3 Md. 11 | Md. | 1852
delivered the opinion of this court.
The opinion on this appeal has been delayed at the request of counsel in the case of Sangston vs. Gaither, in which some of the questions presented by this record were said to arise. The court were disposed to accede to this request, in view of the contrariety of decisions in other courts in which assignments for the benefit of creditors had been contested, and, especially, because of the embarrassing fact, that although the subject oí such assignments had been three times before
John Gamber being indebted to the appellee, an attachment was issued and levied on certain personal property, which had been conveyed, with other personal and a large real estate in Virginia, to the appellants, as trustees. This deed was executed in Virginia, where the grantor and the trustees resided, and where all the property then was. In the progress of the cause the appellants came in, by petition, and claimed to be the owners of the property on which the attachment had been laid, in virtue of this conveyance. The plaintiff proved his debt, that Gamber was a non-resident, that he was insolvent at the date of the deed, and that he thereby conveyed all his property. The court below decided that the deed was void as against creditors, on account of the reservations in favor of the grantor.
This conveyance recites Gamber’s indebtedness to Samuel Brady, and to other parties of the third part named in the deed, and his desire to secure the payment of said debts to Brady, and to such of the olher creditors named in the deed as should sign the same. The property is conveyed to the appellants in trust, for the following purposes:
1st. To permit the grantor to hold possession of all the property, real, personal and mixed, to take the rents, issues and profits, and to possess and enjoy the use and benefits thereof, paying no rent therefor, until a sale should be effected according to the- provisions of the deed, the grantor giving bond, with security, for the delivery of the property at the day of sale, which bond was to be held on the trusts declared in reference to the property.
2nd. That if the grantor should not pay to Brady, in three
3rd. If the proceeds of sale should prove insufficient for the above purposes, then to pay .a certain claim of Peabody & Co., and to distribute the residue ratably to Brady, and such other of the creditors named in the deed as might sign the same.
4th. The deed to be void if Gamber should pay all the debts mentioned in the deed, with costs, commission, &c., &c.
5th. The creditors named in the deed, by signing the same, covenanted and agreed with Gamber to extend to him a credit of six, twelve, eighteen and twenty-four months on their respective claims, subject to the power to sell in case default should be made in paying these instalments as they might fall due.
It will be observed that this deed does not stipulate for releases from the creditors who might sign. In this respect it differs from the instruments which were the subjects of controversy in the cases of McCall vs. Hinkley, 4 Gill, 128; Albert and Wife, vs. Winn and Ross, 7 Gill, 446, and Kettlewell vs. Stewart, 8 Gill, 472, to which allusion has been made. But the grantor reserves to himself the possession and enjoyment of all the property for at least six, perhaps for twenty-four months, and, indeed, for an indefinite time, if the trustees should not think proper to sell, and none of the preferred creditors should require the sale to be made. He also reserves to himself the surplus, after payment of the claims of the assenting creditors, and of Brady, (whose assent is not required,) to the exclusion of all other creditors, who can in no event obtain any part of their claims by the provisions of
Various questions have arisen in the .courts of the several States upon the construction and effect of assignments of this description. The contest, however, has been carried on, principally, between those who affirm and those who deny the validity of preferential deeds requiring releases, as one class of such instruments has been designated in this court. 8 Gill, 506, With whatever force of argument or weight of authority these have been sustained, there is little difference among the authorities, as to the necessity of the debtor’s conveying all his property for the benefit of his creditors. And although there are cases in which deeds, reserving a part of the property or the whole, for- a limited time, for the use pf the grantor or his family, have been held to be valid, yet much the greater number of decisions have condemned them as fraudulent and void. Those in which partial assignments have been thus stigmatized, have but asserted a plain principle of justice — that a debtor, confessedly unable to pay his debts, when he asks to have his future earnings released from liability, must accompany this appeal to the humanity of his creditors, by a tender of all the property that he has, and that if he wishes to retain any portion for the benefit of-himself or family, it must be done with the assent of all those who have a just and legal claim upon it; because if a debtor can rightfully coerce his creditor into releases of this kind, it must be on the principle that the statute of Elizabeth does not operate on one’s time and future labor, but only devotes that which is the subject of assignment — his property — to the payment of his debts, and protects that only from being placed beyond the reach of his creditors by fraudulent conveyances; and that, therefore, while exercising his undoubted right to prefer some creditors to all the others, by paying them in full or by assigning property in satisfaction of their claims, he may so
