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Brooke Grove Foundation, Inc. v. Bradford

United States District Court, D. Maryland, Southern Division

December 6, 2018

BROOKE GROVE FOUNDATION, INC. et al., Plaintiffs,
v.
EDGAR C. BRADFORD et al. Defendants.

          MEMORANDUM OPINION

          Paul W. Grimm United States District Judge.

         Plaintiff Brooke Grove Foundation, Inc. ("Brooke Grove") is a creditor of a decedent's estate. The company here seeks to return a parcel of real property to the estate, arguing the personal representative (the decedent's son, Edgar C. Bradford) violated the Maryland Uniform Fraudulent Conveyance Act ("MUFCA") when he transferred the property to himself for no consideration. It also seeks a declaration that the son's preexisting federal and state tax liens do not encumber the property.

         There can be little doubt that the conveyance was fraudulent under Section 15-204 of Maryland's Commercial Law, which proscribes conveyances that leave a transferor insolvent and that are unsupported by fair consideration. See Md. Code Ann., Com. Law § 15-204. Accordingly, I am granting Plaintiffs' Motion for Summary Judgment, ECF No. 41, and setting aside the conveyance. In doing so, I reject the United States's argument that its liens with respect to Mr. Bradford's unpaid taxes apply to the real property in question in spite of the unlawful way in which he acquired it. The United States's Cross-Motion for Summary Judgment, ECF No. 47, is accordingly denied.

         FACTUAL BACKGROUND

         This is a dispute over rights in property. The property in question, located at 1413 Morningside Drive in Silver Spring, Maryland, is the former home of Mr. Bradford's parents, Christine H. Bradford and Edgar E. Bradford Jr. The Bradfords bought the property in 1968 as tenants by the entirety. ECF No. 41-5. When Edgar E. Bradford Jr. died in 1983, his interest in the property extinguished, leaving his wife as the sole owner in fee simple. ECF No. 41-4. The property was part of her estate, and was far and away its most valuable asset, when she died on October 14, 2014. Amended Inventory 1, ECF No. 41-3.

         Christine Bradford had spent the final year of her life at the Brooke Grove Rehabilitation and Nursing Center in Montgomery County, Maryland. Answer, ECF No. 18. A few weeks after she died, and after Mr. Bradford submitted her will to the Orphans' Court for Montgomery County, Petition for Administration 1, ECF No. 41-6, Brooke Grove filed a claim of $84, 798.31 against the estate, Claim, ECF No. 41-9. The court soon admitted the will into probate and named Mr. Bradford as personal representative of the estate, consistent with the terms of the will. Administrative Probate Order, ECF No. 41-8; Petition for Administration 1.

         On June 19, 2017, the Orphans' Court entered a judgment approving Brooke Grove's claim for $84, 798.31. June 2017 Order, ECF No. 41-10. The order gave Mr. Bradford 45 days to obtain financing to pay the claim or, failing that, to enter into a listing agreement with a real estate agent to sell his mother's house. Id. Mr. Bradford, however, had just preempted that latter option only a few days earlier, when he signed a deed transferring the Morningside Drive property to himself. Deed, ECF No. 41-11. The deed, signed and notarized on June 14, 2017, could not have been less subtle, stating that the transfer was "for and in consideration of ZERO DOLLARS ($-0-)." Mat 1-3.

         Brooke Grove soon filed an emergency petition to enforce the court's order and remove Mr. Bradford as personal representative, which the court granted on September 21, 2017. September 2017 Order, ECF No. 41-12. The order named attorney Helen M. Smith as the new personal representative of the estate. Id.

         Brooke Grove and Ms. Smith (collectively, "Plaintiffs") filed this action on October. 2, 2017, seeking an order invalidating the June 14, 2017 transfer to Mr. Bradford'[1] Complaint, ECF No. 2. Their Complaint accused Mr. Bradford of fraudulently conveying property in violation of the Maryland Uniform Fraudulent Conveyance Act ("MUFCA"), Md. Code Ann., Com. Law § 15-201 to -214; breaching his fiduciary duty as personal representative of the estate; and unjust enrichmen., Id. at 6-9. The suit also named the State of Maryland and the United States as defendants, noting that both had obtained tax liens against Mr. Bradford in the Circuit Court for Montgomery County before he transferred the Morningside Drive property to himself.[2] Id. at 5-6. Plaintiffs sought a judgment declaring the tax liens did not encumber the property. Id. at 7.

         The Maryland Comptroller's Office asked this Court to grant Plaintiffs' request for relief. ECF No. 13. The United States, though, opposed Plaintiffs' Motion for Summary Judgment, [3] Pls.' Mot. for Summ. J., ECF No. 41, and filed a Cross-Motion for Summary Judgment of its own, Cross-Mo.. for Summ. J., ECF No. 47. It argued that its preexisting liens against Mr. Bradford applied to property he subsequently acquired (albeit fraudulently, and voidably), including the Morningside Drive property, and that these liens enjoy priority over Plaintiffs' claim. Cross-Motion for Summ. 1. 4-6.

