A. V. Laurins & Co., Inc. v. Prince George's County

• Decision Date: 30 November 1979
• Docket Number: No. 1,1
• Citation: 420 A.2d 982,46 Md.App. 548
• Parties: A. V. LAURINS & COMPANY, INC., et al. v. PRINCE GEORGE'S COUNTY, Maryland. . Oct. 8., 1980. John H. MacVey, Washington, D. C., with whom was Alan M. Perlman, Silver Spring, on the brief, for appellants. Robert N. Stokes, Jr., Associate County Atty. for Prince George's County, with whom were Robert B. Ostrom, County Atty. for Prince George's County and Michael O. Connaughton, Deputy County Atty., for Prince George's County, on the brief, for appellee. Argued before MELVIN, WILNER and COUCH, JJ. COUCH, Judge. On
• Court: Court of Special Appeals of Maryland

Page 548

46 Md.App. 548

420 A.2d 982

A. V. LAURINS & COMPANY, INC., et al. v. PRINCE GEORGE'S COUNTY, Maryland.

No. 1.

Court of Special Appeals of Maryland.

Oct. 8., 1980.

John H. MacVey, Washington, D. C., with whom was Alan M. Perlman, Silver Spring, on the brief, for appellants.

Robert N. Stokes, Jr., Associate County Atty. for Prince George's County, with whom were Robert B. Ostrom, County Atty. for Prince George's County and Michael O. Connaughton, Deputy County Atty., for Prince George's County, on the brief, for appellee.

Argued before MELVIN, WILNER and COUCH, JJ.

COUCH, Judge.

On November 30, 1979 the Circuit Court for Prince George's County, Maryland declared fraudulent a conveyance made between the appellants, A. V. Laurins & Company, Inc. and LAV Shell Company, Inc., in 1975. The Circuit Court imposed a lien upon the real property involved and appointed a trustee to sell the property. The Court also adjudged the appellants Laurins and Norman to be in contempt for their failure to appear at trial on July 31, 1979, pursuant to subpoenas. Each of the appellants was fined $2,000.00.

At a subsequent hearing the Circuit Court assessed attorney's fees of $1,500.00 against the appellants.

From these decisions of the Circuit Court the appellants appeal and present three questions:

"1. Did the Court below err in reaching conclusions not supported by the evidence of record; in ruling that the circumstances of this case shifted the burden of proof to the defendants; in ruling that defendants could not produce any evidence of any nominee agreement or any credible evidence of an antecedent debt; and in concluding that the conveyance of certain condominium units was fraudulent?

2. Did the Court below err in finding defendant Laurins and defendant Norman guilty of direct contempt of court when the evidence of record shows that defendants, if contemptuous, should have been charged with constructive criminal contempt requiring compliance with the procedures specified by Rule P4?

3. Was the assessment of $1,500.00 against defendants for attorney's fees for the entire case arbitrary, unreasonable, and capricious when the record shows that the County's motion for costs related only to discovery and that defendants did comply with the Court order for discovery?"

We find that the Circuit Court did not err in determining that the conveyance was fraudulent. The Court did err, however, in finding Laurins and Norman guilty of direct criminal contempt. Furthermore, the Court improperly determined the assessment of attorney's fees against the appellants.

The reasons for our findings and additional facts concerning this case will be presented in the discussion of the issues.

I.-FRAUDULENT CONVEYANCE

The appellants request that we reverse the decision of the Circuit Court for Prince George's County which set aside the conveyance of certain condominium units. We decline to follow this request and instead we affirm the finding that the conveyance was fraudulent as defined by Md.Com.Law Code Ann. § 15-207.

This provision states:

"Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future creditors."

A. V. Laurins & Company, Inc. (AVL Co.) was a Delaware corporation authorized to do business in the State of Maryland with offices at 8401 Connecticut Avenue, Suite 700, in Chevy Chase. Its corporate officers and directors were Aleksandrs V. Laurins, James G. Norman, and Charlene Baden. All of the stock of AVL Co. was owned by LAV Shell Company, Inc., a Maryland corporation with offices in the same Suite 700 and with the same corporate officers and directors as AVL Co.

As a management and real estate development corporation AVL Co. was the general partner in several limited partnerships. These partnerships included the Co-Op Development Limited Partnership (Development), formed in 1972 by AVL Co., and the National Mortgage Corporation (NMC). Development was formed to acquire, renovate, convert to condominium and sell a housing project known as Coronado Apartments in Adelphi, Maryland. In 1973 Development obtained legal title to the apartments and sold them as condominium units. Shortly thereafter ten of the individual purchasers involved in the condominium conversion filed complaints with the Prince George's County Landlord-Tenant Commission. They contended that certain sums paid to AVL Co. exceeded the amount permitted by the County Rent Control Law which became effective June 22, 1973.