It is not our purpose to examine the decisions on this point. The subject has been elaborately discussed in most of the States, and in none with greater ability than in the late Court of Appeals. It is much to be regretted that a difference of opinion among the judges should have left so material a question unsettled, and it is because the subject has been fully argued before us, and the counsel in both cases have suggested the importance to the public of having it settled, whether assignments, as common as those are said to have been in this State, are valid or void, for the reasons assigned in those cases, that we feel warranted in saying, that hereafter, as to deeds presenting the question which we understand to have been before the Court of Appeals, we shall follow the decisions in 4 Gill and 8 Gill. The first of these was decided in 1846, since when the same question arose in 8 Gill, and in the Circuit Court of the United States, in the case of White, Warner & Co., vs. Winn and Ross, in which Chief Justice Taney delivered the opinion of the court, affirming the validity .of the same deed which the Court of Appeals, in 7 Gill, declared to be void. These decisions have probably induced the belief, with the community and the profession, that such .conveyances would thereafter be sustained, and it is not unlikely that, under this impression, much property is now held by titles of this kind. These considerations, and the state in which we find this question in Maryland, are, we think, of sufficient weight to render unnecessary a re-examination of the principles on which the doctrine adverted to has been maintained. We, therefore, content ourselves with recognising the law as declared in the two cases to which we have referred, as more conducive to the public interest, than that these decisions should now be disturbed.
The deed before us does not require releases from the assenting creditors, and it was on this ground, as we understood the appellants’ counsel, that he mainly contended that it is valid; because, as he urged, most if not all such instruments
The appellants’ counsel has also referred to the cases of Rose’ Adm’x, vs. Burgess, 10 Leigh, 186. Claytor vs. Anthony, 6 Randolph, 285, and Kevan vs. Branch, 1 Grattan, 274. The deed in the first of these cases was executed by an administrator, to indemnify the sureties in his official bond; and the property might, without objection, remain with the
In the second the deed was for personal property to secure a particular debt, with power in the trustee to sell, and did not, in any sense, partake of the character of an assignment for the benefit of creditors.
The last of these cases, however, is very much like the one before us, as respects the reservation of the property to the grantor, and does sustain the view taken, on the part of the appellant, of this branch of the case. But there is no opinion of the court, nor statement of the grounds of the decision; under which circumstances, and being opposed by nearly all the cases in which the subject has been discussed, we cannot acknowledge its authority.
The counsel for the appellant has also relied on the case of Halsey vs. Whitney, 4 Mason, 218, to show that the assignment need not transfer all the debtor’s property. It was suggested at the bar that the debtor had no other property; but Judge Story did not deem it material, in that case, to introduce the fact by amendment of the pleadings. The only reason assigned by the judge is this: “But if he has other property, then the presumption of fraud is less cogent; for a debt- or, conveying part only of his estate to certain privileged creditors, does not thereby necessarily impair the rights of other dissenting creditors. The argument has generally come from the other side, as repelling any inference of fraud, such was the reasoning of Estwick vs. Caillaud, 4 Term. Rep., 420, and Wilkes vs. Ferris, 5 Johns. Rep., 335.” We have shown the character of the case, in 4 Term Rep., 420, and that it does not in our opinion, apply to cases like the one before us. The case in 5 Johns., 335, also referred to by the learned judge, was decided on the authority of Estwick vs. Caillaud, and has been followed by scarcely any case in New York, since, while most of them have adopted the opposite doctiine.
