Summary
holding that "[u]pon the death of husband or wife the survivor becomes the sole owner by virtue of the deed creating the tenancy by the entirety"
Summary of this case from In re GrimesOpinion
Filed 1 May 1968.
1. Pleadings 12 — A demurrer admits, for the purpose of testing the sufficiency of the pleadings, the truth of factual averments well stated and relevant inferences of fact reasonably deducible therefrom.
2. Fraudulent Conveyances 1 — A voluntary conveyance by a debtor is invalid as to creditors if the grantor did not retain property fully sufficient and available to pay his then-existing debts.
3. Same — A conveyance is voluntary when it is not for value.
4. Fraudulent Conveyances 3 — In plaintiff's action to set aside a deed as a fraudulent conveyance, an allegation that the deed was without legal consideration is sufficient to allege that the conveyance was without valuable consideration.
5. Husband and Wife 15 — The nature of the estate by the entireties is such that the estate can not be subjected to execution to satisfy a judgment taken against the husband or wife alone, and the lien of a judgment so taken does not attach to the entirety property during coverture.
6. Same — While the husband can do no act to affect the wife's right of survivorship in entirety property, the use, rents, issues and profits arising from the entirety property during coverture become the absolute property of the husband and constitutes a part of the fund from which his creditors may be satisfied.
7. Same; Fraudulent Conveyances 3 — Creditor may not set aside as fraudulent conveyances by husband of entirety property to wife. In an action against the wife to set aside a deed from her husband as a fraudulent conveyance, plaintiff alleged that (1) it had recovered judgment against the husband, (2) subsequent thereto the husband conveyed to his wife certain lands owned by them as tenants by the entireties, (3) that the conveyance was without legal consideration and was for the purpose of defrauding his creditors, and (4) the husband, at the time of the conveyance, did not retain sufficient property to pay his existing creditors. Held: The wife's demurrer on the ground that the plaintiff had no interest or right in the conveyance was properly allowed, since no lien could attach to the entirety property or to the possibility that the husband might become sole owner by surviving his wife.
APPEAL by plaintiff from McKinnon, J., August-September 1967 Civil Session of ROBESON. This case was docketed and argued at Fall Term 1967 as No. 855.
W. Earl Britt for plaintiff appellant.
L. J. Britt Son and Robert Weinstein for defendant appellee.
SHARP, J., concurring in result.
BOBBITT, J., joins in concurring opinion.
HUSKINS, J., took no part in the consideration or decision of this case.
Civil action to set aside deed as being a fraudulent conveyance.
Plaintiff alleged in its complaint that it had recovered judgment against Alex L. Leggett on 17 May 1966 in the amount of $8,276.46; that on 27 December 1966 Alex L. Leggett purported to convey certain lands by warranty deed (filed for registration on 27 December 1966 and recorded in the Robeson County Registry in Book 15-W at page 25) to his wife, the defendant; that prior to 27 December 1966, Alex L. Leggett and defendant owned the lands described in the warranty deed as tenants by the entirety and that Alex L. Leggett was entitled to possession of said lands and the rents and profits therefrom; that the conveyance was without legal consideration and was for the purpose of defrauding the creditors of Alex L. Leggett; that Alex L. Leggett did not, at the time of the conveyance, retain sufficient property to pay his then existing creditors.
Notice of lis pendens was filed in the office of the Clerk of Superior Court of Robeson County on 2 February 1967.
The demurrer to the complaint on grounds that it did not state facts sufficient to constitute a cause of action against defendant in that plaintiff had no interest, title or right in law to the proceedings, matters and things alleged in its complaint, was allowed. Defendant's motion for cancellation of the notice of lis pendens was also allowed.
Plaintiff appealed.
It is well settled law in North Carolina that a demurrer admits, for the purpose of testing the sufficiency of the pleadings, the truth of factual averments well stated and relevant inferences of fact reasonably deducible therefrom. Strong's N.C. Index, Vol. 3, Pleadings, 12, p. 625.