Following hearings on the complaints the Executive Director of the Landlord-Tenant Commission issued an order directing AVL Co. to reimburse the ten complainants various amounts totalling $2,065.44. The Executive Order was issued March 11, 1975.

Two days later, on March 13, 1975, AVL Co., as general partner of Development, conveyed Coronado condominium units 703A and 704A to LAV Shell Company, Inc. On March 14, 1975, Laurins and Norman, as officers of AVL Co., dated a document purporting to dissolve the limited partnership between AVL Co. and NMC. This document was notarized on May 29, 1975 by Charlene Baden. There was no signature on the document on behalf of the limited partner, NMC, nor was any certificate of cancellation recorded. The document itself purported to commit $13,350.00 of the cash assets of the limited partnership

"as a reserve for its liabilities and transferred to Metropolitan Mortgage Bankers, Inc., for the purpose of payment of Accounts Payable, Warranties, the Noble lawsuit, the Rent Control Suit and other potential lawsuits."

Laurins and Norman were also corporate officers of Metropolitan Mortgage Bankers, Inc.

On April 1, 1975, the deed conveying condominium units 703A and 704A was recorded and transfer taxes paid. The deed bears the notation for mailing of 8401 Connecticut Avenue, Chevy Chase, Maryland. That same month, management of the Coronado units was taken over by Shannon & Luchs. This company, however, continued to make receipts and disbursements for the account of "A. V. Laurins" having received no notice of change of ownership. LAV Shell Co., Inc. did inform the Landlord-Tenant Commission in October, 1975 that AVL Co. had no assets with which to satisfy the rent reimbursement order. The Commission was also informed by LAV Shell that AVL Co. was no longer in business. More accurately the authorization for AVL Co. to do business in Maryland had been cancelled on December 16, 1974 by the State Department of Assessments and Taxation. AVL Co. had failed to file the required 1974 foreign ordinary business corporation personal property return.

Prince George's County filed a Bill of Complaint on January 5, 1976 to enforce the Executive Order against AVL Co., Laurins and Norman. ¹ Ten days later Laurins moved to San Francisco. On September 13, 1977, the Circuit Court for Prince George's County entered judgment in favor of the County and against only the appellant AVL Co. in the amount of $2,065.34. No appeal was taken from this judgment.

The County returned to the Circuit Court on March 10, 1978, filing a Bill of Complaint against AVL Co., LAV Shell Co., Inc., Laurins, and Norman, to establish a fraudulent conveyance and impress a lien on real estate.

At the hearing on July 31, 1979, the County contended that the conveyance of March 13, 1975 was made with actual fraudulent intent to hinder, delay or defraud the County from satisfying the award of $2,065.34. The County presented evidence that the condominiums were assessed to LAV Shell Co., Inc., but that during a four year period from 1975 to 1979 the benefits of the property went to Laurins.

Charlene Baden testified for the defendants. She said that LAV Shell Co., Inc. never owned any units in Coronado, but that LAV Shell acted as "nominee" for Co-Op Mortgage Investment Associates (Co-Op), a corporation formed by AVL Co. and Wyoming Associates in 1973. Defense testimony indicated that Co-Op, acting through AVL Co., had borrowed $231,758.00 from NMC. This purported loan was documented by copies of sheets from Co-Op's record books, dated 1973. AVL Co. loaned this $231,758.00 to Pleasant Hill Associates, a limited partnership of which AVL Co. was the general partner. As general partner in Pleasant Hill Associates, AVL Co. agreed to repay the loan by assigning to Co-Op the AVL Co. interest in Development. At the time of the repayment agreement between AVL Co. and Co-Op, $90,000.00 was still due on the loan. Co-Op's interest in Development (the Coronado project) was valued by the defendants at $120,000.00. No notes or other evidence of bona fide debts incurred with valid consideration were introduced by the defendants. No nominee agreement was presented to indicate the proper relationship between Co-Op and LAV Shell Co., Inc.

Prince George's County asserted that a fraudulent conveyance occurred when the condominium units were transferred from Development to LAV Shell Co., Inc. in an arrangement with Co-Op. This conveyance did render AVL Co. insolvent and unable to reimburse the Coronado tenants.

The defendants at the hearing and the appellants in this appeal have argued that no fraud occurred in the transfer, but rather that the $90,000.00 antecedent debt was paid off by Co-Op's receiving assets from the dissolution of Development. Payment of Co-Op's loan took the form of $61,678.00 in notes receivable, cash of $3,600.00, and the condominiums which the appellants value at $26,200.00.

After assessing the evidence presented at the hearing, the chancellor ruled in favor of the County. Based on the continued disbursements from Shannon & Luchs to Laurins following the transfer of the deed from AVL Co. to LAV Shell Co., Inc., she determined:

"(T)here was no real delivery even intended in this situation as no rights or duties with respect to the property were really changed, as the debtor...