Virginia National Bank v. Woodson

• Decision Date: 31 March 1964
• Docket Number: No. 9108.,9108.
• Citation: 329 F.2d 836
• Parties: VIRGINIA NATIONAL BANK (formerly known as Peoples National Bank of Charlottesville, and also formerly known as Peoples National Bank of Central Virginia), Appellant, v. B. B. WOODSON, Trustee in Bankruptcy, Appellee. In the Matters of Sterling R. DECKER, Bankrupt, In Bankruptcy, No. 706, and Sterling R. Decker and Mary Jane Decker, Partners, t/a Berkeley Community Builders, Bankrupts, In Bankruptcy, No. 707.
• Court: U.S. Court of Appeals — Fourth Circuit

329 F.2d 836 (1964)

VIRGINIA NATIONAL BANK (formerly known as Peoples National Bank of Charlottesville, and also formerly known as Peoples National Bank of Central Virginia), Appellant, v. B. B. WOODSON, Trustee in Bankruptcy, Appellee In the Matters of Sterling R. DECKER, Bankrupt, In Bankruptcy, No. 706, and Sterling R. Decker and Mary Jane Decker, Partners, t/a Berkeley Community Builders, Bankrupts, In Bankruptcy, No. 707.

No. 9108.

United States Court of Appeals Fourth Circuit.

Argued November 8, 1963.

Decided March 31, 1964.

Atwell W. Somerville, Orange, Va. (Somerville & Moore, Orange, Va., on brief), for appellant.

William S. Aaron, Jr., Charlottesville, Va. (Walker, Woodson & Aaron, Charlottesville, Va., on brief), for appellee.

Before HAYNSWORTH, BOREMAN and BRYAN, Circuit Judges.

BOREMAN, Circuit Judge.

This appeal stems from a decision of the District Court with respect to a transfer of property by a bankrupt alleged as preferential under the provisions of Section 60 of the Bankruptcy Act, 11 U.S.C.A. § 96.

Facts

Pursuant to a petition filed by his creditors on December 11, 1961, Sterling R. Decker was adjudicated an involuntary bankrupt. At or about the same time, involuntary petitions were filed against Sterling R. Decker and Mary Jane Decker, partners trading as Berkeley Community Builders, who were thereafter adjudicated bankrupts. On June 11, 1962, B. B. Woodson, the duly appointed Trustee of the bankrupt estates, filed his petition before the Referee attacking as preferential a payment of $8,000 by Sterling R. Decker's sister, Vivian A. Decker, to The Peoples National Bank of Charlottesville, the predecessor of Virginia National Bank.

In 1957 Decker and several others had purchased a tract of land in Albemarle County, Virginia, which was developed by them as a residential subdivision under the name of Berkeley Community. In early 1961 Decker constructed a swimming pool on a portion of the land in Berkeley Community, the purpose of the swimming pool being to enhance the desirability of Berkeley Community as a residential subdivision. A nonprofit corporation, known as the Berkeley Community Swimming Pool Corporation, was formed for the purpose of operating the swimming pool. Article IV of the Corporation's Articles of Incorporation reads as follows:

"The membership of the corporation shall consist of two classes, resident members and seasonal non resident members; the former shall be those persons resident in Berkeley Community who are in good standing in the Corporation, as shown by the records, minutes and By-laws of the corporation. Swimming pool privileges shall accrue to each resident member\'s family. The total amount of memberships shall not exceed eighty (80). Seasonal non resident memberships may be authorized by a majority vote of the resident members in an amount not to exceed the number unsubscribed resident membership, but at no time will the total amount of resident memberships and seasonal non resident memberships exceed eighty (80). Resident members of the corporation shall receive certificates of membership, which shall entitle them to all of the privileges of the corporation, but which shall not entitle them to any financial profits of any type, and which, in case the member shall resign or have his membership terminated in accordance with any of the By-laws of the corporation, shall become null and void."

The fee for membership in the swimming pool corporation was fixed at $200.00 per person. As a consideration for the services rendered by Decker in the construction of the swimming pool and to reimburse him for expenditures of his own funds in such construction, the corporation gave Decker the right to initially designate new members; for each such designee subsequently accepted by the corporation as a member, Decker was to receive the $200.00 membership fee.

For a number of months prior to November 10, 1961, the bank accounts of the bankrupts at the Bank had been substantially overdrawn. As of November 8, 1961, the overdraft in the account of Mary Jane Decker was $35.72 and the overdraft of Sterling R. Decker or Mary Jane Decker was $582.89; and as of November 10, 1961, the overdraft in the account of the partnership, Berkeley Community Builders, was $8,877.90. There is evidence to support the inference that these overdrafts were the result of Decker's connivance with a bank employee. After officials of the bank discovered the overdrafts Decker was pressed for payment. The Referee found that the possibility of criminal prosecution against both Decker and the involved bank employee was mentioned, but whether to Decker or not is not clear from the evidence. Decker had exhausted all sources for borrowing funds. In desperation he turned to his sister, Vivian A. Decker, who lived in Florida, for assistance in covering the overdrafts.

The Referee found that "the possibility of criminal prosecution is one of the levers employed by Decker to prevail upon his sister to make the loan to him." Vivian Decker was reluctant to advance any money but the record is clear that Decker promised to give his sister an assignment of forty-five swimming pool shares or rights for a loan of $8,000.00, that being the maximum amount which she informed her brother she could raise. Miss Decker not having implicit faith that her brother would use the money to take care of the overdrafts had a telephone conversation with an attorney of Charlottesville, Virginia, arranged to send him $8,000.00 and instructed him to apply that amount on Decker's overdrafts at the bank "only if he raised sufficient other funds to cover the overdrafts."

On or about November 11, 1961, the Charlottesville attorney received from Vivian A. Decker a Western Union money order for $8,000.00 but on the same day Miss Decker arrived in Charlottesville from Florida and repossessed the money order. In accordance with instructions from Decker, the attorney had prepared an assignment to Vivian A. Decker of the swimming pool rights but had no independent knowledge as to whether the assignment was executed by Decker. On November 13, 1961, while sitting in a car parked near the bank, Vivian Decker delivered to an employee of The Peoples National Bank the Western Union money order for $8,000.00. This was the first contact had by any representative of the bank with Vivian Decker concerning this particular transaction and it does not appear that any inquiry was made by the bank employee at that time, or subsequently, as to the nature of the transaction between Decker and his sister. The Peoples National Bank used the $8,000.00 to pay the overdraft of $35.72 in the account of Mary Jane Decker, the overdraft of $582.89 in the account of Sterling R. Decker or Mary Jane Decker, and to reduce the overdraft in the partnership account by the sum of $7,381.39.

After Miss Decker's return to Florida, she received a promissory note in the amount of $8,000.00 dated November 10, 1961, executed by Decker and payable to her order on demand. This note was delivered to her personally by Decker's wife. On or about November 17, 1961, Miss Decker received through the mail a so-called Bill of Sale signed by Decker and acknowledged by him on November 10, 1961, which purported to sell, assign, set over and transfer unto Vivian Decker "all his...