Lutherville Supply & Equipment Co. v. Dimon

Prescott, J., delivered the opinion of the Court. A judge of the Circuit Court for Baltimore County sustained a demurrer to appellant’s amended bill of complaint, which sought, inter alia, to set aside a deed to a husband and wife as in defraud of creditors, and it has appealed. The bill alleged that: appellant is a Maryland corporation; the appellee, Harry F. Dimon, was one of its employees and over a period of time became its debtor. In one instance, he purchased goods and services for his personal use (totaling some $960.30), and, with appellant’s consent, charged these items to it, with the understanding that he would repay the amounts expended.

He borrowed sums aggregating $1,050 from it. He also borrowed $5,000 from a bank in Baltimore, and, upon nonpayment of the indebtedness, it was reduced to judgment and assigned to appellant for valuable consideration. None of said indebtedness has ever been paid. The bill further alleged that subsequent to the time when appellant became his creditor, Dimon purchased real estate in Baltimore County making a down-payment of $5,000 with funds belonging solely to him, and caused title to be placed in his and his wife’s names as tenants by the entireties.

At the time of this transaction, Dimon was insolvent, or the transaction itself rendered him insolvent. His wife contributed nothing for the interest she received in the property. (There were also allegations in the bill concerning a purchase money mortgage, which has now been completely paid; and the parties agree that any questions relative to the rights of the mortgagee therein have become moot). A mortgage on said property was given, and, from time to time, was partially paid (it has now been paid in full) from the individual funds of Dimon.

The whole transaction was completed with full knowledge of its details by Dimon’s wife. It was executed with intent to hinder, delay and defraud ¹⁹⁷ appellant from collecting its valid debt from Dimon, and it had that effect. No brief was filed in behalf of the appellees. Appellant contends that the allegations of its complaint state a cause of action under Code (1957), Article 39B, Section 4 and also under Article 45, Section 1; and we are constrained to agree with appellant.

Section 4 provides: “Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.” And Section 1 defines conveyance: “ 'Conveyance’ includes every payment of money, assignment, release, transfer, lease, mortgage or pledge of tangible or intangible property * * (Italics ours.) This statute is declaratory of the common law, and is construed liberally by this Court and the Courts elsewhere. As early as 1570 the Parliament declared void any conveyance made with intent “to delay, hinder or defraud creditors,” excepting, however, from the operation of the statute any estate or interest conveyed “upon good consideration and bona fide” to anyone without notice of the fraud. 1 Alexander’s British Statutes (Coe’s Ed.), 499-545; Statute 13 Eliz., Ch. 5. The object of the statute was to protect creditors from fraudulent conveyances by debtors to friends or relatives upon the pretext of discharging a moral obligation. It is an offspring of the broad principle that the law requires every person to be “just before he is generous,” and this is especially true when the object of his “benevolence” is an attempt to bestow a benefit upon himself and upon his wife without any consideration from