Gardner v. Lewis

Magrgder, J. delivered the opinion of this court. The appellee in this case was appointed permanent trustee of William Holton, Sen., an insolvent debtor, on the 14th June 1845, and on the 29th July of the same year, instituted this action in Baltimore county court. It is an action of trover, brought to recover the value of goods and promissory notes, which, it is alleged, are the property of the appellee, and had been converted, by the appellant, to his own use. There was a verdict for the appellee, and the record contains exceptions, by the appellant, to two instructions given by the court, at the instance of the appellee, and because of a refusal, by the court, to give three instructions, as asked by the appellant himself. It appears,, from the statement in the bill of exceptions, that this is a controversy between two persons, each claiming to derive title to the property in dispute, from the same person (the insolvent;) both agree that on the 4th June 1845, Holton was the' owner of the goods and promissory' notes, and it appears, continued the owner until the appellee was appointed his trustee, and the title vested in him, unless,-before then, the appellant himself had acquired a valid title to the things in controversy, from the insolvent himself. The plaintiff below made oat his case, and-all the-doubt arising in it, is caused by the introduction into it, of the proof of title by the defendant. That title is impeached,- and if successfully, then, the defendant has no right. It seems proper, then, to examine the questions in regard to that title, as presented by the prayers of the defendant below. Before doing this, however, it is necessary to dispose of a question, which, although it is not expressly raised in any of the exceptions, meets us at every point in the case,- and perhaps, would materially influence the decision of the case. The defendant below insists, that the validity of his title depends, not upon the law of Maryland, but upon the law of Virginia; and with respect to a part of the property, on the law of the District of Columbia, inasmuch as the agreement which constitutes his defence, transfers property, at the time, without the territorial limits of Maryland, (most of it in Virginia,) and is an agreement between persons, who, although at the time, citizens of and residents in Maryland, were without — 392 — its limits. For these'reasons, the validity of it depends, with respect to the goods, upon the law of Virginiaj and so far as it relates to the notes, upon the law of the District of Columbia; no part of it upon the law of Maryland. It is contended, moreover, by him, that, according to the laws of Virginia, and of the District of Columbia, the proof furnished by him establishes a valid transfer, by the insolvent to him, of all the property. Is there any law of Virginia known to us, which may make this a valid transfer of the goods in controversy ? Any law of the District of Columbia, which can legitimate this transfer of the promissory notes now in controversy ? If the goods in controversy had not been withdrawn by the defendant below, from the protection of the laws of Virginia, and the plaintiff was in a court of that State, claiming title to them, and seeking redress for the alleged conversion; and if, as is now alleged, the Virginia law makes the transfer by the insolvent to the defendant below, valid, then the plaintiff would have been obliged' to invoke to his aid the law of Maryland, and to ask the court below, to hear and decide the case, according to that law. What would have been the result, we are not to conjecture. The comity of nations, we are told, (see Story on Conflict of Laws, p. 38,) “is derived altogether from the voluntary consent of the latter,” (the State, within whose territory it is attempted to make the law of another State obligatory,) “and it is inadmissible, when it is contrary to its known policy, or injurious to its interests;” and it is “only in the silence of any positive rule, affirming, or denying, or restraining the operation of any foreign laws, the courts of justice presume the tacit adoption of them, by their own government; unless they are repugnant to its policy, or prejudicial to its interests.” This also, he assures us: “A nation will not suffer its own subjects to evade the operation of its own fundamental policy, or laws; or to commit fraud in violation of them, by any acts or contracts made with that design, in a foreign country; and it will judge for itself, how far it will adopt, and how far it will reject, any such acts or contracts.” See sec. 106. — 393 — In answer to all that is urged for the appellant, about the comity of nations, the appellee insists, 1st, that we have no evidence of the existence of this Virginia law, which his adversary would invoke to his aid; and 2ndly, that, if its existence was conclusively proved, it does not furnish us with the law, by which this cause is to be tried here, in a Maryland court. These suggestions will be considered-. We are so much in the practice of looking into the reports