Tuttle v. Webb ( 2012 )

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).
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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.
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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
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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).
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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
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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.
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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.
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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.
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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
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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
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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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