Union Trust Corp. v. Fugate

• Decision Date: 09 January 1939
• Citation: 200 S.E. 624
• Parties: UNION TRUST CORPORATION. v. FUGATE.
• Court: Virginia Supreme Court

200 S.E. 624

UNION TRUST CORPORATION.

v.FUGATE.

Supreme Court of Appeals of Virginia.

Jan. 9, 1939.

Error to Circuit Court, Washington County; Walter H. Robertson, Judge.

Action by T. H. Fugate against the Union Trust Corporation, for fraud and deceit in sale of notes. Judgment on a verdict for plaintiff, and defendant brings error.

Affirmed.

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

Love B. Rouse, of Bristol, and Thomas C. Phillips, of Abingdon, for plaintiff in error.

E. Hagan Richmond and Hagan Bond, both of Gate City, for defendant in error.

SPRATLEY, Justice.

This proceeding is based upon a charge of fraud and deceit. It involves a transaction whereby certain notes for the payment of money were alleged to have been sold upon false and untrue representations that they were secured by a deed of trust constituting a first lien upon real, estate.

The jury found a verdict for the plaintiff, T. H. Fugate. The trial court sustained the verdict. The defendant asks us to set aside the judgment as contrary to the law and the evidence, and for alleged errors of law committed during the trial.

The parties will be referred to hereinafter as plaintiff and defendant, the respective positions they occupied in the trial court.

So far as the question of the weight and sufficiency of the evidence to support the judgment is concerned, we need, in view of the verdict of the jury, consider only so much thereof as is favorable to the plaintiff. If that is credible and sufficient to sustain the verdict, it cannot be discredited merely because of contradictions. It was within the peculiar province of the jury to determine whom they believed.

Viewed in this light, the record discloses that the jury might have found therefrom the following facts:

The Union Trust Corporation, whose name was formerly Union Trust Bank, is a commercial banking institution located at Bristol, Tennessee.

In October, 1923, this Bank made a loan to J. B. Bowlin, the father-in-law of T. H. Fugate. The debt was evidenced by two notes for $500 each made by Bowlin and his wife, payable to bearer one year after date. They were secured by a deed of trust of even date, therewith from Bowlin and his wife to D. T. McKee, trustee, conveying 267 acres of land in Scott county, Virginia, upon which the grantors resided. Union Trust Bank promptly forwarded the deed of trust to the clerk's office of Scott county, with the request that it be recorded and returned to it, stating that it would pay the recording fee when the bill was received. The clerk did not receive the recording fee, and did not record the deed of trust.

The Bank demanded payment at maturity, but the makers of the notes were unable to pay them. Bowlin having become involved in financial difficulties, told his son-in-law, T. H. Fugate, that he owed this $1,000, secured by a first deed of trust on his land and home, and suggested to Fugate that if he could arrange to purchase, or pay the notes, his money would be safe.

Fugate, a man with little education and small business experience, then went to the Bank, and asked Mr. J. H. Faucette, its president, if the notes were safe, and particularly if the deed of trust was recorded. Mr. Faucette stated to him that the notes were perfectly safe, and that the deed of trust was duly of record in Scott county. Fugate then arranged with the president of the Bank to purchase the notes and then, or soon thereafter, began making payments on the debt. These payments were made from time to time, and a number of them were made to S. T. Bowman, then assistant cashier of the Bank. The payments were made out of funds belonging to Fugate, and which he said he secured from work as a laborer, from his farming operations, and from a loan to him from a friend.

Fugate testified that he did not purchase the notes for his father-in-law, nor was any of his father-in-law's money used in the purchase. J. B. Bowlin corroborated him in this, and states that he furnished none of the money for the purchase, but that Fugate used his own money.

Fugate completed payment of the full amount of the notes, principal and interest, in December, 1926. The Bank stamped the notes "Paid, " and delivered them to Fugate with a letter to H. P. Nickels at Gate City, the location of the clerk's office of Scott county, authorizing him to release the deed of trust, and saying that Fugate would pay the release fee of fifty cents. Fugate says that this letter was written because he had advised Mr. Faucette that he contemplated making a deal with Bowlin, whereby he might purchase some of the latter's land, and, in that event, wanted the lien released. However, the letter was never delivered to Mr. Nickels, nor the notes presented for a release of the deed of trust. Fugate, believing that he had purchased the notes and was the legal holder thereof, and relying upon the Bankpresident's statement that the notes were safe and secured by a deed of trust, duly of record, did not go to the clerk's office to have the deed of trust released, but carried the notes with him and kept them securely for two or three years.

Fugate afterwards spoke to a lawyer, a kinsman by marriage, who told him the notes had not been properly assigned. He carried them back to the Bank, and discussed the matter with Mr. S. T. Bowman, who had become the cashier of the Bank. He explained to Mr. Bowman that he had purchased and paid for these notes, and desired to hold them as regularly assigned to him. Mr. Bowman then made the following endorsement, undated, upon each of the notes:

"This note was paid to us by T. H. Fugate and bought from us by him, and although paid so far as we are concerned, they should not have been marked paid as Mr. Fugate holds them for value.

"Union Trust Bank "By-- S. T. Bowman, Cashier."

In the meantime, J. B. Bowlin and wife had executed two other deeds of trust on their real estate, one of them covering the 267 acres embraced in the deed of trust to McKee.

On November 29, 1928, subsequent to the other deeds of trust, Bowlin and his wife executed another deed of trust to J. W. Bowlin, trustee, to secure the payment of $1,050, to T. H. Fugate. This latter deed of trust was on 44 acres of land, a separate tract from that in the deed of trust to McKee, but covered the same debt. This was a prior deed of trust against these 44 acres of land. Fugate did not then examine the records to ascertain whether the deed of trust to McKee had been recorded, but claimed he secured the execution of the deed of trust to J. W. Bowlin, trustee, in order to protect himself, because he was disturbed over the method of the assignment of the notes to him.

Subsequently, J. B. Bowlin, having become seriously involved financially, and being unable to pay his debts, foreclosure proceedings were instituted against him.

Fugate, in arranging to present his claim for a first lien under the deed of trust to McKee, heard that this deed of trust had not, in fact, been recorded. This was about the year, 1936, and he went again to the Bank, where its officers again assured him that the deed of trust was recorded. He then arranged' for one of the Bank's officers to accompany him to the clerk's office at Gate City, and there they found the deed of trust had never been put to record, nor the recording fee paid. There was a notation on its back showing the amount of the recording fee, and the words "Statement sent.--Another sent."

The real estate of Bowlin was sold under foreclosure proceedings, and did not realize a sum sufficient to pay the creditors secured under the recorded deeds of trust, leaving nothing for Fugate's claim.

As opposed to the claim of the plaintiff, the defendant relies upon the stamping of the notes as paid; the action of Fugate in having another deed of trust executed to secure his debt; the long lapse of time in discovering the failure of the recordation of the McKee deed of trust; its suspicion that Fugate was concealing the truth as to his knowledge of the situation and as to the source of the money paid; that Fugate and Bowlin were in collusion to extort the money from the Bank; that the evidence of the alleged fraud was not clear and convincing; and that the trial judge expressed his doubt as to the right of recovery.

Where there were questions of fact, or conflicts in the evidence, the jury resolved each question against the defendant.

The instructions as to the law were just as favorable to the defendant as could have been properly given. They covered every phase of its several contentions.

It is true that fraud is not to be presumed, and that it must be proved by evidence that is clear, cogent, and convincing. The court instructed the jury in this exact language. There was clear and cogent evidence of constructive fraud, and...