WILLIAM C. SIBLEY and BARBARA F. SIBLEY vs. GERALD A. BLOOM, JILL M. BLOOM, SUNBURST BUILDERS AND BROKERS, INC., PATRICIA GALVIN, SOUTH MIDDLESEX CO-OPERATIVE BANK and JOHN J. BUCKLEY.

William C. Sibley and Barbara F. Sibley, the plaintiffs, of Holliston in the County of Middlesex filed a complaint with the Land Court Department on August 23, 1979 in which they sought a decree that they had fee simple title to the premises numbered 510 Central Street in said Holliston free of any rights of the defendants, Gerald A. Bloom and Jill M. Bloom, therein and that at the time of an attachment by the defendants, Bloom of said premises as property of Sunburst Builders and Brokers, Inc., "the record or legal title thereto standing in the name of Patricia Galvin" (Exhibit No. 5) the corporation had no interest therein. The defendant John J. Buckley is the sheriff of Middlesex County who had been prepared to sell said premises taken on execution on September 14, 1979; such sale was postponed by agreement until after the final determination of this case. [Note 1]

The defendant Sunburst Builders and Brokers, Inc. ("Sunburst") admitted most of the allegations made in the Complaint and set forth an assignment for the benefit of creditors made on June 26, 1978 to George R. Desmond, an examination by him as to the deed which is the crux of this case and a determination that there was consideration for the conveyance. The defendants Bloom followed an outmoded method of pleading in their answer which contained no illuminating allegations. South Middlesex Co-operative Bank (the "Bank") did not answer.

A trial was held on October 31, 1979 at which a stenographer was appointed to record the testimony. All exhibits introduced into evidence are incorporated herein for the purpose of any appeal. Unless the context otherwise requires the recording references herein are to the Middlesex South District Registry of Deeds.

At the commencement of the trial the parties submitted to the Court a "Stipulation of Facts" agreed to by counsel for all parties. The facts set forth therein were as follows:

1. The Plaintiffs, William C. Sibley and Barbara F. Sibley, are in actual and exclusive possession of a certain parcel of land with the buildings thereon described as follows:

The land in Holliston, Middlesex County shown as lot No. 1, as depicted on a plan entitled "Plan of Land in Holliston, Mass., Property of Kuhlmann, Inc., Scale l" = 40', January 23, 1976, Schofield Brothers, Inc., Registered Land Surveyors, 1071 Worcester Road, Framingham, Mass.", said Plan being Plan No. 1074 of 1976 recorded at the Middlesex South District Registry of Deeds, Book 13064, Page End, the subject lot being further depicted as Lot 1 on a plan entitled "'Old Oaks', A Subdivision in Holliston, Mass., Owner of Record: Kuhlmann, Inc., 138 Holly Lane, Holliston, Mass., Applicant Kuhlmann, Inc., Attn: John Kuhlmann, President, Scale 1" - 100', August 30, 1976, Schofield Brothers, Inc., Professional Engineers and Registered Land Surveyors, 1071 Worcester Road, Framingham, Mass., Revised: November 16, 1976" said Plan being Plan No. 32 of 1977 and recorded with the Middlesex South District Registry of Deeds, Book 13125, Page 544.

2. The real estate described in Paragraph 1 of this Stipulation of Facts (hereinafter the "Premises") is the subject matter of this action to quiet title and remove a cloud from the title thereto.

3. By deed dated May 11, 1977, Kuhlmann, Inc. conveyed the Premises to the defendant Sunburst Builders and Brokers, Inc. (hereinafter "Sunburst"). Said deed is recorded in the Middlesex South Registry of Deeds, Book 13190, Page 554.

4. Sunburst granted a mortgage of the Premises to the defendant South Middlesex Co-operative Bank (hereinafter the "Bank") to secure the payment of $47,000 as provided in a note from Sunburst to the Bank, dated May 16, 1977. Said mortgage was also dated May 16, 1977 and recorded in Middlesex South Registry of Deeds Book 13190, Page 556.

5. By deed dated October 17, 1977, Sunburst conveyed the Premises to the defendant Patricia Galvin (hereinafter "Galvin"). Said deed stated that the consideration for the conveyance from Sunburst to Galvin was the "assumption by the grantee of all outstandingmortgages and encumbrances of record, which the grantee, by the acceptance of this deed agrees to assume and pay." Said deed is recorded in the Middlesex South Registry of Deeds Book 13313, Page 290.

