REID v. THE PEOPLES BANK

Mrs. Dorothy Reid filed a petition for equitable relief against the Peoples Bank, William A. Reid, and John S. Reid, Sr. The petition, as amended, alleged: The petitioner is the owner of described real estate which was purchased originally by her husband, William A. Reid, at which time he assumed a loan to the Peoples Bank in the sum of $26,000. He later borrowed an additional $8,600 secured by a second mortgage on the premises. She and her husband had marital difficulties and he conveyed the premises to John S. Reid, his father. A divorce action was filed between the petitioner and her husband, and upon resolving the marital difficulties, and in partial consideration therefor, John S. Reid, Sr., conveyed the premises to the petitioner, and title remains in her at the present time. At the time the property was conveyed to her it was subject to the first and second mortgages in favor of the Peoples Bank, for which her husband was liable. The approximate balance due the bank at the time the property was conveyed to the petitioner was $20,000. In October, 1962, her husband advised her that he was in severe financial difficulty, and in order to avoid a financial crisis, it would be necessary for her to refinance the obligations against her property in order to take care of his financial obligations. Her husband told her that it was absolutely necessary that he be refinanced in order to protect his assets and the family assets. Unknown to the petitioner, her husband consulted the Peoples Bank, and counseled, connived, and schemed with the Peoples Bank for the purpose of determining how to subject the petitioner's property to a greater encumbrance, thereby discharging his liability to the bank. The exact details of the scheme and arrangement worked out by her husband and the Peoples Bank are unknown to the petitioner. Because of the threats and constant badgering of her husband, the petitioner was afraid not to do his will with respect to her property. Thereafter, the exact date being unknown to the petitioner, her husband phoned her and requested her to meet him at the Peoples Bank. The petitioner does not know exactly what she signed, but now knows that she signed a note for $55,000 jointly with her husband, William A. Reid, and his father, John S. Reid, Sr., and a deed to secure debt for $55,000. The security deeds against her property evidencing her husband's liabilities to the bank were marked paid and satisfied of record. The bank and the bank officer handling the transaction well knew that the petitioner was a housewife having no income to repay the loan and the only purpose in causing her to join in the transaction was for her and her property to be security for her husband's obligations, and to discharge her husband's prior obligations to the bank. A $13,000 savings account of John S. Reid, Sr., was at that time pledged to the Citizens Southern National Bank as collateral for a debt of approximately $29,000 of William A. Reid. The loan officer of the bank promised John S. Reid, Sr., that the bank would make the loan provided John S. Reid, Sr., would pledge the $13,000 savings account as additional collateral to the defendant bank, which was accomplished by the payment of her husband's debt in the sum of $29,000 to the Citizens Southern Bank. The petitioner and her husband separated in September, 1963, and she filed an action for divorce against him. Subsequently to the refinancing, her husband paid the monthly installments to the Peoples Bank until December, 1963. He has since failed and refused to pay further installments and on account of the failure to pay, the Peoples Bank has declared the entire indebtedness due and is now threatening to foreclose its deed to secure debt. The note and deed, in so far as the liability of the petitioner is concerned, should be canceled since they were executed pursuant to the plan of the defendants to cause the petitioner's separate property to be deeded to the bank as collateral for the debts of her husband and causing her with respect to the deed and note to be a surety for her husband in violation of Code § 53-503. The petitioner does not know the exact amount due against her property at the time of the refinancing, but believes that the amount was $19,234.72. In order to do equity the petitioner tenders into the registry of the court a note payable to the order of the People's Bank in an undetermined amount, and a loan deed in favor of the Peoples Bank in which all dates and amounts have been left blank, for insertion as may be determined by the court. She prayed for process; for cancellation of the deed to secure debt; that her obligation on the note of $55,000 to the Peoples Bank be declared null and void; that the bank be enjoined from transferring the note and from foreclosing the deed to secure debt; and for further relief.

After the petition was twice amended, the trial judge sustained an oral motion in the nature of a general demurrer to dismiss the petition. This motion was sustained and the petition dismissed. The petitioner excepts to this judgment.

HEAD, Presiding Justice.

