Court Opinion

ID: 1057830
Source: CourtListenerOpinion
Date Created: 2013-10-09 18:27:22.15989+00
Date Added: 2024-06-11T09:35:07.811292
License: Public Domain

PRESENT: Kinser, C.J., Lemons, Goodwyn, Millette, Mims and
Powell, JJ., and Koontz, S.J.

LLOYD VERNON TUTTLE, JR.
                                            OPINION BY
 v.   Record No. 111911          CHIEF JUSTICE CYNTHIA D. KINSER
                                      September 14, 2012
HENRY B. WEBB, EXECUTOR
OF THE ESTATE OF GRACE TUTTLE

          FROM THE CIRCUIT COURT OF PRINCE EDWARD COUNTY
                 Thomas V. Warren, Judge Designate

      Lloyd Vernon Tuttle, Jr. (Lloyd) appeals the circuit

court's judgment holding that execution of a check payable to

his wife, Grace Overton Tuttle (Grace), excluded the funds from

Grace's augmented estate and that therefore Lloyd's written

consent or joinder was not required when Grace, before her

death, gifted the funds to her son.   Lloyd also appeals the

circuit court's judgment holding him liable for more than one-

half of an indebtedness evidenced by a note executed by him and

Grace as co-makers.   Because we conclude that Lloyd's check to

Grace did not exclude those funds from Grace's augmented estate

pursuant to Code § 64.1-16.1(B)(i) and that Lloyd is liable for

only one-half of the joint indebtedness, we will reverse the

circuit court's judgment.

                I. REVELANT FACTS AND PROCEEDINGS 1

      In 2010, Grace died and was survived by her husband, Lloyd,

their two adopted children, and Henry B. Webb (Henry), her son

      1
       The facts and proceedings are set forth in a written
statement of facts filed pursuant to Rule 5:11(e).
from a previous marriage.    In her will, which was probated in

the Prince Edward County Circuit Court Clerk's Office, Grace

named Henry as the executor of her estate, and devised and

bequeathed her entire estate to him. 2

     Lloyd timely filed a claim for an elective share in Grace's

augmented estate pursuant to Code § 64.1-13.    Subsequently,

Henry filed a complaint in the circuit court, naming Lloyd as a

defendant and seeking, among other things, a determination of

the value of Lloyd's elective share in Grace's augmented estate. 3

     The circuit court, sitting as the trier of fact, heard

evidence regarding Grace's estate.     In 2005, Lloyd and Grace

sold their jointly owned real property located in Chesterfield

County and deposited the sale proceeds of $118,000 into their

joint checking account.     After using a portion of the proceeds

to pay jointly owed debts, Lloyd executed two checks drawn on

the joint checking account, each in the amount of $41,750.      One

check was payable to Lloyd, and the other check was payable to

Grace.   Lloyd never cashed his check, and his $41,750 remained

in the joint checking account.    Grace, however, used the

     2
       Grace excluded Lloyd and her adopted children from
inheriting anything under her will.
     3
       A petition to establish the amount of an elective share
may be filed by a surviving spouse, a decedent's personal
representative, or any party in interest. Code § 64.1-16.2(D);
Chappell v. Perkins, 266 Va. 413, 418, 587 S.E.2d 584, 587
(2003).

                                   2
proceeds from her check to obtain two cashier's checks, each

issued in the amount of $20,875 and payable to Henry. 4

     Henry testified that the cashier's checks were a gift from

Grace and that Lloyd knew of the gift.    Lloyd, however,

testified that Grace told him that she gave Henry the money to

invest for her.

     The circuit court held that by executing the check to

Grace, Lloyd "made a gift of $41,750[] from joint funds of the

parties to his wife Grace," and that the check to Grace

represented his consent in writing to a gift from Lloyd to

Grace.   Thus, the court concluded that Grace's gift of those

funds to Henry required no further "written joinder" by Lloyd as

the funds were already excluded from Grace's augmented estate.

