Atlantic Lumber Corp. v. Waxman

¹⁹³ Sloan, J., delivered the opinion of the Court. On May 8th, 1931, the appellee, Mannes E. Waxman, filed his bill of complaint, wherein he alleged that he had obtained two judgments against the appellant Herman M. Meyer, “trading as The Atlantic Mill and Lumber Company,” one for $2,050 on April 30th, 1930, the other for $4,580.25 on March 31st, 1931; that a writ of fieri facias was issued on the first of the judgments and returned nulla bonaj that the appellant Meyer organized four corporations, the Atlantic Mill & Lumber Realty Company, the Atlantic Lumber Corporation, the Cottage Building & Loan Association of Baltimore City, and the Home Owners’ Corporation, for the purpose of concealing and hiding therein and thereunder his property in fraud of the rights of his creditors and to prevent the collection of his debts. “That the intention in the formation of said bodies corporate was not bona fide but merely a simulation to prevent collection of debts due by said Herman M. Meyer”; that all of the corporations named were holding property and assets of Meyer, except the Home Owners’ Association, which it is alleged was formed for the purpose of doing the same thing as the others, but there was no charge that it had anything belonging to Meyer. The charge was also made on information and belief that Meyer and the Atlantic Mill & Lumber Company were insolvent, and that the lumber business of Meyer was transferred to it in violation of the Sales in Bulk Act, Code, art. 83, secs. 100-104. The bill then prayed (a) discovery; (b) accounting; (c) a restraining order; (d) the appointment of a receiver or receivers for each of the defendants; (e) that the assets of the corporations be declared to be the property of Herman M. Meyer and the judgments of the appellee be declared liens on such assets; (f) general relief.

Each of the defendants filed general demurrers and gave eleven reasons, several of them duplications, why the demurrer should be sustained. The reasons assigned are that the facts alleged are insufficient for an accounting, restraining order, discovery, or receivership; that the allegations of ¹⁹⁴ the bill are vague, indefinite, and ambiguous; that the charge of fraud is not founded on facts sufficiently alleged; and that the bill is multifarious. The demurrers of all defendants except that of the Home Owners’ Corporation were overruled, and all except it appealed, so that we have four appeals in one record. The demurrers are to the whole bill, and any allegations sufficient to give equity jurisdiction would result in their being overruled.

Ho gan v. McMahon, 115 Md. 195, 205 , 80 A. 695 ; McIntyre v. Smith, 154 Md. 600 , 672, 141 A. 405 ; Miller’s Equity Proc. 172 and notes. The only grounds of demurrer which apply to the bill as a whole are that the charges of fraud are vague, indefinite, uncertain, and insufficient, and that the bill is multifarious, and, unless it meets one of these objections, the demurrer should be sustained; otherwise overruled. The bill alleges, and certified copies of the docket entries filed show, that the appellee has recovered two1 judgments against Herman M. Meyer amounting to more than $6,500; that execution was issued on one of them and the sheriff was unable to find any property belonging to the judgment debtor on which to levy. The plaintiff then went into equity and filed a bill wherein he in effect said the debtor did have property, but that it Was hidden away under the cover of several corporations through which the debtor was doing business as a sole trader, and that he was thus evading his creditors and avoiding his debts, and that it was being done for the purpose of defrauding his creditors.

These allegations are substantially all that are ever set up in a bill to set aside a fraudulent conveyance, though the method pursued by the debtor, if correctly described, is unique. The appellants contend that the bill should be dismissed because the appellee has an adequate remedy at law by attachment or execution. By section 9 of article 39B (The Uniform Eraudulent Conveyance Act), it is provided that a creditor under such circumstances as are here recited may “(a) have the conveyance set aside or obligation annulled to ¹⁹⁵ the extent necessary to satisfy his claim, or (b) disregard the conveyance and attach or levy execution upon the property conveyed.” 9 Unif. Laws Ann. 179.

This statute is in effect declaratory of the provisions of the Statute of 27 Elizabeth, cap. 4, against covinous and fraudulent conveyances, long in effect and consistently observed in this state. The contention was made in Sakelos v. Hutchinson Bros., 129 Md. 300, 304 , 99 A. 357, 359 , that the “appellee’s proper remedy is by attachment, and that, an adequate remedy at law being thus available, a court of equity has no jurisdiction in the case. The rule has been settled, however, that creditors may question, either by attachment or by bill in equity, the validity of a disposition of property by which their rights are prejudiced,” and this is in terms what the Uniform Eraudulent Conveyance Act just quoted provides. As stated by Judge Miller in Trego v. Skinner, 42 Md. 426 , 431: “We have no doubt, but that a creditor who has exhausted his remedy at law, by a fruitless execution on his judgment, has the right to ask the aid of a court of equity to discover and reach the equitable assets of his debtor, including property purchased by the debtor in the name of another, and to have fraudulent conveyances standing in his way, and covering up the property, set aside and vacated.

Jurisdiction in equity to grant such relief is clear and established by abundant authority,” and equity will retain jurisdiction to the end that a decree may be had for satisfaction of the debt. Goodman v. Wineland, 61 Md. 449, 452 ; Lipskey v. Voloshen, 155 Md. 139, 145 , 141 A. 402 . The appellants now contend that, because provision has been made for supplementary proceedings by Code, article 75, secs. 147-152 (Act of 1890, ch. 558) to locate property or credits of a judgment debtor who- “is concealing or has concealed or disposed of the same with intent to evade the effect of said judgment,” equity no longer has jurisdiction in such cases. Provision is made by section 150 for