         Plaintiffs, in response, argued the federal tax liens never attached to the property because the transfer was void as an illegal fraudulent conveyance. Pls.' Reply 1-2, ECF No. 49. The United States did not dispute that this Court might have grounds to set aside the transfer under MUFCA. U.S. Surreply 2, ECF No. 51. It maintained, though, that the federal tax liens would nevertheless be enforceable against the property because the Court's judgment would have no retroactive effect - that is, it would declare the transfer void, but not void ab initio. Id.

         The parties have brief their arguments in full. No. hearing is necessary. See Loc. R. 105.6.

         STANDARD OF REVIEW

         Rule 56(a) of the Federal Rules of Civil Procedure oblige a court to enter summary judgment in a movant's favor upon a showing that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A dispute of material fact is genuine if the evidence would allow the trier of fact to return a verdict for the nonmoving party." United Bank v. Buckingham, 301 F.Supp.3d 561, 568 (D. Md. 2018). In reviewing the motion, the court must view the facts and make all reasonable inferences "in the light most favorable to the nonmoving party." Bauer v. Lynch, 812 F.3d 340, 347 (4th Cir.2016).

         DISCUSSION

         Plaintiffs seek two forms of relief. First, they urge the Court to set aside the June 2017 conveyance of the Morningside Drive property, returning the property to Mr. Bradford's mother's estate. Second, they ask the Court to declare that the state and federal tax liens are not attached to the property. These requests present distinct legal issues. I will address each in turn.

         Fraudulent Conveyance

         Plaintiffs' contention that the 2017 conveyance violated MUFCA rests on two alternative theories. They first argue the conveyance was illegal under Md. Code Ann., Com. Law § 15-204 because it rendered the estate insolvent. They argue, in the alternative, that it violated § 15-207 because Mr. Bradford had the "actual intent" of hindering, delaying, or defrauding creditors. Because I conclude Plaintiffs are entitled to judgment as a matter of law under § 15-204, there is no need to address their second theory.

         Section 15-204 provides: "Every conveyance made ... 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 ... without a fair consideration"" Md. Code Ann., Com. Law § 15-204. Maryland courts have carved this provision into its constituent elements, holding that a fraudulent conveyance under § 15-204 requires: "(1) a conveyance, (2) the debtor either already is insolvent, or will be made insolvent by this conveyance; (3) the existence of a debtor-creditor relationship; and (4) lack of fair consideration"" Greystone Operations, LLC v. Steinberg, No. 454, 2077 WL 1365365, at *3 (Md. Ct. Spec. App. Apr. 12, 2017).

         Mr. Bradford has not placed any of these elements in dispute. As to the first element, the statute defines the term "conveyance" as broadly including "every payment of money, assignment, release, transfer, lease, mortgage, or pledge of tangible or intangible property, and also the creation of any lien or incumbrance." Md. Code Ann. § 15-201(c). Mr. Bradford has not denied that the 2017 transfer comes within this definition.

         Moving on, the statute provides that a person is considered "insolvent" for purposes of § 15-204 "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 matured." Id. § 15-202(a). Here, Mr. Bradford filed with the Orphans' Court an amended inventory dated March 31, 2016, showing the estate was worth $320, 944.17. Amended Inventory, ECF No. 41-3. Of that, the Morningside Drive property accounted for $315, 400. Id. at 2. In transferring the property to himself for no consideration, Mr. Bradford appears to have left the estate with less than $6, 000 in assets - far less than the roughly $85, 000 Brooke Grove had been seeking from the estate over the previous three years. Plainly, the transfer left the estate insolvent within the meaning of § 15-202(a). See In re Anton Motors, Inc., 177 B.R. 58, 61 (Bankr. D. Md. 1995). Again, Mr. Bradford has not disputed this.

         There is no dispute over the remaining two elements, either. Mr. Bradford has not denied that Brooke Grove was a creditor of the estate. He likewise has not disputed that the June 2017 transfer lacked fair consideration. The Maryland statute specifies that consideration is considered fair where it is given "[i]n exchange for the property ..., as a fair equivalent for it and in good faith." Md. Code Ann., Com. Law § 15-203(1). "Proof of the absence of any consideration whatsoever. . places significant burdens upon the transferee to establish the validity of the transfer." In re Colandrea,17 B.R. 568, 579 (Bankr. D. Md. 1982). Here, the June 14, 2017 deed indicates that Mr. Bradford, acting as personal representative for his mother's estate, transferred the ...


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