Aman v. Walker, 165 N.C. 224, 81 S.E. 162, is a "landmark case" on fraudulent conveyances. It is therein stated:
". . . If the conveyance is voluntary, and the grantor did not retain property fully sufficient and available to pay his debts then existing, it is invalid as to creditors; . . ."
Appellee contends that the complaint was fatally defective because it fails to allege that the conveyance was made without a valuable consideration. This poses the question whether a voluntary conveyance or conveyance without a valuable consideration was sufficiently alleged by plaintiff's allegation, "As plaintiff is informed and believes said deed was without legal consideration."
A conveyance is voluntary when it is not for value, i.e., when the purchaser does not pay a reasonably fair price such as would indicate unfair dealing and be suggestive of fraud. Supply Corp. v. Scott, 267 N.C. 145, 148 S.E.2d 1; Austin v. Staten, 126 N.C. 783, 36 S.E. 338.
A "good" consideration means a valuable consideration. Arrington v. Arrington, 114 N.C. 151, 19 S.E. 351. Black's Law Dictionary, Fourth Edition, defines "legal consideration" as follows: "One recognized or permitted by the law as valid and lawful; as distinguished from such as are illegal or immoral. The term is also sometimes used as equivalent to `good' or `sufficient' consideration." (Emphasis ours.) Construing the pleadings in the light most favorable to the pleader with a view to substantial justice between the parties, as we must, Glover v. Brotherhood, 250 N.C. 35, 108 S.E.2d 78, we hold that the complaint sufficiently alleges a conveyance without valuable consideration.
Applying these rules to the pleadings in instant case, it is apparent that had the property conveyed been owned by the husband alone, the allegations of the complaint would have been sufficient to withstand defendant's demurrer and motion.
Since the trial court sustained the demurrer because "plaintiff has no interest, title, or right in law in the proceedings and matters and things alleged in its complaint," the real question becomes whether or not during the lifetime of his wife the rents, uses, issues and profits from the entirety land could be subjected to judgment taken solely against the husband. We must therefore consider some of the incidents and properties of an estate by the entirety. An estate by the entirety is an estate where the husband and wife are neither "joint tenants" nor "tenants in common," since they are considered one person in law. They cannot take the estate by moities but both are seized per tout and non per my, thus neither can dispose of any part without the assent of the other, but the whole must remain in the survivor, Bryant v. Shields, 220 N.C. 628, 18 S.E.2d 157. The doctrine of title by entireties between husband and wife as it existed at common law remains unchanged by statute or constitutional provision in North Carolina. Johnson v. Leavitt, 188 N.C. 682, 125 S.E. 490. The nature of the estate is such that the estate cannot be subjected to execution to satisfy a judgment taken against the husband or the wife alone, and the lien of a judgment so taken does not attach to the entirety property during coverture. Thus, in such case, during coverture the joint deed of the husband and wife may convey the entirety property free and clear of a judgment lien docketed against only one of them. Grabenhofer v. Garrett, 260 N.C. 118, 131 S.E.2d 675. The reasoning which precludes a lien being placed on entirety property by a judgment solely against one spouse is forcibly stated in Bruce v. Nicholson, 109 N.C. 202, 13 S.E. 790, as follows:
"The nature of this estate forbids and prevents the sale or disposal of it, or any part of it, by the husband or wife without the assent of both; the whole must remain to the survivor. The husband cannot convey, encumber, or at all prejudice, such estate to any greater extent than if it rested in the wife exclusively in her own right; he has no such estate as he can dispose of to the prejudice of the wife's estate. The unity of the husband and wife as one person, and the ownership of the estate by that person, prevents the disposition of it otherwise than jointly.
"As a consequence, neither the interest of the husband, nor that of the wife, can be sold under execution so as to pass away title during their joint lives or as against the survivor after the death of one of them. . . . Indeed it seems that the estate is not that of the husband or the wife; it belongs to that third person recognized by the law, the husband and the wife. It requires the co-operation of both to dispose of it effectually."
