White v. Llewellyn

Summary

The Supreme Court of Virginia considered the effect of a presumption of fraudulent conveyance arising from proof of badges of fraud. The Court held that, under Virginia precedent, the presumption shifts both the burden of production and the burden of persuasion to the party seeking to uphold the transaction, who must establish its bona fides by strong and clear evidence. The Court reversed the circuit court’s dismissal of the complaint and remanded for further proceedings.

Holdings

1. When a plaintiff establishes a presumption of fraudulent conveyance by proving badges of fraud, the presumption is governed by the Morgan theory and shifts both the burden of production and the burden of persuasion to the party seeking to uphold the transaction.
2. A defendant seeking to uphold a transaction subject to a presumption of fraudulent conveyance must rebut that presumption with strong and clear evidence establishing the bona fides of the transaction.
3. The circuit court erred by shifting only the burden of production and by failing to require strong and clear evidence to rebut the presumption; the judgment therefore had to be reversed and the case remanded for further proceedings.

Questions Presented

1. Whether, in a Virginia fraudulent conveyance case, proof of badges of fraud shifts both the burden of production and the burden of persuasion to the party seeking to uphold the transaction.
2. What standard of proof applies to the defendants' rebuttal of the presumption of fraudulent conveyance.
3. Whether the circuit court's dismissal and denial of attorneys' fees could stand after it applied the wrong allocation and standard of proof.

Disposition

reversed_and_remanded