Third National Bank v. Lanahan

66 Md. 461 | Md. | 1887

Bryan, J.,

delivered the opinion of the Court.

The material facts of this case lie within a very narrow compass. R. W. L. Rasin as the general.partner of the firm of R. W. L. Rasin & Co. made an assignment for the benefit of his creditors, both individual and partnership. The assignment embraced all the property of the firm and all the separate property of the grantor. The Third National Bank was a creditor of the firm. A portion of this indebtedness arose in this way: E. K. Cooper, known as a special partner of the firm, executed five promissory notes of five thousand dollars each payable to the order of R. W. L. Rasin & Co. These notes were secured by a pledge of certain other notes belonging to the partnership, and which were owing from its debtors. They were delivered to the Bank, together with the collateral securities, and by it discounted after they had been endorsed in the firm name.

After the execution of the assignment, judgments were obtained by the Bank on these notes and on other causes of action against Rasin, trading as R. W. L. Rasin & Co. By due proceedings the Circuit Court of Baltimore" City has assumed administration of the trust estate, which is not sufficient to pay the creditors. The Bank has filed its claim with the auditor for payment out of the assets in the hands of the trustee. Before the filing of the claim, it had collected a large sum from the collaterals pledged do secure the discounted notes. It contends that it is entitled to a dividend on the full amount of the indebtedness without deducting the sum received from the col-laterals; admitting, however, that this dividend must not exceed the amount due, when added to the sum already paid.

The Circuit Court is administering the trust according to the terms of the deed. It seems to us, therefore, that the distribution must he made according to these terms. The trustee is required to pay all the partnership creditors in full if the partnership assets are sufficient, and, “if not, then ratably and equally according to their respective amounts.” It cannot he denied that the sum received from the collaterals diminished the indebtedness ■of the partnership. We do not perceive how any question in respect to the marshalling of assets can arise. It is simply the case where a portion of a debt is paid by property of the debtor which had been pledged to secure its payment. The question is not whether the other creditors ■can compel the Bank to seek payment from the collaterals before claiming distribution from the trust fund. The Bank has actually received payment to a certain extent. The portion remaining unpaid is an ordinary debt reduced to judgment. It has no priorities over other judgments •of the same date. It can have no superior claim against the debtor by reason of the fact that a portion of it has been paid by the proceeds of property specially pledged. The same means of enforcing payment against the judgment debtor are open to the Bank as belong to any other judgment creditor, hut none other or greater. How, the trustee is hound to pay “ ratably and equally, according to their respective amounts,” such debts as the grantor was bound to pay. He has no power to pay any debt which the grantor does not owe; nor can ho pay one creditor a larger dividend than he pays to another. If one creditor has a lien, or a priority at law or in equity, of course he must be paid according to the rights which the law has given him. Where there are no liens or priorities, it is necessary to ascertain what sum is payable by the debtor who made the assignment, and the creditor is entitled to. be .paid the amount in full, or in due proportion. The obligation of the trustee to pay does not depend on the state of the account between the creditor and the assignor at the time of the assignment; but at the time when payment is made.

There was some discussion at the bar, about the nature of the affidavit which a creditor was required to make when he filed his claim with the auditor. Where a fund is distributed in a Court of equity, if a claim is not disputed, it is always allowed by-the auditor on the production of such proof as is required for authenticating a claim in the Orphans’ Court. There is no tradition in the profession showing that a different practice has ever prevailed. Chancellor Bland, in Dorsey vs. Hammond, 1 Bland, 470, says that it existed long before the passage of the Testamentary Act in seventeen hundred and ninety-eight. He applied this rule of practice in Strike vs. McDonald, 2 Harris and Gill, 235, where a deed was set aside for fraud against creditors, and distribution was made amongst them. His decree in this case was affirmed by this Court, page 262. In Allender vs. Trinity Church, 3 Gill, 172, the Court alludes to this sort of proof, in -terms which show that it was regarded as ordinarily necessary in uncontested cases. Of course, such proof is only of a primary character, and the opposing party may demand full proof if he chooses to do so. In the case last cited it is said in referring to evidence of this hind, “ Primary proofs stand in the place of full proof, until full’ proof is demanded. Prom that moment they cease to he any evidence in the case, and there no longer exists any necessity for their production.” This practice is of importance as showing the facts of which the Court must he assured hy the claimant’s oath, before it will allow his claim to he paid, even when not contested. According to this rule it was necessary for the Bank to file an affidavit showing that it had not received any portion of the sums for which the judgments were rendered, except such as were credited. Article 93, section 84, of the Code. In" cases of insolvency, the statute law requires the distribution to he made according to the principles of equity. Article 48, section 10. Equality is equity, and this equality is to he declared according to tide established rules of equity practice. If the deed'of trust had prescribed any other rule of distribution, it would have been void hy the thirteenth section of the Act of’ 1880, chapter-one hundred and seventy-two.

(Decided 5th January, 1887.)

We have been referred to certain decisions made by the English Courts in cases arising under Acts of Parliament, known as the “ Winding up Acts.” It is foreign to the present purpose to discuss these opinions, learned and able though they are, and in every respect entitled to the highest consideration, because the question before us must be decided according to the jurisprudence of Maryland.

The learned Judge of the Circuit Court held that the Bank was entitled to a dividend only on that portion of its claim which remained unpaid after deducting the sums cf money received from the collaterals. We agree in opinion with him.

Order affirmed, with costs.

Judge Miller dissented.