209 Md. 98 | Md. | 1956
delivered the opinion of the Court.
This is an appeal by Lloyd H. Dreisonstok, appellant, who was appointed on April 18, 1950, trustee in bankruptcy for Henry I. Hoffman, from a decree dated June 17, 1955, dismissing his bill of complaint with costs. The bill of complaint was filed against Henry 1. Hoffman and Flora Hoffman, his wife; Alvin Peck and Stella Peck; William Cohen and Rosalie Cohen; Charles Cohen and
Henry I. Hoffman and Flora Hoffman purchased the property now in question know as 8025 Georgia Avenue, Silver Spring, Maryland, on October 9, 1943. They held title to this property until January 31, 1946, when they conveyed it to Toll Road Laundry, Inc., (Toll Road). The consideration for the sale by the Hoffmans to Toll Road was $150,000.00. Hoffman testified that he thought he collected from the sale $1,000.00 to $1,200.00 in cash. This property at that time was subject to the lien of a first trust in the amount of $60,000.00 to Suburban National Bank. Toll Road on January 31, 1946, executed a $60,000.00 deed of trust securing two notes in the amounts of $25,000.00 and $35,000.00 to the Suburban National Bank to take the place of the former deed of trust in that amount to that Bank. On the same date Toll Road gave a second deed of trust in the amount of $80,000.00 to Maurice Freedman and Louis Ottenberg, trustees, securing a note given Henry I. Hoffman and Flora Hoffman. This note was guaranteed to the extent of $25,000.00 by John F. Markel, who was President of Toll Road.
Toll Road held the property subject to the aforesaid deeds of trust until early in 1948. At that time it went into bankruptcy and. its assets were then vested in M. Taft Woodruff, trustee in bankruptcy for Toll Road. During 1948 Mr. Woodruff endeavored to sell the property.
In the summer of 1948 Alvin B. Peck and Stella Peck, the son-in-law and daughter of Henry I. Hoffman and Flora Hoffman, and Jack Coopersmith formed a Delaware corporation known as D. & L. Inc. All of the stock, two hundred shares, was originally issued to Alvin Peck, Stella Peck and Jack Coopersmith. Peck testified that he formed the corporation for the purpose of purchasing the property from Toll Road. About two days after the corporation was formed Peck said he transferred one hundred shares of stock of this corporation to Hoffman
On August 17, 1948, the referee in bankruptcy passed an order authorizing the trustee to sell the property to D. & L. Inc. for $3,000.00 subject to liens of $131,955.50. This sale was ratified. The deed was not executed until March 28, 1949. On that same date D. & L. conveyed the property to Alvin and Stella Peck, who in turn that same day conveyed a one-half interest to Charles Cohen and Freda Cohen, William Cohen and Rosalie Cohen. On the same date, March 28, 1949, the Pecks and the Cohens executed a deed of trust to the Bill White Investment Corporation for $16,000.00. The charter of D. & L. was cancelled on April 1, 1952, for non-payment of taxes.
On March 17, 1950, Henry I. Hoffman filed a voluntary petition in bankruptcy in the United States Court for the District of Columbia. He listed among his assets the $80,000.00 note given to him and his wife by Toll Road and on which there was an endorsement by Markel guaranteeing the first $25,000.00 of this $80,000.00 note. The note had written across its face in ink: “paid and canceled 3/28/49, D. & L. Inc. by Henry I. Hoffman, President.” He also listed among his assets one hundred shares of stock in D. & L. Inc. as of no value.
Louis Ottenberg, as surviving trustee of the $80,000.00 deed of trust dated January 31, 1946, to the Hoffmans, released that deed of trust on March 14, 1952. For the purposes of refinancing on March 3, 1952, the Pecks and the four Cohens executed a deed of trust to secure the Perpetual Building Association for the sum of $57,-500.00. This lien was still unpaid at the time of the hearing below. On March 27, 1952, the $16,000.00 deed of trust securing Bill White Investment Corporation was paid and released, and on March 31, 1952, the $60,000.00 deed of trust securing the Suburban National Bank was paid and released.