6. On February 16, 1978, the defendants, Gerald A. Bloom and Jill M. Bloom (hereinafter the "Blooms") brought an action against Sunburst (First District Court of Southern Middlesex C28-503) and, on February 9, 1979, obtained a judgment for $3,858.25. Execution was issued upon this judgment on February 21, 1979.

7. On June 6, 1978, the Blooms obtained an attachment against real estate of Sunburst, "the record or legal title thereto standing in the name of Patricia Galvin," and such attachment was recorded on June 8, 1978 in the Middlesex South Registry of Deeds Book 13458, Page 439.

8. The plaintiff acquired record title to the Premises pursuant to a deed from Galvin, dated June 8, 1978 and recorded on June 9, 1978 in the Middlesex South Registry of Deeds, Book 13459, Page 693.

9. The plaintiff granted a mortgage of $47,000 to the Bank dated June 8, 1978 and recorded on June 9, 1978 in Middlesex South Registry of Deeds Book 13459, Page 694.

10. The defendant Galvin is, and at all times relevant hereto was, the wife of the principal stockholder of the defendant Sunburst.

11. It is further stipulated between the parties hereto that the following documents may be entered into evidence:

a) certified copy of deed of Kuhlmann, Inc. to Sunburst dated May 11, 1977;

b) certified copy of mortgage of Sunburst to the defendant South Middlesex Co-operative Bank dated May 16, 1977;

c) certified copy of deed of Sunburst to defendant Galvin dated October 17, 1977;

d) copy of judgment for defendants Blooms against defendant Sunburst entered in First District Court of Southern Middlesex C28-503 dated February 9, 1979;

e) certified copy of Bloom's attachment against the Premises dated June 6, 1978;

f) certified copy of deed of defendant Galvin to plaintiffs dated June 8, 1978; and

g) certified copy of plaintiff's mortgage to the defendant Bank dated June 8, 1979.

The instruments referred to in paragraph 11(a) to (g) inclusive were marked Exhibits Nos. 1 to 7 inclusive.

On all the evidence I find the following additional facts:

1. Alva H. Galvin, the husband of the defendant Patricia Galvin, and the principal stockholder of Sunburst was also its treasurer. Mr. Galvin also is the trustee of the Alpat Trust under a Declaration of Trust dated October 17, 1977 and recorded with Barnstable Deeds (Exhibit No. 13). The beneficiary of said trust is Patricia Galvin.

2. At the time of the conveyance of the premises to Mrs. Galvin the only other assets of Sunburst were about $2,000 to $2,500 in a checking account. [Note 2] The only creditors of Sunburst at that time so far as appears from the evidence were the Bank and Mullen Lumber. Prior to the acquisition of the plaintiffs' lot by Sunburst and obviously therefore prior to its conveyance to Mrs. Galvin the defendants Bloom had complained orally and by letter (Exhibit No. 12) to Sunburst's treasurer relative to the construction of his home and its appurtenance but had instituted no legal proceedings.

3. The plaintiffs were not represented at the closing of their purchase of the premises other than by the Bank's attorney. The latter did not testify at the trial, and there is no evidence as to whether the record of the attachment was missed in the final rundown of the records or was considered and determined to be ineffectual in view of the conveyance to Mrs. Galvin.

4. At the closing of their purchase the Bank advanced to the plaintiffs the sum of $33,000. The balance of the mortgage loan of $47,000, $14,000, plus $18,000 of their own funds, have been expended by the plaintiffs in the completion of the home on the premises.

5. The judgment of $3,800 obtained by the defendants Bloom, appears to have been entered by default, the attachment having been secured by an ex parte order.

6. Sunburst was organized on July 25, 1968 and dissolved on June 26, 1978. During its corporate existence it or its officers, agents and employees constructed about 400 houses. Mrs. Galvin arranged the interior decorating of many of the homes built by the corporation, and it was intended that whatever equity there was in the premises after payment of encumbrances was to reimburse her for services. However, she testified that locus was transferred to her to be the family residence; her husband confirmed this by testifying that his original plan was to return to Holliston when houses had been constructed on the land owned by Alpat Trust on Cape Cod.