     In her will, Grace devised to Henry a parcel of real

property, located in the Town of Farmville, that she previously

had received as a gift from her mother.    That real property was

the residence of Lloyd and Grace and was encumbered by a deed of

trust, which Grace had executed as the sole owner of the

property.   The deed of trust secured the payment of a note in

the principal amount of $50,000, which both Lloyd and Grace had

     4
       Although there is a discrepancy in the written statement
of facts with regard to the date Grace and Lloyd deposited the
proceeds from the sale of their real property into their joint
checking account and the date Grace acquired the cashier's
checks, it does not affect the Court's analysis of the issues on
appeal.

                                 3
executed as co-makers.   They used $25,000 of the loan amount to

repair the Farmville residence, but Lloyd withdrew the remaining

$25,000 and deposited that sum into an account held solely in

his name.   Lloyd stipulated that, as co-maker of the note, he

was liable for one-half of the principal amount, i.e., $25,000,

together with interest, and that such sum should be deducted

from his elective share of Grace's augmented estate.

     The circuit court accepted an appraisal of the Farmville

residence showing the property to be worth $170,000.   The court

found that Grace had failed to maintain that real property as

separate property to the extent of $120,000 because Grace and

Lloyd used part of the loan proceeds to repair and improve the

property.   Thus, the circuit court included the amount of

$120,000 in Grace's augmented estate.   Of that amount, Lloyd's

elective share, one-third of the augmented estate, was $40,000.

The circuit court further concluded that Lloyd and Grace's

estate each should repay one-half of the first $25,000 of the

loan proceeds because that amount was used to repair the

Farmville residence.   Because Lloyd withdrew the remaining

$25,000 and deposited the funds into an account in his name

alone, the court concluded that he must repay the second $25,000

withdrawal.   Thus, the circuit court attributed $37,500 of the

$50,000 indebtedness to Lloyd and ordered that amount deducted

                                 4
from his $40,000 elective share, leaving Lloyd with the net sum

of $2,500.

        The circuit court incorporated these and other findings

regarding Grace's augmented estate in a final order.    We awarded

Lloyd an appeal on two issues: (1) whether the circuit court

erred by holding that the $41,750 check payable to Grace

excluded those funds from her augmented estate and that no

further "written joinder" by Lloyd was required when Grace gave

the money to Henry; and (2) whether the circuit court erred by

requiring Lloyd to repay one-half of the $25,000 loan proceeds

used to repair the Farmville residence in addition to the other

$25,000 of the indebtedness.    We will address the issues in that

order.

                             II. ANALYSIS

                         A. Standard of Review

        The issues on appeal present mixed questions of law and

fact.    Thus, "[w]e give deference to the trial court's factual

findings and view the facts in the light most favorable to the

prevailing part[y,]" but we review the trial court's application

of the law to those facts de novo.     Caplan v. Bogard, 264 Va.
219, 225, 563 S.E.2d 719, 722 (2002).

                                   5
                        B. Augmented Estate

     As relevant to this appeal, the term

           augmented estate means the estate passing by
           testate or intestate succession, real and
           personal, after payment of allowances and
           exemptions . . . to which is added the sum
           of the following amounts:

                              . . . .

              3. The value of property transferred to
           anyone other than a bona fide purchaser by
           the decedent at any time during the marriage
           to the surviving spouse, to or for the
           benefit of any person other than the
           surviving spouse, to the extent that the
           decedent did not receive adequate and full
           consideration in money or money's worth for
           the transfer, if the transfer is of any of
           the following types:

                              . . . .

              d. Any transfer made to or for the
           benefit of a donee within the calendar year
           of the decedent's death or any of the five
           preceding calendar years to the extent that
           the aggregate value of the transfers to the
           donee exceeds $10,000 in that calendar year.

Code § 64.1-16.1(A)(3)(d).

     To prevent one spouse from disinheriting the other by

transferring property before the transferor dies, this statutory

provision imputes to the decedent's augmented estate the value

of property transferred by the decedent during the marriage.

