Textor v. Orr
38 A. 939
Md.
1897
Check Treatment
Briscoe, J.,

delivered the opinion of the Court.

In April, 1896, Daniel R. McCauley, who was then carrying on the business of barrel making, was indebted to the appellant, Textor, for materials purchased in the sum of $1,256.34. In order to secure this indebtedness and to obtain further credit from Textor, the following agreement was entered into between [the parties :

“ This agreement, made this second day of April, 1896, in Ellicott City, Baltimore County, State of Maryland, between D. R. McCauley of said city, in Baltimore County, of the first part, and Anton Textor, of the city of Baltimore, also in State of Maryland, of the second part: Witnesseth, that the said D. R. McCauley, of the first part, hereby gives the hoops which are now stored in the old stone foundry now owned by the C. A. Gambrill Manufacturing Company, said foundry is in Ellicott City, in Baltimore County, Maryland, as security for the payment of four notes, which are all dated April 2nd, 1896, drawn by John W. McCauley, favor of D. A. McCauley, say running for 40, 60, 90 days and four months, amounts $300.00, $300.00, $300.00 and $356.43, total, $1,256.34-100.

“That said Anton Textor hereby agrees to release his claim against said hoops upon the payment of the last aforesaid note, amount $365.43—100 ; that the storage of said lot of hoops is to be paid by the said McCauley.

*397“That said McCauley claims that there are about three hundred thousánd hoops in the old stone foundry, that said lot of hoops to be the property.of said Anton Textor in the event of any of said notes not being paid at their maturity.

“Witness our hands and seals this second day of April, 1896.

D. R. McCauley, [Seal],

“Witness: Anton Textor, [Seal],

Geo. A. Nicklas.”

The hoops mentioned in this contract were stored at the time of its execution in a building under the control of Mc-Cauley and remained in his possession without any delivery, actual or constructive, to the appellant, until December 9th, 1896, when McCauley in his own right and as surviving partner of the firm of D. R. McCauley & Co. executed a general assignment of all his property for the benefit of creditors to the appellee, W. L. Orr. This assignee took possession of the hoops referred to, then amounting to about 280,000, and the appellant filed a petition in the Court below, which had assumed jurisdiction over the administration of the trust, asking that the agreement be enforced as creating a first lien in his favor on these hoops, taken into possession by the trustee.

It is clear, we think, that the contract above set forth did not constitute a pledge of the hoops as security for the debt, because transfer of possession of the thing pledged to the pledgee or to a third party for his benefit is essential to the creation of a pledge. Casey v. Cavaroc, 96 U. S. 490; Moors v. Reading, 167 Mass. 322. In the case now before us, the hoops remained in the possession and under the control of McCauley.

Nor can the agreement be effective as a bill of sale or chattel mortgage, as against third parties, because it is not acknowledged and recorded as required by the Code, in all cases where the seller or mortgagor of chattels remains in possession. Art. 21, sec. 40 of Code.

It is obvious, however, that the intention of the parties *398in this case was that the hoops described in the contract should be held by McCauley in trust as security for payment of his indebtedness to the appellant. The evidence shows that the appellant received verbal assurances from McCauley and his agent that they would not deal with or dispose of any of the hoops without his consent. The purpose of the parties was therefore in effect to mortgage the property and the way they adopted to effectuate their purpose, while invalid and insufficient in some respects was a binding contract between them. The law is well settled in this State that a promise to execute a mortgage of certain property or a defectively executed or unrecorded mortgage, creates an equitable lien upon the property, binding the conscience of the mortgagor and enforceable by a Court of Equity against him. Dyson v. Simmons, 48 Md. 207; Carson v. Phelps, 40 Md. 73; Triebert v. Burgess, 11 Md. 452. An unrecorded mortgage under our statute is good between the parties thereto and a pre-existing indebtedness is a sufficient consideration. Code, Art. 21, sec. 47; Woods v. Fulton, 4 H. & J. 327; Alexander v. Ghiselin, 5 Gill, 138.

While an equitable mortgage or lien, such as the one before us in this case, is not valid and enforceable against a bona fide purchaser or mortgagee for value without notice (Ohio Life Ins. Co. v. Ross, 2 Md. Chancery, 25; Nelson v. Hagerstown Bank, 27 Md. 51), yet it is enforceable not only against the mortgagor himself, but also against parties who claim under him as volunteers or without an equity superior to that of the creditor holding the lien. An assignee for the benefit of creditors is such a party. He is not a bona fide purchaser for value. He stands in the shoes of the assignor and can assert no claim to the property which the assignor could not. Luckemyer, &c., v. Seltz, 61 Md. 315; Tyler, Trustee, v. Abergh, 65 Md. 18.

We are, therefore, of the opinion that the equitable lien in this case is enforceable, under the authorities here cited, against the assignee and against creditors of the assignor who were such at the time the agreement was made.

*399(Decided December 1st, 1897).

The assignee in this case so far represents subsequent creditors as to be entitled to contest for their benefit claims against the estate made to their prejudice. 6th Ward Bld. Asso. v. Wilson, 41 Md. 506; Mackintosh v. Corner, 33 Md. 598.

We fully concur in the views expressed by the learned Court below, when it says : “ That in distribution of the proceeds of the sale of said hoops, the claims secured by said agreement are entitled to priority over unsecured creditors existing at the time of the execution thereof; but with respect to general creditors whose debts were contracted after the date of said agreement without notice thereof, are entitled to come in pari passu with the claims mentioned therein. Pannell v. Farmers' Bank, 7 H. & J. 202; Sixth Ward Building Asso. v. Wilson, 41 Md. 506; Stanhope v. Dodge, 52 Md. 483; Hoffman v. Flack, 75 Md. 590.”

The case of Brown v. Deford & Co., 83 Md. 297, is relied on by the appellant to show that the lien of this equitable mortgage is enforceable against subsequent as well as preexisting creditors. It will be seen in that case the property upon which the equitable lien was held to exist was purchased with the money of the creditor, and also that the lien was not enforced against subsequent creditors. Deford & Co. advanced the money to their debtor with which to purchase the property and it was expressly agreed that the hides so purchased were to be and remain the property of Deford & Co. We said in that case that the validity of the contract could not be sustained if in prejudice of subsequent creditors or purchasers in good faith without notice. This case is clearly distinguishable from Deford’s case, and there is nothing in that case to support the contention made here by the appellant.

Finding no error in the decree appealed from, it will be affirmed with costs.

Decree affirmed with costs.