7. Although Mrs. Galvin claimed to have signed an assumption agreement with the Bank, no copy of it was produced. The mortgage from Sunburst to the Bank (Exhibit No. 2) permitted the Bank at its option to accelerate payment of principal and interest or to deal with successors in title should ownership of the premises become vested in a person other than the mortgagor.

8. From the sale of the premises Mrs. Galvin realized only $492.61 (Exhibit No. 9) after payment of the liens thereon and other outstanding obligations.

In General Laws, c. 223, §67 [Note 3] is found the statutory procedure for attachment of property which allegedly has been fraudulently conveyed. The attachment in question met the statutory directive which requires a brief description of the land and the names of the persons in whom the record or legal title stands. Section 68 of said chapter directs the register of deeds to index the attachment "in the same manner as if the estate of such persons were attached as defendants in the action." It is not clear from G. L. c. 223, §67 and G. L. c. 109A, §9 [Note 4] how the two statutes interrelate, but for the purposes of this case they need not be reconciled. Rather the solution rests on the application to the facts of other sections of c. 109A. The first of these is section 7 which would govern if "actual intent, as distinquished from intent presumed in law, to hinder, delay or defraud either present or future creditors" had been shown; under such circumstances, the conveyance would have been fraudulent as to both present and future creditors.

If the conveyance from Sunburst to Patricia Galvin was motivated by an actual intent to defraud creditors, the Blooms' attachment would be valid whether or not there was fair consider- ation for the conveyance, G. L. c. 109A, § 7, if Patricia Galvin knew of or participated in the fraud. Merchants Discount Co. v. Esther Abelson, Inc., 297 Mass. 517 , 519-20 (1937); Barishefsky v. Cohen, 299 Mass. 360 , 362 (1938); Marble v. Bloom, 262 Mass. 191 , 196 (1928). The Blooms bear the burden of proving bad faith. Mullins v. Riopel, 322 Mass. 256 , 259 (1948); Marble v. Bloom, supra; Barron v. International Trust Co., 184 Mass. 440 , 443 (1903). "In the absence of evidence to the contrary every presumption both of law and of fact is in favor of innocence and legality." Lioni v. Marr, 320 Mass. 17 , 21 (1946). The court cannot find fraudulent intent merely because a transfer is between husband and wife, Kerrigan v. Fortunato, 304 Mass. 617 (1939); Lyon v. Wallace, 221 Mass. 351 , 355 (1915), even if property is placed in the wife's name to shelter it from future debts or the hazards of business. Jaquith v. Massachusetts Baptist Convention, 172 Mass. 439 , 446 (1899). [Note 5] Therefore, there is nothing in the record to warrant a finding of an actual intent to defraud. Accordingly we look for guidance to other sections of Chapter 109A, sections 4, 3 and, 2. The former of these provides that "(e)very conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent 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." Section 2(1) defines insolvency in this manner: "A person is insolvent within the meaning of this chapter when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured." At the time of the conveyance to Mrs. Galvin Sunburst had assets of roughly $2,000 in addition to whatever equity it had in the house. Debts secured by liens on the real estate were assumed by Mrs. Galvin so only unsecured obligations of Sunburst remained to be paid by it. At this time any obligation to the Blooms was speculative at best; it was characteristic of the customary conflict between contractor and customer. There certainly was no indication that a lawsuit would be the result, and it falls short of the characterization "existing debt." No other "existing debts" were shown. Neither was it apparent from the testimony that the conveyance to Mrs. Galvin was a sham or that Sunburst continued to work on the house after the deed out was recorded. It is evident that the house was far from completed when the plaintiffs purchased it, for they expended from the balance of the mortgage proceeds and their own resources the sum of $32,000 after the closing. I therefore find and rule that it was not established that the conveyance rendered Sunburst insolvent.

