of a failure on its part to comply with all the requirements of the statute. The statute contemplates that this should be done, and the courts should make effectual its expectations in this respect. But the statute should not be strained beyond its general intendment, fairly and reasonably construed, according to accepted principles of construction, to meet the supposed hardships of a Virginia litigant. Our inquiry should be: (1) What is the general policy of the statute, and what are the cases for which it intends to provide? (2) Is the claim under consideration one of those cases? government, in the case in judgment, the Illinois Surety Company had lost its right to do business in this state by virtue of its failure to pay its taxes, would its loss of right in the respect suggested have in any wise impaired its capacity to execute its bond to the United States, or affected the rights of Ellington & Guy under that bond? Those rights are derived purely under a federal statute. Ellington & Guy would have had precisely the same rights against any surety company guaranteeing the undertaking of the Brent Company that it had against the Illinois Surety Company. The fact that the latter company, at the time it executed the bond, supra, had a license to do business in Virginia is irrele-interpreted broadly was made in Shepherd v. vant and unimportant. [4] Commissioner Peyton, with some difficulty on his part, reached the conclusion that the words "any such undertakings or obligations of such company," found in section 7 of the act (page 167), should be given a liberal construction, and, giving the same such a construction, that the statute afforded Ellington & Guy a lien upon the bonds in the hands of the treasurer. The word "such," in the connection cited, and in its general use, is not a word of amplification, but of identification. It serves to connect the words "undertakings or obligations" with their use or appearance in some antecedent portion of the statute. The section would have been much broader, if the word "such" had been omitted, leaving the sentence to read: "Upon the bonds deposited as aforesaid with the treasurer, any citizen of this state who may be interested in the * ⚫ performance of any * undertakings, or obligations of such company, whether as principal or surety, shall have a lien for the amounts due or to become due in consequence of any failure in the performance, and shall be entitled," etc. Looking to section 2 (page 166), we find the words "undertaking or obligation," which are later identified by the word "such" in section 7. Section 2 provides that "Although any such company may become surety for the faithful performance of any trust, duty, contract, agreement, or bond, public or private, official or otherwise, or have assumed any duty or obligation of like nature, as principal or otherwise, or qualified as fiduciary, without conforming to the requirements of this act, and of the laws relating to the same, the undertaking or obligation shall be valid, whether said company was incorporated by the laws of this state or not." Any citizen of the state interested in the faithful performance of these obligations or undertakings, as contemplated by the statute, is entitled to the benefit of the lien provided. The statute under consideration should be given a broad interpretation, to the end that any company undertaking to do business in this state shall not escape liability for its The contention that this statute should be Va. State Ins. Co., 120 Va. 383, 91 S. E. 140. The claimant in that case was a domestic insurance company, holding a contract of reinsurance on risks outside of the state with a foreign company doing business in this state. The foreign company having become insolvent, the domestic company maintained that it was entitled to be classed as a policy holder and lienor under the provisions of section 17 (chapter 2) of the act. This court, construing the section cited and other sections in pari materia, held: First, that the policy holders contemplated by the act and therein protected were only such as held policies on properties in Virginia; and, second, that the purpose of the section as to fire insurance was to protect only holders of policies on property. The court, in the case last cited decided that the Legislature did not contemplate "as a possible result of section 17 of the Virginia act [discussed supra], that a resident company would be permitted to bring a claim for fire losses and unearned premiums under a contract reinsuring its own risks in a foreign state, into a ratable distribution of the the holders of fire insurance policies protectproceeds of the bonds deposited, along with ed in the act." Such a construction, the court said, "might often result, as it would do in the case at bar, in nullifying to a very material degree the ruling purpose in the statute." We have reached a like conclusion with respect to the effect of giving claims such as that of Ellington & Guy a lien on the securities in the hands of the treasurer. This was a judgment obtained, as pointed out supra, under the federal statute. The surety company, as a prerequisite to