Barter Systems, Inc. v. Rosner

KARWACKI, Judge. This appeal requires us to consider the extent to which Md.Code (1975, 1983 Repl.Vol.), § 15-209 of the Commercial Law Article, which addresses the rights of a creditor vis-avis property fraudulently conveyed by his debtor, is to be reconciled with Md.Code (1974), § 8-105(a) of the Estates and Trusts Article, which governs the order of payment to estate creditors. On July 27, 1981, Stephen G. Rosner executed a “No Consideration” deed whereby he conveyed a condominium unit, located at 11213 Columbia Pike, Silver Spring, Maryland, with right of survivorship to himself and his brother, Dennis J. Rosner, one of the appellees. This deed was ²⁵⁹ subsequently recorded on September 23, 1981.

On August 23, 1981, Stephen G. Rosner died. 1 At the time of his death the decedent was indebted to numerous creditors in various amounts totalling $19,109.40. Among those creditors was Barter Systems, Inc., the appellant, to whom the decedent owed $9,275.13. On February 5, 1982, the appellant filed a claim for this debt against the decedent’s estate in the Circuit Court for Montgomery County sitting as an orphans’ court. The claim was allowed by the court on June 1, 1982.

On September 30, 1983, the appellant filed in the Montgomery County Circuit Court a declaration which by its terms sought to enforce the “judgment” of the orphans’ court against the decedent’s estate. 2 The appellant accompanied the declaration with a motion for summary judgment. On November 14, 1983, the personal representative of the decedent’s estate responded with an Answer denying that the estate was indebted to the ²⁶⁰ appellant. On December 5, 1983, the Circuit Court for Montgomery County entered an order granting the appellant’s motion for summary judgment and entered judgment for the appellant against the estate of the decedent in the amount of $9,275.13. 3 The appellant thereafter caused to be issued a writ of fieri facias directed against the aforementioned real property, the condominium unit located at 11213 Columbia Pike, Silver Spring, Md. Following the levy of this writ, the appellee, Dennis J. Rosner, who prior to this time was not a party to the proceedings, responded with an answer to levy, a plea of nulla bona est, and a motion to dismiss the writ, accompanied by his supporting affidavit. In his motion to dismiss the writ Mr. Rosner stated, as he did in his answer, that the property had been transferred to him by the decedent prior to the decedent’s death and, therefore, it was not part of the decedent’s estate.

In its opposition to the motion to dismiss the writ of fi fa, the appellant alleged, inter alia, that the subject real property was an asset of the decedent’s estate inasmuch as the conveyance of that property by the decedent to the appellee was fraudulent as to the appellant and other creditors of the decedent. On November 2, 1984, a hearing on the motion to dismiss and the opposition thereto was held before the Circuit Court (Latham, J.). The court granted the motion to dismiss the writ of fi fa, holding that the appellant could not proceed directly against the property, since the deed showed on its face that the property was titled in the name of the appellee and, therefore, was not part of the decedent’s estate. The court advised the appellant that before it could seek the relief it desired, it must first proceed to set aside the fraudulent conveyance.

The appellant appeals that order, contending that the court erred in dismissing the writ, and in not requiring the appellees to go forward at the November 2, 1984 hearing to ²⁶¹ prove the solvency of the decedent at the time of the transfer of the subject property, since the appellant had made a prima facie demonstration that the conveyance was fraudulent. The gravamen of the appellant’s argument is that § 15-209(a)(2) of the Commercial Law Article permits a creditor to disregard a fraudulent conveyance and forthwith attach or levy execution on the property conveyed. 4 The appellant argues that by dismissing the writ, the lower court effectively foreclosed it from exercising its option to proceed directly against the fraudulently conveyed property. The appellees concede that ordinarily a creditor has such an option, but that because the situation sub judice involves estate proceedings, § 15-209(a) must be reconciled with applicable estate law. The appellees contend that the unique nature of an estate proceeding prohibits a creditor from pursuing the remedy provided in § 15-209(a)(2).

In responding to the issue before us, we find it necessary to retrace and comment upon the procedural path taken by this case. We begin in the Circuit Court for Montgomery County sitting as an orphans’ court for that county pursuant to its constitutional grant of authority. Maryland Constitution article IV, § 20(b). 5 A judge of the ²⁶² Montgomery County Circuit Court who sits as a judge in the orphans’ court cannot, however, exercise his authority and power as a circuit court judge. Willoner v. Davis, 30 Md.App. 444, 448 , 353 A.2d 267 , affd sub nom, Davis v. Davis, 278 Md. 534 , 365 A.2d 1004 (1976).

