Methodist Episcopal Church v. Hadfield

Moore, J., delivered the opinion of the Court. May Starr Hadfield, appellee, individually and as personal representative of her deceased husband’s estate, 1 filed a bill of complaint against the Methodist Episcopal Church of Emory Chapel, appellant, to set aside a fraudulent conveyance. Her complaint stated, inter alia, that she was unable to include the marital residence in the estate because her husband had conveyed the home to appellant to defraud her of her marital rights. The case was heard on July 16, 1981.

The Circuit Court for Howard County (Gilmore, J.) entered a judgment in favor of appellee with an order nullifying the deed to appellant and ordering the property to ²⁰⁷ devolve into the estate to be distributed pursuant to the laws of intestate succession. For the reasons stated we shall remand the case for further determination by the trial court without affirmance or reversal. I Robert Webster Minns Hadfield and May Starr Hadfield were married on September 16, 1972. They lived in a house known as "Cheriton” in Howard County, Maryland, which he had inherited from his first wife, Elizabeth Cavey Hadfield (Mrs. Cavey), and which was titled in his name alone.

Mr. Hadfield was an engineer who had retired from Westinghouse Corporation. Mrs. Hadfield had worked outside the home for 22 years but quit when she married and assumed the duties of a housewife. In late 1974, she was advised by a doctor to seek part-time employment as therapy for her nerves and an angina condition. She found temporary work as a hostess at a restaurant in mid-1975.

Later that year, her husband discovered that she had withdrawn $10,000 from a joint account and put it into a separate account in her name alone. Angered by this transaction, her husband called her a "robber” and a "thief.” 2 Mrs. Hadfield testified at trial that the $10,000 account had been opened in both their names before they were married. She withdrew the money after her husband started charging her 14 cents a mile to go to and from work. Apparently, he was unhappy that she was employed outside the home.

About this time, Mr. Hadfield, without his wife’s knowledge, signed a deed conveying a remainder interest in their home to the Church, reserving for himself a life estate ²⁰⁸ with full powers "to sell, mortgage, or otherwise dispose” of the property within his lifetime, 3 without the joinder of the Church. Mr. Hadfield and his first wife, Mrs. Cavey, were members of the Church and had supported it "generously.” In 1976 Mr. Hadfield became seriously ill with cancer and underwent a major operation. Mrs. Hadfield "nursed him back to health.” Subsequently, she found full-time work as a deputy clerk for the Howard County Circuit Court. Following a second heart attack, Mr. Hadfield died, intestate, on January 13, 1980.

A cancelled will, various insurance policies, and government bonds were found in his safe deposit box. Mrs. Hadfield, who was appointed personal representative, received a letter from the Church ten days after her husband’s death expressing sympathy and seeking a meeting to discuss when she planned to vacate the house. 4 She responded by filing, individually and as personal representative, a bill of complaint "to set aside a fraudulent conveyance.” Her complaint stated, inter alia, that as personal representative, she was unable to include the mari ²⁰⁹ tal residence in the estate because of the demands of the Church, that the purported conveyance was without consideration, that it was fraudulent because its purpose was to defraud the wife of her marital rights in the estate, and that the deed was an attempt to make a testamentary disposition without compliance with the pertinent laws of Maryland and was, therefore, invalid. Mrs. Hadfield asked that the deed be declared null and void, and cancelled, and that the estate of Mr. Hadfield be declared the owner in fee simple of the property known as 3966 Columbia Road. After a hearing on July 16, 1981, both sides filed comprehensive legal memoranda.

Judgment for appellee was entered on December 3, 1981. Judge Gilmore found that the transfer of the property to the Church was without consideration 5 and defrauded the wife in that Mr. Hadfield did not relinquish full control. The judge declared the deed null and void, set aside the conveyance, and held that the statutory provisions pertaining to a surviving spouse’s right to elective share did not apply because Mr. Hadfield had died intestate. Thus, the house became part of the estate to be distributed to the wife.

Appellant challenges the decision of the circuit court on two grounds. First, the Church argues that the court erred in considering only the factor of lifetime control of the property in determining whether the inter vivos conveyance ²¹⁰ defrauded appellee of her marital rights. Second, assuming arguendo that the court correctly held that the property devolved into the estate, appellant suggests that appellee’s share should be determined by the laws of testate rather than intestate succession even though Mr. Hadfield departed without a will. 6 II The heart of appellant’s argument is that the chancellor failed to consider all the factors outlined in the leading cases of Whittington v. Whittington, 205 Md. 1 , 106 A.2d 72 (1953), relying instead on the single ground that Mr. Hadfield’s failure to convey the house to the Church absolutely and unconditionally constituted a fraud on the widow’s marital rights. See Grove v. Frame, 285 Md. 691 , 402 A.2d 892 (1979).