of decisions of the English courts, and of our sister States, in order to learn what is our own law, that it may be well occasionally to remember, that these reports of adj udged cases are not evidence to us, of what is the law of the State or countiy, in which they are pronounced. We are in this case left in ignorance, whether this law of Virginia, which is to direct us in our decision, is that which is to be found in her statute boob, or is a part of that unwritten law, which is said to be the birthright of every citizen, and which, in our own State it is declared in the bill of rights, to be alterable, to be sure, but unalterable, except by the legislature of the State. How are we to discover, that Virginia has, or ever had any law, written or unwritten, which would give validity to the agreement, made under the circumstances disclosed to us in this case? We are called upon to say, that although this agreement may be, without doubt, fraudulent and void, and must be so pronounced, if this cause be tried by Maryland law, yet that the result will be very different, (it will be quite a fair transaction,) if from the law of Virginia, we are to learn its character. We have been repeatedly told, that outlaw of 1834 does not make any part of the law of Virginia. Possibly not. But it can never thence be inferred, that by no law of that State, is a transaction like this, declared not to be fraudulent. How then are we to learn, if it be needful for us to know, what the laws of Virginia, statute or common, say of a transaction like this? “ The court of one State cannot, judicially, take notice of the laws and practices of another,” 20 Pick., 472. The written law of foreign countries should be proved by the law itself, as written. Washington C. C. Reports, p. 2. But the law of Virginia., which is to inform us, — 394 — whether this agreement is there deemed a fraudulent or fair one, is probably nowhere to be found among the statutes of that State; at all events, no such statute has been shown to us, and if it be, in whole or in part, unwritten law, then the book last mentioned, in the same page, tells us, that “the common, customary, or unwritten law is to be proved by witnesses acquainted with the law.” “ They must be proved as facts.” 1st Greenl. on Evid., sec. 486, see also sec. 409. So far, there is no difference of opinion,.it is believed, anywhere. The oldest lawyers in this State cannot remember when,, in regard to it, our courts entertained any doubt. But in regard to the next inquiry, there is some conflict of opinion. In Mullikin’s case, 1st Pennsylvania Reports, p. 125, Gibson, chief justice, speaking of the manner of proving a law of Maryland, says, “whether the property was bound by the proceedings in Maryland, when the attachment was laid, is a distinct and material fact which ought to have been expressly stated, because not only the existence of a foreign law, but the construction which is a part of it is determinable, not by the court, but by a jury.” Now if this be true, surely reported cases are not to prove facts- of this description. We can only know from them that the-printer said, that the reporter said, that the judge said, that the law is, as he is made to say that it is, This is equally an objection to evidence by reported cases, if it be offered to the court. But Justice Story, in his Conflict of Laws, sec. 637, 638, after- telling us that “the established doctrine now is, that no State takes judicial notice of the laws of a foreign country, but they must be proved as facts,” proceeds, “but it may be asked-whether they are to be proved as facts to the jury, if the case is tried at common law, or as facts to the court;” and answers, “it would seem as faets to the latter.” How this subject is understood in this court, will be seen in the case of Thrasher vs. Everhart, 3rd G. & J., 242. This-inquiry however, is not very necessary in a case like this, in which no evidence is offered either for the court or the jury. Such being the case, we are told in 1st H. & J., 720, what is to be done by us. “No doubt the law of South Carolina, must — 395 — govern the court in determining upon the operation and validity of this deed, if they are different from the laws of this State. But no proof has been adduced that the laws of South Carolina will make this deed a good and valid deed, and without proof the jury cannot find what the law of South Carolina is, the court must decide it according to the laws of this State.” We may be told about the lex rei sites, to which the same answer may be given. It really does seem to be unreasonable to ask any court of Maryland, to find out and give effect to any law elsewhere, the effect of which would be, that a citizen of Maryland, who designed to take the benefit of our insolvent laws by crossing the line which separates this State from the District of Columbia, or by going into any adjoining State, (taking with him his property,) may rid himselfof all that he owes, and then return to Maryland, and rid himself of all his debts. But of what benefit would it be to the defendant below to prove that there is no law in Virginia, like some of our insolven t laws? “The rule of comity,” Kent mys, in his Commentaries, 2nd vol. 4.07, “is held to be overruled by positive law,” and what is deemed the settled law of Maryland on this subject, some of the learned men who once occupied our seats, have long since told us. “If the legislative enactment of this State and another State should differ, it cannot be made a question here, which shall prevail. Where there is no constitutional barrier, we are bound to observe and enforce the statutory provisions of our own State.” 