The appellant in this case asks that the defendants be restrained from conveying or encumbering the property
The chancellor, who saw and heard the witnesses, here found that the deed of trust to Perpetual should not be declared subordinate to the $80,000.00 deed of trust originally given to the Hoffmans as there was no fraud on its part. With this finding we agree. Perpetual actually loaned the sum of $57,500.00 for the purpose of discharging the prior liens of Suburban National Bank and Bill White Investment Corporation. It was, of course, charged with knowledge of the record of the $80,000.00 deed of trust which had not then been released on the record. However, it knew through á title company that the $80,-000.00 note secured by that deed of trust had been marked “paid and canceled” and that the deed of trust was in the process of being released by the surviving trustee. This is substantiated by the fact that the $80,000.00 deed of trust was actually released of record eleven days after Perpetual’s deed of trust was recorded. Perpetual knew of no alleged fraud. Of course, in alleging fraud, the burden is upon the party who alleges it, to set aside a contract executed or partly executed, to establish the alleged fraud by clear and indubitable proof. This power ought not to be exercised except in a clear case of fraud and unless the complainant has been deceived and injured thereby. Cox v. Tayman, 182 Md. 74, 80, 32 A. 2d 368, and cases there cited. There was no such proof here.
The chancellor further found that there wg,s no fraud on the part of the Cohens. There is not the slightest evidence that they committed any fraud. They put tip
The chancellor also found that the Pecks had dealt in good faith in the matter and there was no fraud on their part. With this finding we agree. They had a natural interest in the welfare of Hoffman, Mrs. Peck’s father. Peck said he entered into an agreement with his father-in-law, Hoffman, to convey to him fifty percent of the stock of the D. & L. corporation. This was done in July of 1948, about two days after the corporation was formed. As consideration for this stock Hoffman and Peck say that Hoffman agreed to exchange his $80,000.00 deed of trust on the property for the one hundred shares of stock in D. & L. Inc. Hoffman testified that he surrendered this deed of trust one day after the $3,000.00 was paid to the trustee in bankruptcy. However, this deed of trust was not released by Louis Ottenberg, the surviving trustee for Hoffman, until March 14, 1952, in an attempt to preserve the personal guarantee of Markel as to $25,000.00 thereof. This note at the time of trial had written across its face in ink as aforesaid stated: “paid and canceled 3/28/49, D. & L. Inc. by Henry I. Hoffman, President.” Hoffman, therefore, owned one hundred shares, fifty percent of the stock of D. & L. Inc.; the Pecks ninety-eight shares, forty-nine percent; and Jack Coopersmith two shares, one percent. Peck further testified that he invested $7,000.00 in the corporation. $3,000.00 was paid to the trustee in bankruptcy for Toll Road and $150.00 was paid as costs for incorporation. The balance was used for new equipment and operating expenses. There is no evidence that the Pecks conspired together to defraud Hoffman’s creditors. Had they not come to Hoffman’s rescue in 1948 by forming the D. & L. corporation, the first deed of trust to Suburban National Bank would have been foreclosed, as threatened, and Hoffman and his creditors probably would have lost everything then.
As to Hoffman, he came out of all of these transactions with practically nothing. He had lost the property, his
The appellant here asks this Court to upset large transactions. If Mr. Barney H. Kraft, President of Southern Venetian Blind & Awning Corporation, who has leased this property for ten years, unaware of any alleged fraud, is reimbursed in the amount of $32,000.00 for the improvements which in good faith he made to the property; if the Cohens and Pecks are paid back the amounts which they invested in the property; and all other liens made in good faith are paid, it is very doubtful whether there would be any value to the $80,000.00 second trust which the appellant asks us to reinstate.
In the bankrupt estate the total amount of claims proven, the time for proving claims having now expired, is $7,500.00. The appellant, when asked, more than four years after the institution of the bankruptcy proceedings and at least three years after all unfiled claims were barred, whether one of the claims, included in the $.7,-500.00, was barred by the Statute of Limitations, replied: “I haven’t made a complete examination of the claims filed at this time. I just glanced through them — not for
There appears no excuse for the delay in bringing the action here. There is no doubt that such delay would cause great prejudice to the adverse parties if the relief prayed is granted. This is peculiarly a case in which the doctrine of laches should apply. The decree will be affirmed.
Decree affirmed, with costs.