Reported Maryland Appellate Opinion on Vacating Spouse’s Fraudulent Conveyance

by | Jun 27, 2013 | Firm News | 0 comments

In June 2013, the Court of Special Appeals published its decision in Meese v. Meese, in which it affirmed the granting of a Motion of Summary Judgment to vacate a fraudulent conveyance of real property.   Stewart A. Sutton represented Tim Meese in both his divorce and fraudulent conveyance cases.

During their marriage, the Meeses bought a home from Mrs. Meese’s father and assumed his mortgage obligation.  The home was titled only in the name of Mrs. Meese.  The underlying mortgage had a due on sales clause.  The Garn St. Germain Federal Depository Institution Act provides that a lender cannot enforce its due on sales clause when a parent conveys a home to a child.  12 U.S.C. 1701j(3)(d)(6).  However, there is no similar exception when a parent conveys a home to a child and son-in-law.

In his underlying divorce case, the following factual findings were made: (1) Mr. and Mrs. Meese’s home was marital property, because it had been purchased during the marriage; (2) Mrs. Meese dissipated the home by conveying it to an Irrevocable Trust for zero consideration while the marriage was breaking apart; (3) she intended that the transfer would prevent Mr. Meese from enforcing his expected monetary award as a judgment lien against the home; and (4) Mrs. Meese’s divorce attorney prepared and recorded the Deed that conveyed the home to the Irrevocable Trust for zero consideration.

After Mr. Meese was awarded a $30,000 monetary award in the divorce case, he moved for summary judgment to vacate the fraudulent conveyance.

There are two methods of establishing a fraudulent conveyance.   First, a conveyance of property without fair consideration, which would render the debtor insolvent, constitutes a fraudulent conveyance.  Maryland Uniform Fraudulent Conveyance Act (“MUFCA”), Maryland Commercial Law at § 15-202(a) (“A person is insolvent if the present fair market value of his assets is less than the amount required to pay his probable liability on his existing debts as they become absolute and mature); § 15-204 (“Each conveyance made and every obligation incurred by a person who is or will be rendered insolvent by it is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration”); § 15-206 (“Every conveyance made and every obligation incurred without fair consideration when the person who makes the conveyance or enters into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature is fraudulent as to both present and future creditors”).

Secondly, it is a fraudulent conveyance to transfer property “with actual intent, as distinguished from intent presumed in law”, to “defraud present or future creditors”.  Id. § 15-207.

In his Motion for Summary Judgment, Plaintiff Tim Meese established that the transfer of the family home was a fraudulent conveyance under both methods.  Not only was Defendant Ms. Meese insolvent when she conveyed the home to the Irrevocable Trust for zero consideration, it was done for the express purpose of preventing Plaintiff Mr. Meese from enforcing his expected monetary award as a judgment lien against the family home.  The trial court ordered that the home be re-conveyed from the Irrevocable Trust to Defendant Ms. Meese; and Mr. Meese’s $30,000 judgment from the divorce case automatically became a judgment lien against the home.

In 2013, Defendant Ms. Meese paid the entire judgment along with post-judgment interest after Plaintiff Mr. Meese had requested that the Montgomery County Sheriff  sell the home to enforce his judgment.

Practice Pointer:  It is common for divorcing parties to dissipate, hide, and give away marital property.  In Meese v. Meese, the Court of Special Appeals has reminded members of the Maryland Bar to be circumspect before assisting their divorcing clients in conveying marital property for less than fair market value or for no value to a family member, friend, or trust.  It is also a violation of Rule 1.6 of the Maryland Lawyers’ Rules of Professional Conduct for an attorney to assist a client in perpetrating a fraud, which will result “in substantial injury to the financial interests or property of another”.




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