The "Whittington factors” were suggested by a distinguished local commentator, Melvin Sykes, Esq. in 'Inter Vivos Transfers in Violation of the Rights of Surviving Spouses.” 10 Md.L.Rev. 1 (1949). In Whittington , the trial judge’s finding that four jointly-owned savings account trusts in favor of the decedent’s two sons were valid, was affirmed by the Court of Appeals in an opinion by Chief Judge Bruñe which pointed out that no evidence of any fraud had been suggested. The Court then addressed the "ultimate question” whether the establishment of these valid trusts constituted a fraud upon the marital rights of the decedent’s surviving spouse. After discussing the earlier case of Mushaw v. Mushaw, 183 Md. 511 , 39 A.2d 465 (1944), and ²¹¹ Allender v. Allender, 199 Md. 541 , 87 A.2d 608 (1952), the Court quoted the following from AUender: "The doctrine of fraud on marital rights represents an effort to balance the social and practical undesirability of restricting the free alienation of personal property against the desire to protect the legal share of a spouse.

It has always been recognized that a husband, in the absence of statutory regulation like that in the case of dower, has an unqualified right to give away his personal property during his lifetime, even though the effect is to deprive the wife of her statutory share. But if the gift is not absolute and unconditional and the donor retains dominion and control over the property during his lifetime, the courts have held that the gift is colorable and may be set aside. ” (Emphasis added.) Whittington, supra at 11 , 106 A.2d at 77 (quoting Allender, supra at 550, 87 A.2d at 611 ). The Court in Whittington then turned to the factors which may be considered as material and pertinent in determining whether a particular inter vivos transfer constitutes a fraud upon the marital rights of a surviving spouse. The Court explained: "In Maryland, the completeness of the transfer and the extent of control retained by the transferor, the motive of the transferor, participation by the transferee in the alleged fraud and the degree to which the surviving spouse is stripped of his or her interest in the estate of the decedent spouse have all been considered material, and no one test has been adopted to the exclusion of all other tests. . . . [T]here are several other factors which have been or may be considered as pertinen t, such as the relative moral claims of the surviving spouse and of the transferees, other provisions for the surviving spouse, whether or not he or she has independent means and the interval of time between the transfer and the death of the transferor.” (Emphasis added.) ²¹² Whittington, supra at 12 , 105 A.2d at 77.

It is apparent from the emphasized language that the Whittington Court was merely suggesting the factors that have been considered and those that may be considered. The case does not hold that all these factors must be evaluated; indeed, the opinion stressed that no single test has been adopted. Id. at 14 , 105 A.2d at 78. Nor does Whittington impinge upon the two-stage analysis to be employed in a case involving fraud upon marital rights.

The first step is not a consideration of any of the pertinent factors, but rather, an examination of the transfer itself to determine whether it is valid and effective or merely colorable and illusory. See, e.g., Gianakos v. Magiros, 234 Md. 14 , 197 A.2d 897 (1964). Therefore, the threshold question is whether the decedent retained some measure of control over the property he attempted to convey. If no control is retained, there can be no fraud.

Grove, supra at 698 , 402 A.2d at 896 (husband’s absolute conveyance of residence to exclude wife from inheritance held not fraudulent). Even if control is retained, the transfer can be technically valid. See Gianakos, supra. The court then must decide whether the transfer should be set aside as a fraud upon the surviving spouse’s marital rights.

It is at this second stage of the analysis that the Whittington factors aid in this determination. Both Whittington and Grove reaffirmed the underlying principles found in Rabbitt v. Gaither, 67 Md. 94 , 8 A. 744 (1887). A husband has the right to convey his property without the assent or knowledge of his wife, and an absolute, unconditional transfer is valid even if the husband intends to deprive his wife of her share; however, if the transfer is a mere contrivance by which the husband retains control over the property during his life to defeat any claim of his widow at death, the law pronounces such a transfer a fraud upon her rights; and the fraud may be proved by his retention of possession and reservation of an interest. Id.

See also Allender, supra at 546, 87 A.2d at 611 . The "Whittington ²¹³ factors” are ancillary to the basic principles. As the Court of Appeals remarked in Winters v. Pierson, 254 Md. 576 , 255 A.2d 22 (1969), after reviewing pertinent case law, "In a nutshell, all of the tests are germane, but no one of them is conclusive in any case.” Id. at 584 , 255 A.2d at 26 . It is apparent that the chancellor below misread Grove to mean that a surviving spouse need show only that an inter vivos transfer was not absolute and unconditional to avoid the transfer.

The relevant portion of Judge Cole’s opinion in Grove reads: "Prior to 1970, the test to determine whether there had been a fraud on a widow’s marital rights applied to personalty only because the transfer of legal title to real property, without the wife’s consent, did not destroy her right of dower upon her husband’s death. However, when the General Assembly abolished the estates of dower and curtesy by Chapter 3, § 1 of the Laws of Maryland 1969, now Code (1974), § 3-202 of the Estates and