Upon the death of husband or wife the survivor becomes the sole owner by virtue of the deed creating the tenancy by the entirety. Woolard v. Smith, 244 N.C. 489, 94 S.E.2d 466. However, where a joint judgment is obtained against the husband and wife during coverture, the lien attaches and the entirety property may be sold under execution. Further, the lien of a judgment docketed against either the husband or the wife will immediately attach to the entirety property if the spouse against whom the judgment is obtained is the survivor and the judgment is still active and unsatisfied. Johnson v. Leavitt, supra.
Although neither the husband nor the wife can separately deal with the estate, and the interest of neither can be subjected to rights of creditors so as to affect the survivor's right to the estate, the husband, during coverture, is entitled to the full control, possession, income, and usufruct of the estate. Bryant v. Bryant, 193 N.C. 372, 137 S.E. 188.
In the exercise of this control use and possession, he may, without joinder of the wife, lease the property, mortgage the property, grant rights-of-way, convey by way of estoppel — qualified in all these instances by the fact that the wife is entitled to the whole estate unaffected by his acts if she survive him. See 41 N.C. Law Review 67, 85, "Tenancy by the Entirety in North Carolina," by Dr. Robert E. Lee, and the cases therein cited.
In Brinson v. Kirby, 251 N.C. 73, 110 S.E.2d 482, the wife brought suit to restrain sale of crops grown on land purportedly held by the entirety. The sale was to satisfy judgments against the husband alone. She offered evidence which tended to show that she owned the land as her separate estate; that an attempt to create an estate by the entirety was made but was void for failure to comply with G.S. 52-12. The court excluded this evidence. This Court held the evidence was erroneously excluded and stated:
". . . The evidence should have been admitted, and with the evidence before the jury the court could not have given a peremptory instruction, to which plaintiff appellant likewise excepts."
In the case of Lewis v. Pate, 212 N.C. 253, 193 S.E. 20, plaintiff obtained a judgment against defendant J. R. Pate. Upon issue of execution the sheriff proceeded to have defendant's personal property exemption allotted. Crops raised on land owned by defendant and his wife by the entirety were set apart as part of the exemption, and other parts of the crops were ordered sold under the execution. In the trial below the jury found that the crops belonged to defendant J. R. Pate. This Court, in finding no error in the trial below, stated:
". . . the appellant presents to this Court for determination only one question, to wit: `Does the husband own and have the right to dispose of all the income, rents and profits, products, etc., accruing from an estate held by entirety to such an extent that an execution against him may be levied upon it to the exclusion of any interest the wife may have?' This question must be answered in the affirmative. It is well established law in this State that the husband, during coverture and as between himself and the wife, has absolute and exclusive right to the control, use, possession, rents, issues, and profits of property held as tenants by the entirety. The common-law rule still prevails. . . ."
A husband alone can do no act to affect the wife's right of survivorship in entirety property; neither may his creditors affix a lien or encumbrance upon entirety property which will affect her right of survivorship. Yet, the use, rents, issues and profits arising from the entirety property become the absolute property of the husband and constitute a part of the fund from which his creditors may be satisfied.
In 24 Am. Jur., Fraudulent Conveyances, 8, p. 166, it is stated:
"The determination of the character of a conveyance as fraudulent or otherwise involves the consideration of various elements and factors, . . .
". . . The law is based upon the theory that the assets or resources of the debtor constitutes a fund out of which the creditors have a right to be paid; and within the purview thereof is any business affair which diverts the debtor's assets from payment of his debts, or which places beyond the reach of creditors property from which their claims might otherwise be satisfied. . . ."
Since in the instant case lien cannot attach to the entirety property, Davis v. Bass, supra, or to the possibility that the husband might become sole owner by surviving his wife, Bruce v. Nicholson, supra, and the pleadings do not allege that there were rents, income, issues or profits accrued or accruing from the entirety property, we hold that the trial judge properly allowed the demurrer to the complaint and the motion to cancel the notice of lis pendens.
Moreover, to avoid husband's deed would be an exercise in futility. Husband and wife could by joint voluntary conveyance transfer the property to anyone of their choice, free of lien or claim of husband's individual creditors.
Judge McKinnon's judgment is
Affirmed.
HUSKINS, J., took no part in the consideration or decision of this case.