Merchants Bank v. Page

128 A. 272, 147 Md. 607, 1925 Md. LEXIS 123

• Court: Court of Appeals of Maryland
• Decided: February 26, 1925
• Status: Published

Opinion

Bond, O. J.,

delivered the opinion of the Oburt.

This is a proceeding to set aside a mortgage as in fraud of the creditors of the mortgagor, under the Fraudulent Conveyance Aeifc. Acts 1920, eh. 395. All the citations of statutory provisions in this opinion refer to that act. The quesr tion to he decided is whether a mortgage, given by a wife on all her assets., to repay money fraudulently obtained by her husband, thus forestalling criminal prosecution of the husband, may be avoided at the suit of .a creditor of the wife herself.

Hnder .an order of the Circuit Court for Wicomico County, passed on December 14th, 1921, the bank commissioner of tike State became receiver of the Bank of White Haven of that county, and among the assets of the hank which came into his 'hands were found unpaid notes made by Hilton W. Robertson and -his brother, Raymond Robertson, both of Washington, District of Columbia, and indorsed by Louise B. Robertson, the wife of Hilton W. Robertson. In her answer in this proceeding the wife admits liability on the indorsements. The husband was .also indebted to the Merchants Bank of Washington for money fraudulently obtained by Mm from that hank, and steps had been taken looking, to criminal prosecution, when, on December 29th, 1921, the wife gave her note for $10,000 of the .indebtedness and, with her husband, executed a mortgage on real property owned by her .at White Haven to secure payment of it. This was all the property which Mrs'. Robertson owned. On a bill in equity by the bank commissioner the court below passed a decree setting aside the mortgage as in fraud of the wife’s own creditors, .and the present appeal is taken from that decree.

The evidence does not show an actual promise by the Merchants Bank toi stifle prosecution of Robertson in consideration of the wife’s note and mortgage; the notes representing the husband’s previous fraudulent transactions were merely cancelled and surrendered in exchange. Whether this amounts to the Compounding of a crime, which furnishes in itself no legal consideration (Wildey v. Collier, 7 Md. 273; Gotwalt v. Neal, 25 Md. 434; Ann. Cas. 1913-A, 522), has been questioned; but the decision on the question seems; unnecessary to tbe decision of this ease. An antecedent debt is fair consideration for a conveyance. Section 3b of tbe act. And a debtor may pay such a debt, even with all bis property, and as to creditors it Would be nothing more than tbe creation of a preference of one of them, not to be reached in this kind of proceeding. Castleberg v. Wheeler, 68 Md. 266, 275; Crane v. Barkdoll, 59 Md. 534, 535; Fuller v. Brewster, 53 Md. 358. 'The additional facts that tibe debtor bad defrauded the creditor preferred, .and 'gained freedom from prosecution by the preference, would add notbing to the rights of other creditors. Traders’ Bank v. Steere, 165 Mass. 389. If, therefore, the wife .stood in her husband’s shoes, and bis .antecedent debt was also hers, it would support her conveyance of -all her property without reference to the compounding of the crime.

But the wife does not stand in the husband’s shoes to this e&tent. In this, case the wife was in no way liable for the indebtedness. 'She has her separata creditors, iamd these have first claim upon her assets; and the compounding of the crime, even if proved, furnishing no valid consideration for it, ber conveyance to pay her husband’s debt can amiount to nó more than a voluntiary gift. It was probably made without thought of her separate liability, without actual intent to defraud her own creditors, .and without knowledge by the grantee of the effect upon them. But a voluntiary conveyance of 'all -the assets of tihie grantor is Void as to that grantor’s creditors (section 4 of the act, Grover v. Radcliffe, 63 Md. 496, 502; Kuhn v. Stanfield, 28 Md. 210; Worthington v. Bullitt, 6 Md. 172); even though without knowledge by the grantee of the fraudulent nature of the transaction (section 4; Richards v. Richards, 98 Md. 136), and without actual intent on tbe part of the gpantor to defraud (section 4; Riley v. Carter, 76 Md. 581, 600; Schuman v. Peddicord, 50 Md. 563). Therefore tbe conveyance here Was void as against the complainant.

Decree affirmed, with costs to the appellee.