There also is another aspect of section 4 as to which the Blooms have not borne their burden of proof. That is the question of "fair consideration" for the conveyance. If the corporation was not rendered insolvent by the conveyance, even a gratuitous conveyance would not be fraudulent as to creditors although it might constitute a preference. Mullins v. Riopel, supra; Goldstein v. Columbia Rug Co., Inc., 366 Mass. 835 (1975). The deed from Sunburst to Patricia Galvin (Exhibit No. 3) recited that the consideration for the conveyance was "the assumption by the grantee of all outstanding mortgages and encumbrances of record, which the grantee by the acceptance of this deed agrees to assume and pay." The defendants argue that the mortgage from Sunburst to South Middlesex Co-operative Bank (Exhibit No. 2) did not permit a conveyance of the mortgaged premises subject to the mortgage. However, what the mortgage in fact provides is that in the event of such a conveyance the mortgagee has the option to accelerate the mortgage debt or to deal with the successors in title. The latter appears to have been the course followed. It is unclear whether the grantee executed an assumption agreement with the mortgagee, but this is usual only in circumstances where the liability of the original mortgagor to the Bank was to be released which was not the case here. The assumption of such obligations is generally held to be good consideration. Hayes v. Kyle, 8 Allen (90 Mass.) 300, 301 (1864); Boston Marine Ins. Co. v. Proctor, 168 Mass. 498 , 500 (1897). The equity in the premises after payment of the liens and expenses of sale was less than $500. Sunburst justified its retention by Mrs. Galvin as recompense to her for services to the corporation which consisted of arranging for the decorating of the houses built by Sunburst. There was no testimony that there was any contractual understanding between the parties which predated the conveyance and would substantiate this somewhat suspect explanation. It should be noted, however, that satisfaction of an antecedent debt is fair consideration unless there is a substantial difference between the debt owed and the value of the property. Bianco v. Lay, 313 Mass. 444 , 453 (1943). The defendants point to the endorsement [Note 6] on the check representing the balance of the purchase price, $490.61 (Exhibit No. 10) [Note 7] as evidence that the funds flowed back to Sunburst or its principal stockholder, Alva Galvin. They may have gone to the Alpat Trust, but since Mrs. Galvin was the sole beneficiary, this is not unusual (Exhibit No. 13). On all the evidence, however, it does not appear that the net proceeds of the home owned by the plaintiffs over the encumbrances was so great as to make the transaction unfair as to the defendants when it is considered that the real estate in question was not even purchased by Sunburst until after the defendants' complaints were made and that at the time of its conveyance no suit by the defendants had been instituted. As was said in MacNeil v. MacNeil, 312 Mass. 183 (1942) at page 186 (with appropriate modification of the pronoun),

However, it is perhaps appropriate to say that there was no evidence to support a conclusion that the conveyance in question was in fraud of the plaintiff's creditors. There is nothing in the record to show that at the time of the transaction the plaintiff was indebted beyond his probable means of payment, or that he was rendered insolvent thereby or that his creditors were in fact hindered, delayed or defrauded thereby, or that he had any actual intent to defraud them. See G. L. (Ter. Ed.) c. 109A, §§2 (1), 6, 7; Kerrigan v. Fortunato, 304 Mass. 617 , 620, 621.

On all the evidence I find and rule that the conveyance from Sunburst to Patricia Galvin was not fraudulent, that at the time of the attachment of the property of Sunburst standing in the name of Patricia Galvin Sunburst had no further interest in the locus, that the plaintiffs hold title thereto free from any claims of the defendants therein, and that the premises cannot be sold on execution in satisfaction of the obligations of Sunburst to the defendants.

The parties have all made requests for rulings. The plaintiffs' requests for findings of facts nos. 1 to 5 inclusive and for rulings of law nos. 1 to 8 are granted, the Court first having excised from nos. 5 to 8 the words "as a matter of law." The defendants filed three separate instruments embodying requests for findings of fact and rulings of law. As to that entitled "Request for findings of fact and conclusions of law" I grant Findings of Fact nos. 3 to 10 inclusive, 12 a and b, 13, 15 a, b and c, 16, 18, 19, 20 to 24 inclusive and deny those numbered 25 to 35. The remainder of the requests for findings of fact set forth in the same instrument are denied since there was no evidence or insufficient evidence to prove them. The requests for conclusions of law therein nos. 1 to 11 are denied. The requests set forth in the instrument entitled "Request that Findings in Favor of Defendants, Blooms, are Warranted" are denied, and those in the instrument entitled "Request for Rulings of Law" are dealt with as follows: Requests no. 1 is denied as an incomplete statement of the law and nos. 2 to 9 are granted.

Judgment accordingly.