It is worthy of remark, also, that Judge Story in deciding Halsey vs. Whitney, sustained a deed exacting releases from the creditors, against his own judgment, upon the authority
In the case of Riggs vs. Murray, 2 Johns. Ch. Rep., 565, Chancellor Kent pronounced against a deed which reserved to each of the insolvent grantors two thousand dollars per annum, for the support of their families, until the creditors executed releases, or until one year after they were discharged by law, for the reason that this and other conditions were onerous and oppressive to creditors, using in his opinion (pag 582,) this language: “If an insolvent debtor may make sweeping dispositions of his property to select and favorite creditors, yet loaded with such durable and beneficial provisions, for the debtor himself, and incumbered with such onerous and arbitrary conditions and penalties, it would be impossible for courts of justice to uphold credit, or to exact the punctual performance of contracts.” This decree was subsequently (15 Johns., 571,) reversed by the Court of Errors. Afterwards Ch. J. Spencer, in sustaining a similar deed, (20 Johns., 447, Austin vs. Bell,) on the authority of this case, said. “We are bound by that decision,” (the decree of reversal,) “whatever our private opinions may he as to its accuracy and solidity.” Later decisions in the courts- of New York have gone so far in vacating deeds containing such reservations to the grantor, that Chancellor Kent, in his Com., 2nd Vol., 535, note, says, that the decision of the Court of Errors, in Murray vs. Riggs, may be considered as justly exploded, Mackie vs. Cairns, 5 Cowen, 547, was a deed reserving $2000 per annum for tile benefit of the grantor, until he should be discharged from his debts. Golden, senator, thus states this case:- “Mr. Cairns being insolvent, assigned, by several instruments, all his property to S. and L., in trust, that they should allow him out of the proceeds, or out of the rents and profits, $2000 a year, till he should be discharged from his debts, but the allowance was not- to extend beyond four years; and upon the further trust, that the residue should be distributed among certain of his creditors.” This is not very dissimilar to the deed before us,- the material difference
„ And the same law prevails in Virginia, whose courts sustain assignments requiring releases from creditors. In Skipwith vs. Cunningham, 8 Leigh, 290, Judge Tucker?' says, in speaking of assignments requiring releases: “On this? subject a distinction has been made in the cases, between the conveyance of the whole and the conveyance of part only of the debtor’s property, upon condition that the creditors should compound and accept a part of their debts, and give releases for the residue. The former is considered admissible and valid, the latter as oppressive upon the creditors, and as fraudulent and pernicious in its tendencies. The English cases are all founded upon the concessum of the principle, that such compositions are lawful, where the party has conveyed the whole of his property, and there is no concealment or underhand agreement with particular creditors.” And in McCullough vs. Sommerville, 8 Leigh, 428, the same court said: “There is no evidence of fraud, nothing to show an intention to withdraw the effects of the firm from the creditors. On the contrary the whole property, of every kind and description, not only of the firm, but of the individual partner, McCul
And in Pennsylvania, where also assignments for the benefit of creditors and stipulating for releases, arc held to be valid, it has been decided, that conveyances of this kind by partners in trade, must transfer all the separate estate of the individual partners, as well as the effects of the firm. Thomas vs. Jenks, 5 Rawle, 221. Hennessy vs. Western Bank, 6 Watts and Serg't, 300. In the last of these cases it is said: “A debtor cannot make a reservation, at tho expense of his creditors, of any part of his income or property, for his own benefit, nor can he stipulate for any advantage either to himself or family;” which Chancellor Kent, in his Com., 2nd Vol., 535, also states to be the result of the authorities.
And so where deeds reserved to the grantor the power of making leases, or of revoking or altering the trusts, or of charging the estate, or gave the trustees power to change the order of preferences, they have been held to be void. 2 Johns. Ch. Rep., 579, 580. Tarback vs. Marbury, 2 Vern., 510. 4 Barb., S. C. Rep., 539, Strong vs. Skinner. 9 Gill, 216, Beatty vs. Davis.
