Opinion ID: 2388540
Heading Depth: 1
Heading Rank: 2

Heading: May an in personam judgment be entered in a suit to set aside a fraudulent conveyance?

Text: While the Maryland law on this subject is not as unequivocal as one might hope, the logic of the authorities is unassailable. Obviously, if the subject of the fraudulent conveyance has been disposed of or cannot be reached, the person defrauded should be able to recover from the person to whom the transfer was wrongfully made, and through whose hands it passed, Aggregates Associated, Inc. v. Packwood, 58 Cal.2d 580, 375 P.2d 425, 431, 25 Cal. Reptr. 545 (1962); Leachman v. Cobb Development Co., 226 Ga. 103, 172 S.E.2d 688, 690 (1970); Vinlis Construction Co. v. Roreck, 67 Misc.2d 942, 325 N.Y.S.2d 457, 463 (Sup. Ct. 1971); 37 Am.Jur.2d, Fraudulent Conveyances, supra, §§ 124, 157 at 803, 827; Glenn, Fraudulent Conveyances § 57 at 77, § 239 at 413 (1940). Peripheral support for these general principles may be found in Riverside Brick Co. v. Wheatley, 92 Md. 410, 412, 48 A. 715 (1901) and in Chatterton v. Mason, 86 Md. 236, 247, 37 A. 960 (1897) which vacated in personam decrees because they had not been sought in the complaint. See also Folsom v. Detrick Fertilizer & Chemical Co., 85 Md. 52, 36 A. 446 (1897); Mish v. Main, 81 Md. 36, 31 A. 799 (1895) and Goodman v. Wineland, 61 Md. 449, 452 (1884). Moreover, it should be remembered that the Legislature, in enacting the Uniform Fraudulent Conveyance Act, Maryland Code (1957, 1971 Repl. Vol.) Art. 39B, was enacting a statute declaratory of the common law, [1] Atlantic Lumber Corp. v. Waxman, supra, 162 Md. at 195, and was not restricting the legal or equitable remedies already available to a creditor, Art. 39B, § 11; Lipskey v. Voloshen, 155 Md. 139, 144-45, 141 A. 402 (1928). The Act simply adds an efficient, optional, and additional remedy to a creditor who has not reduced his claim to judgment.    [T]he underlying objective of the uniform act ... is to enhance and not impair the remedies of the creditor. Lind v. O.N. Johnson Co., 204 Minn. 30, 282 N.W. 661, 667, 668, 119 A.L.R. 940 (1938); see Glenn, Fraudulent Conveyances, supra, § 62 at 101. Interestingly enough, the innovative impact of the Act in other jurisdictions where for the first time a creditor could file his bill of complaint without having reduced his claim to judgment, was not a novel idea in Maryland, where this had been the law since the passage of Ch. 380, § 2 of the Laws of 1835, Code (1957) Art. 16, § 39; Miller, Equity Procedure §§ 730-732, at 832-34 (1897). This provision was not repealed by the Uniform Act and subsisted until 1962 when it was supplanted by Maryland Rule X70, to the same effect. We are simply not impressed by the Damazos' argument that the entry of an in personam judgment is not within the contemplation of the Uniform Fraudulent Conveyance Act, merely because Art. 39B, § 9 offers the alternative of setting aside the conveyance or executing upon the property conveyed. The better rule would seem to be that so long as the property remains in the possession of the fraudulent transferee, who does nothing to lessen its value, a judgment in personam will not be entered. But where the transferee allows or causes the property to depreciate in value or parts with the property without sufficient consideration or puts it beyond the reach of the court, equity will not allow itself to be frustrated but will adapt its relief to the exigencies of the case and will enter a money judgment if this will achieve an equitable result. The form of the relief should be so framed as to place the judgment creditor in the same or similar position he held with respect to the fraudulent transferor prior to the fraudulent conveyance, Miller v. Kaiser, 164 Colo. 206, 433 P.2d 772, 775 (1967). Compare Miller v. Kaiser, supra, at 775-76 and United Shoe Machinery Corp. v. Becker, 51 F. Supp. 802 (D.C.N.Y. 1943) with North River Mortg. Corp. v. Jacob, 144 Misc. 842, 259 N.Y.S. 603 (1932) and see 2 Moore, Fraudulent Conveyances Ch. XIX, § 8 at 1023 (1908) and cases collected in Footnotes 66 and 67. Particularly apposite here is an excerpt from McLaughlin, Application of the Uniform Fraudulent Conveyance Act, 46 Harv. L. Rev. 404, 443 (1933): On general equitable principles, have not the creditors of the grantor an equity in the property in the hands of the fraudulent grantee? And if he dissipates the property, cannot they hold him accountable? And if so, is the operation of such a principle precluded by section 9 of the Uniform Act which specifies the two usual remedies of creditors, or admitted under section 11 as a case not provided for in the Act? A possible construction is that the maxim expressio unius, exclusio alterius applies to section 9 [a construction which the Damazos earnestly espouse]. But a preferable construction is that the creditor's right to avoid, like an equity of rescission in a defrauded transferor, carries with it a remedy against the transferee on a theory of constructive trust. The New York Appellate Division [in Halsey v. Winant, 233 App. Div. 103, 251 N.Y.S. 81 (1931); rev'd on other grounds, 258 N.Y. 512, 180 N.E. 253 (1932); cert. denied, 287 U.S. 620, 77 L.Ed. 539, 53 S.Ct. 20 (1932)] has granted the relief in question without adverting to the possible restrictive effect of section 9.