"A wife may give property to her husband, but a gift will not be presumed. The evidence to support it must be clear and unequivocal, and the intention of the parties must be free from doubt." Code § 53-506. The allegations of fact in the wife's petition negative any intention on her part to give her separate estate to her husband, and the pleaded facts do not support an inference that she intended to give her property to her husband.

The separate property of the wife "shall not be liable for the payment of any debt, default, or contract of the husband." Code § 53-502. "... [W]hile the wife may contract, she may not bind her separate estate by any contract of suretyship nor by any assumption of the debts of her husband, and any sale of her separate estate, made to a creditor of her husband in extinguishment of his debts, shall be absolutely void." Code § 53-503.

The husband's liability on the two deeds to secure debt was in full force and effect at the time the property was conveyed by John S. Reid, Sr., to the petitioner. This liability of the husband was extinguished and satisfied upon the execution by the wife of her deed to secure debt to the bank in the sum of $55,000. The wife thus became obligated for the debts of the husband to a creditor of the husband. By the execution of the $55,000 note and deed not only would the property of the wife covered by the security deed be liable for the debt thus created, but the wife would be individually liable to the extent of her resources for the debts of her husband should the husband fail (as it is alleged he has failed) to make payments as they became due, or should the property be sold for an amount less than the debt secured by her deed.

The present case comes within the facts and the rule stated in Mickleberry v. O'Neal, 98 Ga. 42, 53 ( 25 S.E. 933), where this court ruled in part: "In the present case the deed in question was executed by her as an entire transaction, the vendee undertaking to and actually discharging an encumbrance upon the property purchased by her from her husband, and which encumbrance became, not by assumption of his debts but by relation, a legal charge upon her estate. Had this been the entire consideration, the conveyance could have been upheld as valid. But the real object of the conveyance was to appropriate the value of the property conveyed, in excess of the amount represented in the encumbrance discharged, to the payment of the sums due by the husband of the vendor to the vendee, thus conveying her estates partially in satisfaction of the husband's debt. The deed is thus an entire transaction. As a conveyance of title it cannot be upheld, because of the impossibility of separating that which is legal from that which is illegal ... there is no possibility of upholding the deed executed in pursuance of it as a conveyance of title, and the most that can be done is to award, as was done in this case, that in so far as the plaintiff has extinguished that portion of the debt legally due by the wife, it be made a charge against her estate."

In Bond v. Sullivan, 133 Ga. 160 ( 65 S.E. 376, 134 ASR 199), it was held: "Where a wife executes a deed conveying her property for the purpose of extinguishing her husband's debt, in pursuance of a plan or scheme participated in by the grantee in the deed, such a deed is void, and the wife may maintain ejectment against her grantee or any one else claiming under her grantee with notice of the consideration moving the wife to make the deed to her property, without the institution of equitable proceedings to cancel the deed." Hickman v. Cornwell, 145 Ga. 368 ( 89 S.E. 330); Ulman, Magill Jordan Woolen Co. v. Magill, 155 Ga. 555 ( 117 S.E. 657); Meacham v. Farr, 158 Ga. 343 ( 123 S.E. 270); Magid v. Beaver, 185 Ga. 669 ( 196 S.E. 422); Turner v. Warren, 193 Ga. 455 ( 18 S.E.2d 865).

The petition alleges facts to show that the officer and agent of the defendant bank knew that a part of the proceeds of the loan made to the wife as represented by her note and deed would be used to pay off indebtedness of the husband to another bank. Since approximately $29,000 of the $55,000 loan was used and applied to pay existing obligations of the husband to another bank, the wife became surety for the husband in this amount. This court is not concerned in the present case with what the evidence may show upon the trial before a jury. The petition having alleged a cause of action good as against a general demurrer, it was error to sustain the defendant's oral motion and dismiss the petition.

The present action being in equity, should the wife prevail upon the trial of the cause, she would not be entitled to have her property relieved of the obligations due the bank at the time the property was conveyed to her. See Mickleberry v. O'Neal, 98 Ga. 42, 54, supra; and Bond v. Sullivan, 133 Ga. 160 (2), 163, supra.

Judgment reversed. All the Justices concur, except Duckworth, C. J., who dissents.