There are two uniform acts governing fraudulent conveyances: the Uniform Fraudulent Conveyance Act (1918) (The “UFCA”) and the Uniform Fraudulent Transfer Act (1984) (the “UFTA”). Maryland continues to use the older act which is rooted in the Statute of 13 Elizabeth (1571):
“Fraudulent conveyance law has its origins in the Statute of 13 Elizabeth, ch. 5 (1571). See 5 Collier on Bankruptcy ¶ 548.01 (15th Ed. Revised). The purpose of the fraudulent conveyance doctrine is to prevent assets from being transferred away from a debtor in exchange for less than fair value, leaving a lack of funds to compensate the creditors. Id. In the foundational fraudulent conveyance case, In re Twyne’s Case, 3 Co. Rep. 806, 76 Eng. Rep. 809 (Star Chamber 1601), the Star Chamber examined the facts surrounding such transfers to determine whether they had “signs and marks” of a fraudulent or malicious intent, such a secret transfers, continued ownership or possession of property after its alleged transfer, self-serving representations in transfer documents that the transfer was not intended to defraud creditors, transfers of substantially all assets, or transfer made while action was pending against the transferor. See also Collier’s, supra. In short, fraudulent conveyance law is aimed at preventing debtors from making collusive transfers to other – often friendly recipients – in an attempt to avoid their creditors. See Fraudulent Conveyance Law & Its Proper Domain, Douglas G. Baird & Thomas H. Jackson, 38 Vand. L. Rev. 829, 830 (1985) (“A debtor cannot manipulate his affairs in order to shortchange his creditors and pocket the difference. Those who collude with a debtor in these transactions are not protected either.”)
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In the United States, § 67(e) of the 1898 Bankruptcy Act directly copied much of the Statute of 13 Elizabeth. Most states followed suit, either recognizing 13 Elizabeth through common law, or expressly adopting or reenacting it. See Fick v. Perpetual Title Co., 694 A.2d 138, 143 (Md. Ct. Spec. App. 1997) (citing 37 C.J.S. Fraudulent Conveyances § 2, at 852 (1943)). Maryland adopted the English statute, 1 Alexander’s British Statutes 499 (cod’s ed. 1912), which remained in effect until 1920, when the MUFCA was adopted. See Fick, 694 A.2d at 143; see also Clinton Petroleum Serv., Inc. v. Norris, 319 A.2d 304, 307 (Md. 1974) (stating that the MUFCA ‘replaced in virtually identical terms the statute of 13 Elizabeth’). The Maryland Court of Appeals remarked of the statute, ‘[t]he Uniform Act is declaratory of the common law and is practically a restatement of the Statute of 13 Elizabeth.’ Westminster Sav. Bank v. Sauble, 39 A.2d 862, 864 (Md. 1944) (citations omitted); see also Damazo v. Wahby, 305 A.2d 138, 141-142 (Md. 1973) (reiterating that the MUFCA is declaratory of common law and did not restrict the legal or equitable remedies already available to a creditor).”
In re Abatement Environmental Resources, Inc., No. 03-1771 (4th Cir. 6/15/04) (unpublished). The Maryland version of the UFCA is located in Title 15 of the Commercial Law Article (hereinafter “MUFCA”).
Despite declarations that the MUFCA had “virtually identical terms” with the Statute of 13 Elizabeth, MUFCA was actually a refinement of its antecedent: “The Uniform Act (of 1918) was a codification of the ‘better’ decisions applying the Statute of 13 Elizabeth.” Prefatory Note, Comments, “Uniform Fraudulent Transfer Act” (1984) NCCUSL. These “better decisions” expanded the original requirement of showing subjective intent to defraud to a more objective standard:
“The Statute of Elizabeth required that a creditor prove actual, subjective intent to hinder, delay, or defraud to avoid a conveyance. Because subjective intent to defraud was difficult to prove, courts focused on objective factors to establish the wrongful intent. Decisions under the Statute soon turned on ‘circumstances, so frequently attending sales, conveyances and transfers, intended to hinder, delay and defraud creditors, that they [were] known and denominated badges of fraud.’ The court in Twyne’s Case (an English Star Chamber case of 1601) cataloged several factors having particular probative force: (1) the debtor made a general transfer of all property; (2) the debtor retained possession and use of the property; (3) the transfer was clandestine; (4) the transfer was made ‘pending the writ’: (5) the parties created a trust to govern use of the property; or (6) the deed explicitly vouched for its own validity and the parties’ honesty and good faith.
American jurisdictions enacted legislation similar to the Statute of Elizabeth or adopted the Statute as part of the common law. The American courts similarly adopted the English decisions that expanded the Statute through the use of objective indicia of fraud; later American decisions also increased the list of ‘badges.’ Although a strict construction of the Statute required proof of fraudulent intent, many courts permitted creditors to avoid a transfer on the basis of objective factors alone.”
Alces and Dorr, A Critical Analysis of the New Uniform Fraudulent Transfer Act, 1985 U. Ill. L. Rev. 527, (1985).