executing the bond, did not require a license, or any authority under the Virginia statutes. If judgments of this character, and judgments obtained in other states from Maine to California, by virtue of the statutes of those states, are entitled to the same benefits as judgments obtained in the courts of this state upon contracts made in this state, with reference to business to be done in this state, then the very natural reflection occurs that the depos (105 S.E.) nies is inadequate. Such a holding, in the language of the court in Shepherd's Case, "might often result in nullifying to a mate rial degree the ruling purpose in the statute." We do not believe that our statute ever contemplated that a bond furnished under the requirements of this federal statute, and affording the protection provided by that statute, would give a creditor of a surety company who has obtained a judgment by virtue of such statute the same rights in relation to and the same lien upon the securities of a surety company as are afforded a creditor of such a company who has obtained a judgment on a bond executed by the company within Virginia pursuant to the Virginia statute, for the faithful discharge of an undertaking within the limits of this state. Having obtained a judgment against the Illinois Surety Company by virtue of the federal statute, Ellington & Guy, in the absence of any specific fund provided by that statute for the discharge of its judgment, and there is no such fund, must file their claim with the court in Chicago now administering the estate of the Illinois Surety Company, and receive such dividends as that court shall award. The securities of the Illinois Surety Company were placed with the proper official of this state on trust, and must be returned to the receiver of that company after the discharge of the debts of the company in this state. The conclusions reached in this case are derived from a comprehensive examination of the statute as a whole, with a view to ascertaining its apparent general policy. The results of this examination are supported by the evident meaning of the special provisions cited. It is manifest from what has been stated that the decree of the circuit court of the city of Richmond, giving Ellington & Guy a lien upon the securities of the Illinois Surety Company, must be reversed, and that is accordingly done and this court will enter a decree, sustaining the exception of the appellant to the report of Commissioner Peyton, and awarding to the appellant his costs against Ellington & Guy in this court. Reversed. (129 Va. 281) HUTCHESON v. SAVINGS BANK OF (Supreme Court of Appeals of Virginia. Jan. 28, 1921.) 295(1)—Fraud I. Fraudulent conveyances 2. Fraudulent conveyances271(2), 295(1) -Proof must be clear, cogent, and convincing; burden on one alleging fraud. The proof in suit to set aside fraudulent conveyances must be clear, cogent, and convincing, and the burden rests on the party alleging the existence of fraud. 3. Fraudulent conveyances 295 (2) - Fraud may be proved by circumstances. Fraud in a conveyance may be proved, not only by positive and direct evidence, but by showing facts and circumstances sufficient to support the conclusion of fraud. 4. Fraudulent conveyances 163-Fraudulent Intent, concurred in by both parties, vitiates conveyance. A fraudulent intent, concurred in by both grantor and grantee, always vitiates a conveyance. 5. Fraudulent conveyances 101 - Relationship between grantor and grantee not badge of fraud. Relationship between grantor and grantee is not a badge of fraud in the conveyance, though, when fraud is charged, the dealings of related persons with each other will be closely scrutinized. 271 (4) — Until 6. Fraudulent conveyances Until the facts and circumstances relied on and proved to establish fraud make out a case from which fraud will at least be presumed, defendant to a bill to set aside a transaction as fraudulent is not required to explain such facts and circumstances, though they are not altogether free from suspicion. 7. Fraudulent conveyances 115(1)-Prefer ence to one creditor not illegal, unless benefit accrues to debtor. Save in so far as prohibited by the Bank9586-9656), neither at common law nor in ruptcy Act of Congress (U. S. Comp. St. §§ Virginia is it immoral or illegal to prefer one creditor to another in a deed of assignment, neither having any lien, provided there is no design to secure some fraudulent or illegal pecuniary advantage or benefit therefrom to the debtor himself. 