Chappell v. Perkins, 266 Va. 413, 421, 587 S.E.2d 584, 588

(2003).   If, however, property was "transferred by the decedent

                                 6
during marriage with the written consent or joinder of the

surviving spouse," the value of the transferred property is not

included in the transferring spouse's augmented estate.       Code

§ 64.1-16.1(B)(i).   The exclusion in subsection (B)(i) is at

issue in the case now before us.       The party seeking such an

exclusion of property from a decedent's augmented estate carries

the burden of establishing it.    Chappell, 266 Va. at 418, 587

S.E.2d at 587.

     We addressed this particular exclusion in Chappell.       There,

the real property at issue, known as the Elliotts Creek

property, was purchased by a husband and wife as tenants by the

entirety.   Id. at 417, 587 S.E.2d at 586.      Subsequently, they

executed a deed of gift conveying the property to the wife in

fee simple, and the wife then transferred the Elliotts Creek

property to her revocable living trust.       Id.   The wife died and

the husband filed a claim for his elective share of the

decedent's augmented estate.     Id. at 416, 587 S.E.2d at 585.

The decedent's estate asserted that the

     transfer of the property by [the wife] and [the
     husband] to [the wife] was a transfer of property
     by [the wife] made with the written consent or
     joinder of [the husband] and therefore, that the
     value of the property should be excluded from
     [the decedent's] augmented estate under Code
     § 64.1-16.1(B)(i).

Id. at 421, 587 S.E.2d at 588.

                                   7
     We concluded that the circuit court did not err by

including the Elliotts Creek property in the decedent's

augmented estate.      Id. at 422, 587 S.E.2d at 589.   Holding that

"subparagraph (B)(i) of Code § 64.1-16.1 applies when a spouse

consents to a specific conveyance that removes the property

from, or decreases the value of, the transferring spouse's

estate," we concluded that "the transfer of the Elliotts Creek

property to [the wife] in fee simple did not remove the property

from, or decrease the value of, [the decedent's] estate."       Id.

We explained that "[i]f a transfer does not remove the property

from the transferring spouse's estate, the consent of the non-

transferring spouse, while a consent to the transfer, is not a

consent to any diminution in the estate by virtue of that

transfer."      Id.   Thus, the Elliotts Creek property did not come

within the exclusion in Code § 64.1-16.1(B)(i) because the

husband's consent to the transfer of the property to the wife

was not a consent to a decrease in the value of the decedent's

estate.   Id.

     Relying on Chappell, Lloyd argues that his consent to the

transfer of joint funds to Grace alone was not a written consent

to or joinder in her subsequent gift to Henry.      Lloyd further

contends the circuit court erred by concluding that he did not

need to consent to or join in Grace's gift to Henry because the

funds were already excluded from Grace's augmented estate.

                                     8
Henry, however, contends that Lloyd's act of preparing, signing

and giving the $41,750 check to Grace with the knowledge that

she intended to give the proceeds to Henry constituted his

written consent, or at least his joinder, in Grace's subsequent

gift to Henry.

     Contrary to Henry's assertions, the check from Lloyd to

Grace merely transferred $41,750 of jointly owned funds to

Grace.    At that juncture, the funds gifted to Grace became her

sole property.    Lloyd's execution and gift of the check to Grace

did not remove those funds from, or decrease the value of,

Grace's estate.    In other words, the check represented Lloyd's

consent to the transfer of joint property to Grace alone but it

did not signify his consent to remove the property from or

diminish the value of Grace's estate.    And, contrary to the

circuit court's holding, Lloyd's gift to Grace did not exclude

those funds from her augmented estate.    Consequently, Lloyd's

written consent to or joinder in Grace's subsequent gift to

Henry was still required.    Thus, the circuit court erred by

excluding the sum of $41,750 from Grace's augmented estate.

