itself often furnishes proof of the fraud that is entirely satisfactory." Crowder v. Crowder, 125 Va. 80, 99 S.E. 746, 748; Hazlewood v. Forrer, 94 Va. 703, 27 S.E. 507; Todd v. Sykes, 97 Va. 143, 33 S.E. 517.

Chief Justice Campbell, in Haynes v. Bunting, 152 Va. 395, 401, 147 S.E. 211, 213, said: "While it is true that the relationship of mother and son does not of itself constitute fraud, yet a transaction between parties so closely bound together, where the rights of third parties are involved, calls for the closest investigation." See Dodds v. Lafon, 153 Va. 110, 117, 149 S.E. 417.

In Fowlkes v. Tucker, 164 Va. 507, 514, 180 S.E. 302, the following is said (page 305): "As a general rule the burden of proof rests on him who charges fraud, and not on him whose conduct is charged to be fraudulent. But, where the transaction assailed is between brother and brother or other near relatives, only slight evidence is required to shift the burden of showing its bona fides." Mankin v. Davis, 82 W.Va. 757, 97 S.E. 296; Carlsbad Mfg. Co. v. Kelley, 84 W.Va. 190, 100 S.E. 65; Hickman's Ex'r v. Trout, 83 Va. 478, 3 S.E. 131; Todd v. Sykes, 97 Va. 143, 33 S.E. 517. See Brunswick Bank & Trust Co. v. Valentine, 158 Va. 512, 164 S.E. 569; Flanagan v. Parsons, 167 Va. 6, 187 S.E. 473; Francisco v. Neel, 167 Va. 13, 187 S.E. 495.

Appellees contend that the bona fides of the consideration is established by (1) the value of the Kalorama street residence, (2) the promise to support the grantors so long as they lived, (3) the existence and discharge of the following debts claimed to be due by Mrs. Roudabush: (a) $4565.90 due to Mrs. Miller, a twin sister of Mrs. Roudabush, (b) $1600 due to Virginia Shreve, and (c) $2233.69 due to Waldo W. Roudabush.

Experienced business men residing in Staunton, who knew real estate values and who were familiar with the Kalorama street residence, testified that in 1932 the value of this house and lot was from eight to ten thousand dollars, but it was sold during the depression and, hence, there were few buyers willing to bid on it. Both Mr. and Mrs. Roudabush testified that they thought the property was worth at least $8000, sufficient to pay the liens on it and the amount due appellant, that they offered to give appellant a second lien on the property to secure the amount due it, but appellant refused to take the security. After the sale Mr. Roudabush made an unsuccessful attempt to have the sale set aside on the ground that $3600 was a grossly inadequate price for the property.

These facts are pertinent and are entitled to due consideration in determining whether or not the transfer of the property to the children is tainted with fraud. However, such facts are not alone sufficient to sustain a mere voluntary conveyance against the claim of existing creditors if a suit to invalidate the voluntary conveyance is brought within five years from the date of recordation. See Morriss v. Bronson & Moore, Receivers, Va., 197 S.E. 479, opinion announced at this term of court.

No stress was made in the argument upon the grantees' promise to support the grantors. No such promise was incorporated in the deed, and even if it had been, ordinarily such a consideration for the benefit of the grantor is not valid as to existing creditors of the grantor. See 6 R.C. L. 546; Consolidated Rendering Co. v. Martin, 128 Me. 96, 145 A. 896, 64 A.L.R. 790; but see Bruce v. Dean, 149 Va. 39, 140 S.E. 277.

Appellees rely wholly on the oral testimony of members of the family to prove that the obligations asserted against Mrs. Roudabush, at their inception, were based on promises to repay, thereby creating, at the time, the relation of debtor and creditor between Mrs. Roudabush and Mrs. Miller, Waldo W. Roudabush and Virginia Shreve. Mrs. Miller and her husband, who was a practicing attorney, lived in Los Angeles. She had no children of her own, and was devoted to her nieces and nephew. She made frequent visits to her sister in Augusta, some times staying as long as six months. Each member of the family testified that since 1908 Mrs. Miller had, at various times, sent money to or made expenditures for the benefit of Mrs. Roudabush.

In the spring of 1932 Mrs. Miller, while on a visit to her sister, who has then at the Kalorama street residence in Staunton, called a family conference and, for the first time, demanded a settlement or repayment of all sums that she had given or expended for the benefit of her sister. Mrs. Roudabush told her that she was not able to pay the money and that the farm would not, at that time, bring its full value. Thereupon Mrs. Miller proposed, subject to Mr. Miller's approval, that she and the two children cancel all indebtedness owing to them by Mrs. Roudabush, and that in consideration therefor Mr. and Mrs. Roudabush should convey the farm and the personal property thereon to the three children. As a further consideration, the children "should look after our mother and father, and furnish them food and clothing and medical care all the rest of their lives." This proposal was accepted, and when Mrs. Miller returned to California she talked the matter over with her husband, and wrote Mrs. Roudabush that Mr. Miller approved. Shortly thereafter the deed now under consideration was executed. Mrs. Miller denied any knowledge of the debts due appellant and said that her reasons for making the proposal were that she wanted to do something for the children and, on account of her impaired health, to get her financial affairs settled.

The difficulty we have in accepting this, and other oral testimony of members of the family, is the total lack of written or documentary evidence, or other corroborating circumstances tending to show that at the time the money was advanced, it was the intention of the parties to create the relation of creditor and debtor. Mrs. Miller and members of the family testified that the amount due her was $4565.90, comprising 17 items and interest. The first item is $200 sent to Mrs. Roudabush in 1908 for the purpose of buying...