8. Evidence 77(1)—No presumption against defendant for failure to call witnesses, when plaintiff has not made prima facie case. There is no presumption against a defendant for failure to call witnesses, when plaintiff carrying the burden of proof has not made a prima facie case, and such presumption cannot be used to relieve plaintiff from the burden of proving his case. 9. Equity 342-Unverified answers afford no evidence in favor of defendants, amounting merely to traverse. Answers in a suit wherein answer under oath has been waived afford no evidence in favor of defendants, and amount to rothing more than a traverse, serving to compel plain For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes tiff to prove the material allegations of his 17. Equity bill. Proof 10. Fraudulent conveyances 156(1) that grantee had positive knowledge of grantor's fraudulent intent unnecessary. In order to avoid a conveyance, it is not necessary to prove the grantee had positive knowledge of the grantor's fraudulent intent; it being sufficient to prove the grantee had knowledge of facts justly calculated to excite suspicion in the minds of persons of ordinary care and prudence, and which would naturally prompt him to pause and inquire, and that such inquiry would have necessarily led to discovery of the facts from which the law imputes fraud to the grantor. 11. Fraudulent conveyances 277(1)-Grantee, in case of doubt as to good faith, must prove payment of consideration. If from the relations of the parties and surrounding circumstances a doubt is thrown around the payment in good faith of the consideration for a conveyance of property, the grantee must prove payment of the consideration or the existence of and bona fides of the debts if the conveyance was made to pay debts due to the grantee. 12. Fraudulent conveyances 155-To vitiate conveyance grantee must have had notice of intent. To vitiate a conveyance as made to defraud the grantor's creditors, the grantee must have had notice of the grantor's intent. 13. Fraudulent conveyances 271 (3)-When prima facie case of fraud made, burden of proof shifts. 392-Court did not err in re ceiving deposition and letter in evidence after defendants had made election to stand on record. In suit to set aside a fraudulent conveyance, where defendants had made their election to stand on the record and not risk the perils of cross-examination, there was no error in the trial court's action in receiving a deposition and letter in evidence, while refusing to allow defendants to take further depositions; admission of the matter not creating a new situation, entitling defendants to take testimony on the merits. 18. Equity 392-Request to take further testimony must set up new matter and state evidence relied on. Request to trial court to take further testimony, practically a request for rehearing, must set up new matter, and state distinctly the evidence relied on. Appeal from Chancery Court of Richmond. Suit by the Savings Bank of Richmond against John A. Hutcheson. From decree for plaintiff, defendant appeals. Affirmed. Miller & Miller, of Richmond, for plaintiff in error. A. W. Patterson, of Richmond, for defendant in error. SAUNDERS, J. This is a suit brought by the Savings Bank of Richmond to set aside, on the ground of fraud, a deed made by J. C. Hutcheson to his father, John A. Hutcheson. When a prima facie case of fraud in a John A. Hutcheson, the appellant, conductconveyance has been shown by plaintiff cred-ed for many years a considerable and apitor, the burden of proof shifts, and defend-parently profitable business in the city of ant grantee must establish the bona fides of Richmond in the sale and storage of leaf tothe transaction. 15. Stipulations 18(6)-As to testimony to particular effect not agreement on truth of such testimony. Agreement that a witness, if put on the stand, will testify to a certain effect, is not an agreement that his statements, if so made, are admitted to be true. 16. Fraudulent conveyances 278(1) — Evidence held to make out prima facie case of fraud in conveyance from son to father. In suit by a bank to set aside, on the ground of fraud, deed made by a son to his father, evidence held sufficient to make out a prima facie case of fraud, and to put on defendants, particularly the father, the burden of vindication and explanation. baccos on commission. In the course of time After Hutcheson became heavily indebted to the Savings Bank of Richmond, the aggregate of his indebtedness in December, 1913, being The Savabout $66,000 in various items. ings Bank (plaintiff below), desiring to enter the Federal Reserve system, required the appellant John A. Hutcheson (a defendant below) to reduce his indebtedness. some discussion between the parties, it was arranged that a note of the father, John A. Hutcheson, for $5,000, part of the latter's aggregate of indebtedness, should be replaced by a note of the son, J. C. Hutcheson, for the same amount. At the same time John A. Hutcheson paid off a note of his son in the bank for the sum of $375. This note was protected by 11 shares of Gordon Cigar & Cheroot Company stock, supposed to be worth $100 a share. The $5,000 note of John A. Hutcheson was protected by 32 shares of the same stock. As a part of the above transactions, the aggregate of the 11 and 32 shares of stock, supra, or 43 shares, was placed as security for the replacement note of J. C. Hutcheson. This note was made (105 S.E.) on March 4, 1914, and renewed six times; the property. the last renewal being on March 1, 1915. Interest on the original note and renewals, amounting in the aggregate to $342.66, was paid by John A. Hutcheson. Counsel for J. C. Hutcheson acknowledged service of the notice, but objected to the taking of further depositions. Counsel for J. A. Hutcheson refused to