                        C. Joint Indebtedness

     According to the written statement of facts, Grace and

Lloyd executed the $50,000 note "as co-makers." 5   Whether that

note "was secured or unsecured[] is not material in fixing

     5
         The actual note is not in the record of this case.

                                  9
liability."   Brown v. Hargraves, 198 Va. 748, 751, 96 S.E.2d
788, 791 (1957).   "Where the obligation to pay the debt is

personal, joint and several, as here, it is the nature of the

obligation which controls."    Id.    The debt evidenced by a note

is created when the note is executed.      Id. at 752, 96 S.E.2d at

791.   Thus, as co-makers, Grace and Lloyd became primarily

liable, jointly and severally.    See id. at 751-52, 96 S.E.2d at

791.

       When two or more persons are jointly liable to pay a debt,

"[t]he law implies a contract between [the co-obligors] to

contribute ratably toward the discharge of the obligation."       Van

Winckel v. Carter, 198 Va. 550, 555, 95 S.E.2d 148, 152 (1956).

A party's "right to contribution does not arise out of any

express contract or agreement between the parties to indemnify

each other, but on the broad principles of equity which courts

of law enforce that where two persons are subject to a common

burden it shall be borne equally between them."      Houston v.

Bain, 170 Va. 378, 389-90, 196 S.E. 657, 662 (1938).

       Lloyd argues that nothing under the augmented estate

statutes makes him, as a co-maker of the $50,000 note, liable

for more than one-half of the principal amount of that

indebtedness.   Henry contends, however, that the circuit court

correctly found Lloyd liable for one-half of the first $25,000

draw from the loan proceeds because that sum was used to improve

                                 10
the Farmville residence, thus increasing both the value of that

property and the value of Lloyd's elective share.    Henry argues

that because Lloyd withdrew the second $25,000 for his sole

benefit, unlike the first $25,000 draw that benefited both Lloyd

and Grace, the circuit court acted within its discretion by

requiring Lloyd to pay a disproportionate amount of the

indebtedness.   We do not agree with Henry.

     In Brown, the administrator of an estate sought guidance on

whether a decedent's personal estate should be used to pay a

debt evidenced by two notes jointly executed by the decedent and

the surviving spouse.   198 Va. at 748-49, 96 S.E.2d at 789.

While the defendant did not question the general rule that "a

personal debt of the decedent . . . is to be paid primarily out

of his personalty," the defendant asserted that an exception

applied when "the entire estate is vested in the surviving joint

tenant[] and the estate of the deceased [took] nothing in the

property."   Id. at 750, 96 S.E.2d at 790.    We disagreed and held

the decedent and the surviving spouse, as

     the makers of the notes . . . . made and signed
     personal obligations, whereby each of them became
     personally liable to the holders of the notes for
     the full amounts thereof, and, as between
     themselves, jointly and severally liable. Subject
     to a common burden to be borne equally, each had
     the right to look to the other for reimbursement
     for any amount expended beyond the proportionate
     amount required to be paid by each of them. Thus
     each was entitled to the right of contribution,
     an equity which arises when one of several

                                11
     parties liable on a common debt discharges the
     obligation for the benefit of all.

Id. at 751, 96 S.E.2d at 791.

     Here, both Grace and Lloyd, as co-makers of the $50,000

note, became personally liable to the holder of the note for the

full amount owed and as between themselves, jointly and

severally liable.   Because both Grace and Lloyd became

"[s]ubject to a common burden to be borne equally," each was

entitled to the right of contribution from the other for one-

half of the joint indebtedness evidenced by the note.     Id.

Thus, the circuit court erred by charging Lloyd with more than

one-half of the total indebtedness.

                          III. CONCLUSION

     In sum, the circuit court erred by failing to include the

sum of $41,750 in Grace's augmented estate.    The court further

erred by requiring Lloyd to pay more than one-half of the total

indebtedness evidenced by the $50,000 note.    Therefore, we will

reverse the judgment of the circuit court and remand this case

for further proceedings consistent with this opinion.

                                              Reversed and remanded.

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