3.3.2 Constructive Notice of Fraud
Under MUFCA § 15-209, a transaction may be set aside “as against any person except a purchaser for fair consideration without knowledge of the fraud at the time of the purchase or one who has derived title immediately or immediately from such a purchaser.” Thus, either lack of “fair consideration” or knowledge of the fraud will defeat the transfer. In Fick v. Perpetual Title Co., 115 Md. App. 524, 694 A.2d 138 (1997), the Court held that constructive knowledge is sufficient:
“Must the grantees have actual, as opposed to constructive, knowledge of the fraudulent nature of the conveyance in order to set aside a conveyance as fraudulent under section 15-209? Most courts that have considered the question have held that constructive notice is sufficient.
While there is authority to the contrary in some jurisdictions, the general rule is that if a purchaser had knowledge of facts and circumstances naturally and justly calculated to excite suspicion in the mind of a person of ordinary prudence, and which would naturally prompt him to pause and inquire before consummating the transaction, and such inquiry would have necessarily led to a discovery of the fact with notice of which he is sought to be charged, he will be considered to be affected with such notice, whether or not he made the inquiry. Under these circumstances it is immaterial that the purchaser did not have actual knowledge of the fraudulent intent of the seller or did not participate therein.”
Although the general principle is stated in sweeping language, its application has been narrowly interpreted. Indeed, in Fick the transferee knew of unsatisfied judgments and of a transfer to the debtor’s daughter for no consideration and the Court refused to find imputed knowledge.
Likewise, in the cases involving inter-spousal transfers, the focus is not on imputed knowledge presumably because of the high degree of proof required. Cruickshank-Wallace v. County Banking and Trust Co., 165 Md. App. 300, 885 A.2d 403 (2005), for example, focused on whether a transfer by a husband to a wife for “family support” could constitute fair consideration. In Maryland, the “ancient necessities doctrine” requiring a husband to be liable for his wife’s necessities was abolished as a consequence of ERA. Now each spouse has an affirmative duty to support each other and his or her family. In Cruickshank-Wallace, the transfer did not qualify as fair consideration as a matter of law because of the repeal of the necessities doctrine. The issue of imputed knowledge of insolvency and of the fraud was sidestepped (although the Court reviewed testimony that the wife did not involve herself in her husband’s business affairs).
Cruickshank-Wallace may not have adequately described the implications of the supposed abolishment of the ancient necessities doctrine. In Wal Mart Stores, Inc., 187 Md. App. 690, 979 A.2d 744 (2009), the Court effectively held that the doctrine merely meant that both spouses owe the other a duty to provide necessities. Satisfying that duty would seem to constitute “consideration.”