Citizens Nat. Bank of Havre De Grace v. Leffler

• Decision Date: 10 April 1962
• Docket Number: No. 179,179
• Citation: 179 A.2d 686,228 Md. 262
• Parties: , 100 A.L.R.2d 1088 CITIZENS NATIONAL BANK OF HAVRE DE GRACE, to the Use of United States Fidelity and Guaranty Company v. Mary Fahey Clark LEFFLER.
• Court: Maryland Court of Appeals

Page 262

228 Md. 262

179 A.2d 686, 100 A.L.R.2d 1088

CITIZENS NATIONAL BANK OF HAVRE DE GRACE, to the Use of United States Fidelity and Guaranty Company v. Mary Fahey Clark LEFFLER.

No. 179.

Court of Appeals of Maryland.

April 10, 1962.

William O. Doub and Ronald T. Osborn, Baltimore (Francis A. Michel, Baltimore and T. Leo Sullivan, Bel Air, on the brief), for appellant.

Franklin Somes Tyng, Bel Air (A. Freeborn Brown and T. Carroll Brown, Bel Air, on the brief), for appellee.

Before HENDERSON, PRESCOTT, HORNEY, MARBURY and SYBERT, JJ.

MARBURY, Judge.

The plaintiff below has appealed from an order of the Circuit Court for Harford County sustaining without leave to amend the appellee's demurrer to the bill of complaint in a suit to set aside an alleged fraudulent conveyance.

This case involves the question is the appellant's action against the appellee wife, for alleged fraudulent conveyance from husband to wife, absolutely barred by the provisions of Code (1951), Article 45, Section 1, ¹ which requires creditors to assert their claims within three years after the acquisition of the property by a married woman from her husband, the conveyance in question having been made on October 14, 1946, and suit having been instituted on December 1, 1955; and there being no wrongdoing alleged on the part of the wife. The facts alleged in the bill of complaint, and shown in the exhibits filed therewith, may be briefly summarized.

William A. Leffler, who died during the pendency of the case in the lower court, was married to Vesperina M. Clark, also deceased, many years prior to these proceedings. On March 31, 1927, while William was married to Vesperina, they acquired fee simple title, as tenants by the entireties, to a lot and premises known as 904 South Washington Street, in Havre de Grace, Harford County, Maryland, which is the subject of this suit. Vesperina died on March 16, 1941, vesting title to the property in William alone, by right of survivorship. On November 24, 1943, he married Mary Fahey Clark, a codefendant and the appellee here. On October 14, 1946, William conveyed the subject property, through straw conveyances, to himself and the appellee, as tenants by the entireties. Both deeds effecting the transfer were recorded on October 16, 1946. The bill states no consideration was given by Mrs. Leffler, nor was any received by her husband as a result of this conveyance.

At the time of the conveyance Leffler was insolvent and greatly in debt to his employer, the Citizen's National Bank, as a result of embezzlement, misappropriation, and false entries made in its books and records by him for a period of at least twenty years, which was subsequently established to be $94,945.57, the books and records of the bank having been destroyed up to a period of three or four years prior to December 20, 1954, by or under the instructions of Leffler, or at least with his full knowledge and acquiescence. The cause of action resulting from this situation was fraudulently concealed by Leffler until its discovery by the employer bank on or about that date, when he was dismissed from his position as executive vice-president, after being employed by the bank for approximately fifty years.

A judgment was entered in favor of the appellant against William A. Leffler in the Circuit Court for Harford County, on September 7, 1955, in the sum of $97,794.04, which amount had been paid under the bond of the United States Fidelity and Guaranty Company. The U. S. F. & G. Co. later became assignee of the bank, and is equitable plaintiff in this case.

On May 26, 1955, Leffler and the appellee, while federal charges were pending against him, to which he afterwards pleaded guilty and was fined and imprisoned, conveyed title to the Washington Street property to Frederick J. Hatem and Arianna W. Hatem, his wife, for a total consideration of $38,500. A purchase money mortgage for $25,000 of that amount was executed in favor of the appellee only. Counsel for the appellant stipulated that the Hatems were bona fide purchasers of the property, and the lower court sustained a demurrer filed on their behalf without leave to amend, subject to the agreement of counsel that all payments on account of the mortgage from them to the appellee would be continued to be made by the Hatems into a special account in the Citizen's National Bank of Havre de Grace pending the outcome of these proceedings.