accept service of the notice, and indorsed on same an elaborate memorandum of protest. The deposition taken under the notice, supra, From the stipulation filed in the cause by counsel for the parties, it appears that John A. Hutcheson filed his petition in bank-related solely to the value of the property, ruptcy on March 30, 1915. In due course he was adjudicated a bankrupt. In the answer of J. C. Hutcheson is found the allegation that the president of the bank, in March, 1914, knew that he (Hutcheson) was insolvent. No effort is made to prove this, or any other statement of the answer, but as affecting J. C. Hutcheson it may be considered as an admission of insolvency at that time. On July 7, 1916, the wife of J. A. Hutcheson and mother of J. C. Hutcheson died. On the next day the said J. C. Hutcheson conveyed to his father all his interest in certain real estate in Richmond which passed to the former at the death of his mother. A few days later the wife of J. C. Hutcheson united with her husband in this deed. On July 19, 1916, the Savings Bank of Richmond brought a foreign attachment in equity against the grantor and grantee in the above conveyance to set aside same on the ground that it was made without any valuable consideration and with intent to hinder, delay, and defraud the creditors of the grantor. Both of the Hutchesons answered this bill, denied the fraud, and insisted that the conveyance was for valuable consideration. due course the plaintiff took and concluded its testimony on April 7, 1919. On June 4, neither of the defendants having taken any depositions, the plaintiff moved the court to speed the cause, and the defendants admitting that the plaintiff was entitled to an order, they were required to complete their depositions by June 12, and the plaintiff to complete its evidence in rebuttal by June 18, 1919. No depositions were taken under this order. The case was argued on June 23; counsel for all of the parties being present. Permission was given to counsel at this time to file written notes, all of these notes to be in on or before June 30. In In the course of the oral argument counsel for J. A. Hutcheson insisted that there was no proof in the record of the value of the property conveyed in the deed under attack. The trial judge stated that he knew the property and it was valuable, but on the insistence of counsel stated that he would have proof of value put in the record. It does not appear that any objection was made at this time to this announcement of the court's purpose. On June 27, 1919, the plaintiff gave notice to "J. C. and John A. Hutcheson, or H. R. Miller and Geo. W. Haw, their attorneys," that on June 30 it would take the deposition of H. Selden Taylor and oth and, as will be noted, was taken on the initiative of the court. A letter from Mr. Fritz Sitterding to counsel for the bank, to the same effect as the deposition of Mr. Taylor, was admitted by the court in connection with the deposition. It appears from the affidavit of counsel for John A. Hutcheson ("offered in support of a formal motion that his client be allowed until July 19 to take and file further evidence in his behalf, including the depositions of the two defendants") that "Affiant moved the court to strike out the . the argument on this motion Judge Moncure deposition of Mr. Taylor. In the course of indicated that he would overrule the motion, and affiant asked to be allowed to offer further evidence in that event. The court then asked affiant if he wished to take the evidence of the defendants, and affiant replied that he wished to take other evidence, including that of the defendants. Thereupon, the court, having previously indicated a decision adverse to Taylor would be stricken out as to John A. the defendants, said that the deposition of Hutcheson, and that the said Hutcheson would not be allowed to offer any further evidence." From the stipulation of facts mentioneЛ supra, it appears in paragraph 3: Hutcheson in his bankrupt papers as one of "That John A. Hutcheson did not list J. C. his debtors." And in paragraph 4: "That if John A. Hutcheson were called as a witness to testify on the subject, he would Hutcheson was not listed in said schedule was swear that the reason his claim against J. C. that it was for the most part barred by the statute of limitations." On July 14, 1919, the chancery court entered a decree in which it held that the deed of J. C. Hutcheson and wife to his father was voluntary, fraudulent, and void as to the plaintiff, and accordingly was set aside. From this decree an appeal was allowed by one of the judges of this court. The estate conveyed in the deed supra was subjected to the plaintiff's claim, with inter est from April 30, 1915. The petition assigns four errors: First: "The failure of the court to quash the attachment." Second: "The failure of the court to sustain the demurrer to plaintiff's bill." Third: The action of the court setting aside fraudulent and void, and directing a sale of the each other, or which requires them to conduct property to satisfy the bank's claim." Fourth: "It was error in the court, after the cause had been submitted and argued