Westminster Savings Bank v. Sauble

Delaplaine, J., delivered the opinion of the Court. The issue in this interpleader proceedings is whether an assignment which Jesse W. Shipley made of a remainder ⁶³⁰ ■interest on March 31, 1939, to his daughters, Eulalia D. Shipley Sauble and Beatrice Shipley Myers, is void as against the Westminster Savings Bank, his creditor. On April 1, 1939, the bank sold Shipley’s mortgaged real estate under foreclosure, and in July recovered a deficiency judgment against him for the sum of $1,976.92. In January, 1943, after the life tenant’s death, the bank attached the remainder-man’s share of $2,331.30 in the hands of Ivan L. Hoff, executor.

Upon receiving notice of the assignment, which had never been recorded, the executor petitioned the court to decide whether the remainder belonged to the assignees or to the bank. The chancellor upheld the assignment’ and decreed that the assignees were entitled to the fund. The bank is appealing from that decree. It has been an ancient policy of the common law to protect the. rights of creditors against all dispositions of property which result in fraud.

In 1570 the Parliament enacted the Statute of 13 Elizabeth ch. 5, which declared void any conveyance made with intent “to delay, hinder or defraud creditors,” but provided that the act did not extend to any estate or interest conveyed “upon good consideration and bona fide” to any person without notice of the fraud. 1 Alexander’s British Statutes, Coe’s Edition, 499-545. The object of the statute was to aid in the suppression of fraud by protecting creditors from any conveyances by debtors to relatives or friends under the pretext of discharging a moral obligation. This statute is declaratory of the common law and is construed liberally by the courts, both at law and in equity. It has been uniformly held in England and the United States that a voluntary conveyance made by an insolvent to his child is void as against creditors existing at the time of the conveyance.

Lord Townshend v. Windham, 2 Ves. 1; Reade v. Livingston, 3 Johns Ch., N. Y., 481, 8 Am. Dec. 520 , 535; Sturtevant v. Ballard, 9 Johns., N. Y., 337, 6 Am. Dec. 281 . Justice Story observed that such a conveyance “has neither a good nor a meritorious consideration to support it, * * * for every man is bound to be ⁶³¹ just before he is generous; * * * and no man has the right to prefer the claims of affection to those of justice.” 1 Story, Equity Jurisprudence, 12th Edition, Secs. 353, 355.

The law is now firmly established that no man, upon the pretext of liberality, can give away property which in equity and good conscience ought to be used to pay his debts. It is a settled principle that a voluntary conveyance is prima facie in fraud of existing creditors of the grantor without regard to his actual intention. The primary purpose or motive with which a voluntary transfer of property is made by a party indebted at the time is immaterial. Goodman v. Wineland, 61 Md. 449, 451 ; Hearn v. Purnell, 110 Md. 458 , 72 A. 906 ; Coburn v. Pickering, 3 N. H. 415, 14 Am.

Dec. 375 , 377; Matthews v. Thompson, 186 Mass. 14 , 71 N. E. 93, 96 , 66 L. R. A. 421, 104 Am. St. Rep. 550 . On the other hand, where a transfer has been made for a valuable consideration the Court may possibly still find fraudulent intent from other circumstances, such as insolvency or heavy indebtedness of the grantor, litigation pending or anticipated, relationship between the parties, concealment or secrecy, and transfer of the debtor’s entire estate. None of these indicia of fraud alone necessarily proves fraud; but they do warrant an inference of fraud, especially where several of the indicia concur.

Brennecke v. Riemann, Mo. Sup., 102 S. W. 2d 874 , 109 A. L. R. 1214. In the case before us it is conceded that the assignor was in “dire financial circumstances” when he made the assignment and he made oath that the consideration was love and affection and the purpose that the daughters would keep their parents and take care of them during their declining years. In Wilmer v. Placide, 131 Md. 399, 404 , 102 A. 541, 543 , the Court of Appeals adopted the general rule that when a person conveys property in consideration of an agreement to support him in the future, and by the conveyance renders himself unable to pay his