And however the judges of the Court of Appeals may have differed in the cases to which allusion has been made, on the question then before them for decision, it is manifest that they sanctioned this doctrine. In 4 Gill, 136, Dorsey, J., says: “It was admitted in the discussion of this case, (and such is the principle established by a current of authorities,) that if the assignment contain but a part of the property of the debtor, or if before the full payment of the entire claims of creditors, any part of the property assigned be reserved to the debtor, such an assignment is fraudulent and void.” And Magruder, J., page 158, says: “The deed, it is true, must not be so framed as to keep the property in the power of the debtor.” And
We must observe the distinction between conveyances of the whole or a part of the debtor’s property, as a security for particular debts, on an agreement with the creditors for further time, and voluntary conveyances by debtors for the payment of their debts; the latter the law presumes to be executed with reference to the benefit of the creditors, and not to the advantage of the debtor,, further than the exaction of releases, where such a provision is allowed without avoiding the deed. In one class the object is to gain time for the debtor by agreement with the creditor, in which it is quite consistent with the nature of the transaction that the former shall keep possession. In the other the debtor oilers his property to his creditors in payment of their claims, or for distribution according to such priorities as he may prescribe. Payment being the professed object of the assignment, it must not contain any provision to defeat or hinder this purpose, beyond such reasonable delay as may be incidental and necessary to the proper execution of the trust. Hart vs. Crane, 7 Paige, 37. 4 Wash. C. C. Rep., 235, 237.
Applying these principles to the deed under consideration, we are brought to the conclusion that the court below committed no error in condemning it as void. If it be regarded as an assignment for the payment of his creditors, on terms proposed by the grantor, it cannot be sustained, because, instead of passing the property over to the trustees for the benefit of the creditors, it is retained by the debtor himself for six, and perhaps for twenty-four months, and indeed for so long a time as the trustees may deem proper, provided none of the assenting creditors require the sale to be made. During this time the property would be protected from process issued at the instance of the other creditors, as well those not named in the deed, as those who were named and might not accept its terms. It is not a satisfactory answer to say, that jthe income and products of the property would be liable, in
If it be regarded as a security in the nature of a mortgage, as was insisted on the part of the appellants, it is equally objectionable; because, if the equily of redemption relieves this ■deed from the imputation of fraud, we cannot perceive that it would not have the same effect in other deeds which would be fraudulent without it; and thus a clause which secures to the debtor no right that he would not otherwise possess, and which is, therefore, wholly unnecessary, would give effect to an instrument that would be void but for its insertion. But this right to redeem is to be exercised, not as to all the debts named in the deed, but, only, as to such of the creditors as may assent to its provisions. By this means, the debtor, in his efforts to retain the use of the property, seeks to coerce his creditors to sign the deed by a double motive — the security and preference offered, and the hope, which this provision is calculated to excite, that he really intended and would pay the debts from the rents and profits of the estate — and if the object of the debtor was, as we must now assume, to secure his creditors, he had no right to subject them to the alternative of agreeing that he should have further time, and pay bv instalments prescribed by himself, as the price of the security offered, or lose all benefit of his property, and chance of be
The argument, that a party may be honestly endeavoring to pay his debts, and that for that purpose and to support his family, the property should be allowed to remain in his possession until default in paying the instalments, was well answered by the chancellor in 1 Hopkins, 403. “It is now urged that the support of the grantor, from his own estate, is an object, which if notlawful is at least so reasonable, as to entilet these provisions to some favor. This object is clearly illegal. The fundamental principle of law and justice, is, that all the
There is also, in this deed, a reservation to the grantor of the surplus that might remain after paying the assenting creditors. It is unnecessary to examine this question, in this opinion, as it is presented in two aspects in the case of Sangston vs. Gaither, in which the authorities particularly applicable to this feature of the assignment are cited. We there decide that such a reservation avoids the deed.
The counsel for the appellants suggested that the circumstances attending the transaction should have been left to the jury, before whom the question of fraud could better have
It is said, also, that the laws of Virginia must govern this case, according to which the deed would be treated as a mortgage. There is no evidence before us of what the foreign law is. The mode of such proof is stated in Gardner vs. Lewis, 7 Gill, 377.
From the view taken of this conveyance, under the first exception, it is unnecessary to express any opinion on the points arising under the second.
Judgment affirmed.