Starr v. Dugan

22 Md. 58 | Md. | 1864

Baetol, J.,

delivered the opinion of this Court.

This appeal was taken from an order of the Superior Court of Baltimore City, finally ratifying an auditor’s account, which rejected the mortgage claim of John E. Starr, the appellant, and distributed a trust fund to and among the appellees. The fund came to the hands of Charles Marshall, Esq., under the deed of trust of October 7th 1857, executed by John M. Slaney, Sr., trading-in the name of the Phoenix Metre Company. The deed directs the trustee after paying expenses, to pay: 1st. To John E. Starr $7,500,00 and interest, secured by a mortgage on the real and personal property of John M. Sla-ney, Sr. 2nd. To pay salaries of clerks and wages of workmen. 3rd. To pay borrowed money. 5th. To pay claims of creditors who shall release within sixty days. 5th. To pay all other creditors.

The trustee filed a petition praying that the trust might be administered by the Superior Court, gaye bond, notified creditors to file their claims, and reported his sales.

The auditor stated an account by which the balance, after payment of expenses, was applied to the part payment of John E. Starr’s mortgage claim. The appellees who are creditors of Slaney, excepted to the auditor’s account, alleging that'Starr was a partner in the business conducted by Slaney, under the name of the Phoenix Metre Company, and that* his mortgage claim had no validity as against the creditors of said Slaney and said partnership. The cause was remanded to the auditor, with instructions to take testimony in the matter of the exceptions. The testimony taken before the auditor was returned to the Court accompanied by a report, in which the auditor states his conclusion from the evidence to be, that Starr was a partner, rejected his claims and stated another account (marked B,) in conformity with his views of the evidence. The Court adopted the auditor’s conclusion and passed a decree rejecting the appellant’s claim, and ratifying account B.

The main question involved in this appeal is, whether upon the evidence in the cause, the appellant, Starr, is responsible to the creditors as a partner in the business conducted under the name of the Phoenix Metre Company. We have carefully examined the testimony, and concur with the Superior Court in the conclusion, that Starr was a partner, at least so far as third persons, creditors, are concerned. Without entering into a particular discussion of the facts appearing in evidence, which have led us to this conclusion, we may remark that by the original transaction of purchase from Tansley & Rollins of their two shares, or one-half of the concern, although the transfer of the same was made to John M. Slaney, Sr., yet the beneficial interest or ownership thereof actually passed to Starr, who furnished and paid the purchase money; and the facts accompanying the transaction show, that the mortgage for $7,500 was not given to secure to Starr the payment of a debt due him of that amount, but as collateral security for the performance of a contract of purchase, of his two shares, or half of the concern, by Slaney, Sr. This view is supported by the testimony of the witnesses, and corroborated by the subsequent dealings and transactions of the Metre Company, as disclosed by their books.

We think the Superior Court was correct in ratifying account B, as stated by the auditor, and applying the trust fund to the payment of the appellees, who were creditors of the fourth class, to the exclusion of the mortgage claim of the appellant Starr; unless the appellant is right in the proposition asserted in the 4th point of his brief, which is now to be considered. This proposition denies to these objecting creditors the right to contest the validity of the appellant’s mortgage, or to claim against it; because, as they come in under the deed, claiming under its provisions, it is said they must give effect to all its provisions, and cannot claim against any of the trusts therein declared.

In support of this view a number of cases were cited by the appellant, all of them asserting the principle that a party is not allowed to take a benefit under a will or deed, and at the same time defeat the provisions of the instrument, but in such case is put to his election. There is no rule of Equity better established, but in the opinion Of this Court it is not applicable to the question now presented. Here the contesting creditors are not assailing the deed, as void, and at the same time claiming under it as valid. They do not deny the validity of Starr’s claim as against Slaney, but- deny its validity as against themselves. They are one class of persons for whose benefit the deed was made, and are contesting the claim of another creditor named in the deed. This it is competent for them to do, without any violation of the equitable principle to which we have referred. If the party named as a creditor, whose claim is contested, be.not in fact a creditor at all, or if his claim had been paid, other creditors for whose benefit the deed was intended, would not be estopped from asserting or proving such fact, by coming in and claiming the benefit of the trust in their favor under the deed. Here, Starr’s mortgage, as has been correctly argued by the appellees, if valid at all, must derive its validity from its own intrinsic merits, independently of, and not through the deed of trust; and to question it therefore, is not to impeach or to invalidate the deed. If the mortgage be legally inoperative and void as against the appellees, the principle of equitable election does not apply to' them. . They may claim under the deed, and are not estopped from insisting upon the invalidity of the mortgage. This rule is distinctly asserted in White & Tudor’s Lead. Ca. in Equity, 65 Law Lib., 275, and was recognized by this Court in Tongue vs. Nutwell, 17 Md. Rep., 229.

Entertaining the opinion upon the evidence, that the appellant was as to the creditors a partner, and as such not entitled out of the trust fund to satisfaction either of his mortgage debt, or his account, t.o the exclusion of the claims of the appellees, a decree will be signed affirming the decree of the Superior Court, from which this appeal was taken, and remanding the cause for further proceedings.

(Decided October 7th 1864 )

Decree affirmed and cause remanded.