on June 23, to call for from the plaintiff and to permit the plaintiff to take and offer additional evidence, and this without sufficient notice to petitioner's counsel, and after the introduction of such additional evidence to refuse petitioner's application to be allowed to take further evidence, including the depositions of both defendants, within a short limit of time." With respect to the first two assignments of error, the decree appealed from recites that they were neither argued nor insisted up on, and were therefore overruled. These assignments of error will not be considered by this court. The third assignment requires a review and determination of the controversy on its merits. their business with each other differently from the manner in which they deal with other persons, though when fraud is charged their dealings with each other will be closely scrutinized, as they may strengthen a presumption arising from other circumstances. Johnson v. Lucas, supra. The relationship of the parties (father and son) and the insolvency of the grantor do not of themselves constitute badges of fraud, and relieve the creditors from proving the charges of fraud set up in their pleadings. lied on and proved to establish fraud make out a case from which fraud will at least be presumed, the defendant to a bill to set aside a transaction as fraudulent is not required to explain such facts and circumstances, although they are not altogether free from susE. 497. [6] Until the facts and circumstances re There are no new questions of law involv-picion. ed, the controlling principles having been settled by numerous decisions of this court. [1] It is a fundamental principle of law that fraud must be clearly alleged and proven. Every presumption of law is in favor of innocence, and not of guilt. Engleby v. Harvey, 93 Va. 445, 25 S. E. 225; Shoemaker V. Chapman Drug Co., 112 Va. 612, 72 S. E. 121; Johnson v. Lucas, 103 Va. 36, 48 S. E. 497. [2] The proof in cases of this character must be clear, cogent, and convincing. Baldwin v. Winfree's Adm'r, 116 Va. 16, 81 S. E. 36. [3] The charge of fraud is one easily made, and the burden of proving it rests on the party alleging its existence. It may be proved, not only by positive and direct evidence, but by showing facts and circumstances sufficient to support the conclusion of fraud. But, however shown, the proof must be clear and convincing, and such as to satisfy the conscience of the chancellor, who should be cautious not to lend too ready an ear to the charge. Redwood v. Rogers, 105 Va. 155, 53 S. E. 6. Fraud is not to be assumed on doubtful evidence, or circumstances of mere suspicion. It must be clearly and distinctly proved. The law never presumes fraud, but the presumption is always in favor of innocence and honesty. New York Life Ins. Co. v. Davis, 96 Va. 739, 32 S. E. 475, 44 L. R. A. 305. [4] A fraudulent intent, concurred in by both grantor and grantee, always vitiates a conveyance, as indeed the statute declares affirmatively by pronouncing its nullity, and negatively by providing that it shall not be void if founded on a valuable consideration, and the grantee had no notice of the fraudulent intent. 2 Minor on Real Property, § 1173. [5] Relationship is not a badge of fraud, and there is no law which forbids persons standing in near relationship of consanguin Johnson v. Lucas, 103 Va. 36, 48 S. [7] Save so far as prohibited by the Bank ruptcy Act of Congress (U. S. Comp. St. 9586-9656), neither at common law nor in Virginia is it immoral or illegal to prefer one creditor to another in a deed of assignment (neither having any lien), provided there is no design to secure some fraudulent or illegal pecuniary advantage or benefit therefrom to the debtor himself. Minor's Real Property, vol. 2, § 1177, p. 1290; Johnson v. Lucas, supra. [8] There is no presumption against a defendant for failure to call witnesses, when the plaintiff carrying the burden of proof has not made a prima facie case, and such presumption cannot be used to relieve the plaintiff from the burden of proving his case. Cooper v. Upton, 60 W. Va. 648, 64 S. E. 523. [9] The answers in this case (answer under oath having been waived) afford no evidence in favor of the defendants, and amount to nothing more than a traverse, serving to compel the plaintiff to prove the material allegations of his bill. Jones v. Christian, 86 Va. 1032, 11 S. E. 984. The circumstances attending and following a transaction are often of such a character as to leave not even a shadow of doubt as to the real object and motive of the parties engaged in it. Hazlewood v. Forrer, 94 Va. 706, 27 S. E. 507. [10] In order to avoid a conveyance, it is not necessary to prove that the grantee had positive knowledge of the grantor's fraudulent intent. It is sufficient to prove that the grantee had knowledge of facts and circumstances which were naturally and justly calculated to excite suspicion in the minds of persons of ordinary care and prudence, and which would naturally prompt him to pause and inquire before consummating the transaction, and that such inquiry would have necessarily led to a discovery of the facts |