When he presides in an orphans’ court proceeding, he possesses no more authority in that case than that conferred by the legislature upon the Orphans’ Courts of this State. Id. As the Court of Appeals stated in Crandall v. Crandall, 218 Md. 598, 600 , 147 A.2d 754 (1959): [I]t must be remembered that Orphans’ Courts are not courts of general jurisdiction; on the contrary, they are courts of special and limited jurisdiction only, and they cannot, under pretext of incidental or constructive authority, exercise jurisdiction not expressly conferred by law. See also Comptroller of Treas. v. Russell, 284 Md. 174, 177 , 395 A.2d 488 (1978).

Section 2-102(a) of the Estates and Trusts Article 6 enumerates the powers of the orphans’ court: (a) Powers — The court may conduct judicial probate, direct the conduct of a personal representative, and pass orders which may be required in the course of the administration of an estate of a decedent____ The orphans court has jurisdiction to consider and adjudicate claims against an estate. Schaefer v. Heaphy, 45 Md.App. 144 , 412 A.2d 107 (1980). 7 The process by which such claims are presented for payment was summarized by this Court in Schaefer as follows: ²⁶³ ET, § 8-101(b) states that, after appointment of the personal representative and until the estate is closed, “the procedures prescribed by § 8-104 shall be followed” in enforcing claims against the estate. Section 8-104 provides three methods of presenting claims: (1) delivery to the personal representative; (2) delivery to the register of wills; or (3) commencement of a lawsuit against the estate (or a distributee of estate property) within the time allotted for filing claims. If the creditor chooses the third option — direct resort to a court of law or equity — his success or failure will, of course, depend upon the judgment rendered therein.

Section 8-107(d) provides that “[a] judgment in an action against a personal representative to enforce a claim against the estate of a decedent is an allowance of the claim.” If the creditor uses either of the other options ... the process becomes governed by § 8-107(a) and (b). Subsection (a) gives the personal representative three choices— one implicit, two explicit. The implicit choice, of course, is to allow the claim in its entirety. If he chooses not to do that, he must notify the claimant either (1) that the claim is disallowed in whole or in a stated amount, or (2) that he will petition the orphans’ court to determine whether the claim should be allowed.

If the personal representative disallows the claim directly, ... subsection (b) becomes operative. That indeed is the critical provision. It states, in relevant part: “If the claim is disallowed in whole or in a stated amount, the claimant is forever barred to the extent of the disallowance unless he files a petition for allowance in the [orphans’] court or commences an action against the personal representative or against one or more of the persons to whom property has been distributed.” (Emphasis supplied.) Id. at 151-52, 412 A.2d 107 . We stated further: [Section] 8-108(a) provides, in relevant part: ²⁶⁴ “Upon the expiration of six months from the date of the first appointment of a personal representative, the personal representative shall pay the claims allowed against the estate in the order of priority prescribed in § 8-105____ A person with a valid unbarred claim or with a valid unbarred judgment who has not been paid may petition the [orphans’] court for an order directing the personal representative to pay the claim to the extent that funds of the estate are available for payment.” (Emphasis supplied.) ...

A creditor whose claim has been disallowed by the personal representative may litigate the issue in the orphans’ court; and, if he chooses to do so and is successful, the order of that tribunal is binding upon and enforceable against the personal representative. Id. at 153-54, 412 A.2d 107 . In the instant case, the Montgomery County Circuit Court, sitting as an orphans’ court, apparently at the close of a plenary proceeding in that court, 8 acted pursuant to its authority and granted the appellant’s petition for allowance of its claim against the decedent’s estate. The effect of this allowance was to direct the personal representative of the estate to pay the appellant’s claim, subject to the order of payment set forth in § 8-105(a). 9 See ²⁶⁵ § 8-108.

At that point, the appellant was in no better, or worse, position than other general creditors who had been granted similar allowances. Moreover, there is no method under our Estates and Trusts Article by which the appellant could seek to improve its position vis-a-vis similarly classed creditors. Indeed, § 8-105(b) prohibits preference of one general creditor over other general creditors. Nonetheless, and for reasons about which we can merely speculate, the appellant sought to have the orphans’ court’s allowance of its claim reduced to a judgment at law, and it thereupon filed in the Circuit Court for Montgomery County, sitting in its capacity as a court of law, the declaration referred to supra, 10 with the accompanying motion for summary judgment.

In granting its summary judgment motion, however, the Circuit Court gave to the appellant no greater or different claim against the decedent’s estate than it had received in orphans’ court. Section 8-107(d) expressly states that “[a] judgment in an