The special relief now sought by the appellant is that the mortgage, and all payments made pursuant to it into the special account, be assigned to the U. S. F. & G. Co. to be credited on account of its judgment against William A. Leffler.

The chancellor below sustained the appellee's demurrer on the ground that the claim of the appellant was absolutely barred by the provisions of Code (1951), Article 45 (Husband and Wife) Section 1, which so far as applicable to this case provides in part:

'The property, real and personal, belonging to a woman at the time of her marriage, and all the property which she may acquire or receive after her marriage, by purchase, gift, grant, devise, bequest, descent * * * or in any other manner, shall be protected from the debts of the husband, and not in any way be liable for the payment thereof; provided, that no acquisition of property passing from one spouse to the other, shall be valid if the same has been made or granted in prejudice of the rights of subsisting creditors, who, however, must assert their claims within three years after the acquisition of the property, or be absolutely barred, and, for the purpose of asserting their rights under this section, claims of creditors not yet due and matured shall be considered as due and matured.' (Italics supplied.)

Having a direct bearing upon the effect of Article 45, Section 1, as it relates to the law of fraudulent conveyances, is Code (1951), Article 39B (Fraudulent Conveyances), Section 14, ² which provides:

'All acts or parts of acts inconsistent with this article are hereby repealed. But nothing herein shall be construed to repeal * * * the law relating to fraudulent conveyances from husband to wife as contained in Article 45, §§ 1, 2, and 11 * * *.'

It is, therefore, seen that Article 45, Section 1 is still in full force and effect. But the appellant relies upon Code (1951), Article 57 (Limitations of Actions), Section 14, ¹ which states:

'In all actions where a party has a cause of action of which he has been kept in ignorance by the fraud of the adverse party, the right to bring suit shall be deemed to have first accrued at the time at which such fraud shall or with usual or ordinary diligence might have been known or discovered.'

The appellant claims that the statute of limitations did not begin to run until I effler's peculations were discovered in December 1954, rather than as claimed by the appellee, from the date of the recording of the deeds transferring title from Leffler alone, to him and the appellee as tenants by the entireties. It is, of course, true that unless the transfer in 1946 of the Washington Street property, which was his only substantial asset, can be successfully attacked by a creditor, any transactions with Leffler alone could not give rise to potential claims upon the entirety property. Alexander v. Hergenroeder, 226 Md. 559, 174 A.2d 580; M. Lit, Inc. v. Berger, 225 Md. 241, 170 A.2d 303.

The effect of the transfer was to vest in the wife, as well as in the husband, the entire title to the property during their joint lives, with the right of continued and complete ownership in the surviving spouse. Such an acquisition of property by the wife is within the purview of Article 45, Section 1. The limitation of time which it imposes in absolute terms upon the rights of creditors to contest conveyances from husband to wife has been repeatedly applied. Davis v. Harris, 170 Md. 610, 185 A. 469; Hertz v. Mills, 166 Md. 492, 171 A. 709; United States Fidelity & Guaranty Company v. Shoul, 161 Md. 425, 157 A. 717; Nimmo v. Blick, 128 Md. 326, 97 A. 636; Dixon v. Dixon, 128 Md. 1, 96 A. 1027; Stieff Co. v. Ullrich, 110 Md. 629, 73 A. 874.

As applied to a conveyance from husband to wife through a straw party this Court, where the fraud did not conceal itself, has in several cases construed the meaning of this section to be that the deed conveying such property must be attacked within three years from the date of its recordation. United States Fidelity & Guaranty Company v. Shoul, supra; Nimmo v. Blick, supra; Stieff Co. v. Ullrich, supra.

The appellee relied upon the case of Wilson v. Vandersaal, 134 Md. 481, 107 A. 177, which the trial court considered as authority for sustaining the appellee's demurrer. In that case, at page 491, 107 A. at page 181, it was said:

"It is clear that section 14 of article 57 is not an answer to the express provision in section 1 of article 45, unless at least there was some act or omission on...