5 H. & J., 100, Davis vs. Jacquin. Having now ascertained, that in the trial of this case, the law of Maryland alone is to govern our courts, we proceed to inquire, whether, according to that law, the court below expressed any opinion for which its j udgment ought to be reversed. We are first to examine the defendant’s proof of title. He has none according to his own showing, unless he acquired it by the agreement of the 5tb June — the order of Holton the insolvent, to deliver to him the goods, and the delivery of them to his agent a few days afterwards. With that proof, also, have been connected the proceedings of the court in Norfolk. These proceedings, however, certainly gave to the appellant no title. — 396 — They can be relied upon, only to show a good and valid consideration, for the agreement of the 5th June. It is contended, that if the jury believe every thing which is proved, of these proceedings, the agreement and consummation of it, then the plaintiff is not entitled to recover in this action. It is believed that the three prayers of the defendant below may be considered in connection. In noticing these several prayers, it may be assumed, that if the agreement was a fair and bona fide one, every thing stated in it in regard to the title to this property, would be incontrovertible. But it is charged that this agreement was obtained by fraud; that it is the result of a system of fraud and extortion, and compulsion, practised by the defendant below upon his insolvent debtor, and ought to be avoided for that reason, and further, that even if binding upon the insolvent, it would yet be fraudulent and void, as against his creditors; that there is proof of an actual, as well as statutory fraud. What is said in regard to the latter, will be noticed when we come to examine one of the instructions, which the court gave at the instance of the plaintiff below. These prayers require the court to say, that if the facts stated are proved, — the proceedings in the Norfolk court, the execution of the agreement, and the dismissal of the proceedings in Norfolk, in consideration thereof, — then the verdict of the jury must be for the defendant; notwithstanding any urgency by the defendant below, or threats of taking the goods at Washington, whereby the agreement was procured. 1st. Fraud or no fraud, (not statutory fraud,) is an important question in the case; upon the decision of this depends, in a very great measure, the plaintiff' ’s right to a verdict. There is certainly testimony tending to establish the charge of fraud and extortion in procuring this agreement, (the essential title paper of the defendant below,) which, whether it be technically duress or not, .if established, may invalidate'this instrument. 2 Greenleaf’s Evidence 331. There may have been “ a species of necessity, which acted upon and constrained the will, and being under the necessity of choosing one, he chooses the least pernicious of the two.” — “ It maybe a casein which the — 397 — rule cannot be said freely to exert itself, being rather passive than active; or if active, it was so, rather, in rejecting the greater evil, than in choosing the less?” Notwithstanding all this, it is insisted, that the defendant below must recover, because of the agreement, and the consideration for it, and the dismissal of the proceedings in Norfolk. The result of these proceedings, if brought to a decision, it is said, cannot be doubted, and this too, although we are furnished with no means of judging, but the ex parte statements of the defendant below, and these statements admitted to be erroneous, in, at least, one essential point — the ownership of the notes. But how was the debtor benefited ? He paid his debt, it is said; but it, was paid to the wrong persons: he got his property released, but, not for himself; it was to become the property of the defendant below. With all this evidence it is trot quite clear that such an agreement transferred the notes and goods even as to Holton— at all events the court could not so determine. If Holton could successfully impeach the transaction, for fraud, the property was still his, until it was transferred to his trustee, who then acquired a right to sue for it. But if the insolvent could not sue, if he is to be regarded asparliceps criminis, would it, thence follow, that the trustee could not? Whether a deed be fraudulently obtained from an insolvent, or be the result, of a fraud practiced upon him, if thereby his creditors