United Bank v. Buckingham
247 A.3d 336
Md.2021Background:
- John Buckingham, president of Sun Control Systems (SCS), developed progressive dementia; David was appointed guardian of John’s property.
- SCS and the Buckinghams owed substantial debts to Virginia Commerce Bank (VCB)/United Bank; eight life-insurance policies on John (some personally owned, some owned by SCS under split-dollar arrangements) were among the remaining assets.
- VCB obtained a forbearance purporting to secure death benefits; later litigation found parts of that deal executed while John was incompetent and some signatures forged, voiding VCB’s priority on certain policies.
- As guardian of the property, David changed beneficiaries on the eight policies to several newly created trusts (JDB Trust, Osprey Trust, Blue Heron Trust), sold policies to a trust and extracted accelerated death benefits, diverting proceeds away from creditors.
- United Bank sued the Buckinghams under the Maryland Uniform Fraudulent Conveyance Act (MUFCA). The district court granted summary judgment to the Buckinghams; the Fourth Circuit reversed on MUFCA counts and directed Maryland law questions to the Maryland Court of Appeals.
- The District Court certified two questions to the Maryland Court of Appeals: (1) whether changing a life-insurance beneficiary is a "conveyance" under MUFCA (CL §15-201(c)) in light of IN §16-111(d); and (2) whether a guardian of property may change a ward’s life-insurance beneficiary under ET §15-102(t).
Issues:
| Issue | Plaintiff's Argument (United/Bank) | Defendant's Argument (Buckinghams) | Held |
|---|---|---|---|
| Whether changing a life-insurance beneficiary is a "conveyance" under MUFCA (CL §15-201(c)) | A beneficiary change is a "transfer" of the right to receive proceeds and falls within the disjunctive examples in §15-201(c); IN §16-111(d) confirms fraudulent beneficiary changes are subject to creditor remedies. | A beneficiary has only an expectancy, not a property interest; §15-201(c) should be read narrowly and not reach beneficiary designation; IN §16-111(d) doesn't create a MUFCA right. | Held: Yes. Court reads "includes" illustratively and "transfer" broadly; changing beneficiary is a conveyance under MUFCA; IN §16-111(d) presumes a remedy exists for fraudulent transfers. |
| Whether a guardian of property may change a ward’s life-insurance beneficiary under ET §15-102(t) | Guardian lacks express statutory power to change beneficiary; such a power would dissipate the ward’s estate and thus requires court authorization under ET §13-203(c)(1) / §13-214. | ET §15-102(t) grants a guardian authority to exercise "options, rights and privileges" in policies, which (illustratively) includes changing beneficiaries. | Held: No. ET §15-102(t) does not authorize changing beneficiaries; guardianship’s common-law purpose is preservation of the estate and any change requires court approval. |
Key Cases Cited
- Kennard v. Elkton Banking & Trust Co., 176 Md. 499 (1939) (describing fraudulent conveyance law’s purpose to void transfers intended to hinder creditors)
- Damazo v. Wahby, 269 Md. 252 (1973) (legislative purpose of fraudulent conveyance law to enhance creditor remedies)
- Kelly v. Scott, 215 Md. 530 (1958) (refusing the substituted-judgment doctrine; emphasizing guardian’s duty to preserve ward’s estate)
- Seaboard Sur. Co. v. Boney, 135 Md. App. 99 (2000) (reiterating guardian of property’s fundamental duty to preserve the estate)
- Kay v. Erickson, 244 N.W. 625 (Wis. 1932) (state court view that guardian cannot change ward’s insurance beneficiary any more than alter the ward’s will)
- Salvato v. Volunteer State Life Ins. Co., 424 S.W.2d 1 (Tex. Ct. App. 1968) (noting guardian may change beneficiary only if court-authorized and the change benefits the ward)