are defrauded, the trustee is the person to claim the property in their behalf. In the latter case it is obvious, for the former the act of 1816, ch. 221, has provided. See, also, Kolb vs. Whitely, 3 G. & J., 188. All the property of an insolvent, wherever situate, is conveyed to the trustee; and although it may not be quite certain that all other States will so declare, in regard to property for which the trustee brings suit in their courts; yet, if the property to which the trustee thus becomes entitled, be brought back again to Maryland, it is not for our courts to say, what foreign courts would declare of the deeds of insolvents, so far as they transfer property, which, at the time, was without our territories, When Plater, in the case in 6 G. & J., 116, took the benefit of — 398 — our insolvent laws., his claim against the government of Great Britain certainly was not within the limits of Maryland: yet this court had no hesitation in deciding it was a part of the trust fund, and the trustee was entitled to it. So too, if our own statutes declare that a deed of an insolvent is, (for reasons proved to exist in the case,) fraudulent, although our courts cannot meddle with the property while without our territory, still, here, it is regarded as part of the trust fund, and if it be brought into Maryland, they will entertain a suit for it; and in deciding it, will be governed by the statute of Maryland, disregarding the lex rei sites, With such proof in the cause, we must forget all that was said in the case of Davis and Calvert, 5 G. & J., 303, 304; and in various other cases, before we can condemn the decision of the court below, in regard to the three prayers of the defendant below. It has been contended, that even although the agreement was fraudulent, and the plaintiff had a right to claim the goods and notes, still he could not recover, without proof that he paid or tendered the money, ($200,) which the defendant below paid to the insolvent, at the time of the execution of the agreement. Here we are reminded of the doctrine of Lord Mansfield, that trover is an equitable action, and for this reason only, (if for this reason,) it is believed, can a tender of this money be insisted upon. In order to a decision of this question, it seems to be quite unnecessary to ask, whether trover is an equitable action, or what, in later decisions, has been said on this subject. Equity does require in every case of usuiy, that the principal, with legal interest, be paid or tendered, before it will relieve, at the instance of the debtor. But can equity ever require a return, or tender by the trustee, or the creditors in this case, of the money, which seems to have been the consideration of this agreement ? The contest is between the creditors of the insolvent, and his grantee; the former alleging, that the money paid to their debtor, was paid by the latter in order to defraud them. Now if the fact be so, upon what principle of equity can a fraudulent grantee claim, that those who complain of the fraud, shall return money paid, not — 399 — to the persons complaining, but to their debtor, in order to induce him to defraud them. Surely such a defence is against all equity. It is true, that he who asks equity must do equity. But what equity is there in asking of creditors, who claim to be defrauded by one of their number, that they refund all that the defrauding creditor deemed it expedient to use, in order to accomplish his design of defrauding them ? It is quite enough that he be allowed to participate in the fund, when it is recovered. We are next to examine, if there be error in the first instruction which was given by the court. To this instruction it is objected, that the contract, into which Johnson, in behalf of the defendant below, entered, was not binding upon the latter, because he had no authority to make such an agreement; and moreover, if he had the authority, there was no consideration for it: it was nudum pactum. It is in proof,- that a meeting of the creditors of Holton was proposed by him, and approved of by the defendant below. The meeting was, to be sure, for the relief of their common debtor, but with the hope of benefiting thereby, the creditors themselves. It was to ascertain,-whether, by giving to Holton the indulgence which he asked, his creditors might not be secured the amount due to each of them. All parties, it was possible, might profit by it, and with-a view to ascertain if such was likely to be the case,- a meeting was contemplated. It could not but be known to those who knew of' the meeting, and were interested in it, that, in order to a final adjustment of the business, it might be necessary again to assemble. Such was soon discovered to be the ease,, and a postponement was found to be necessary, not (as far as we can learn,) because so small a number attended as soon as the others did,but because if all the creditors had been then present, nothing definitive could be done, for want of an inventory of the goods then at the several places named. Holton says Johnson remarked, that lie (II.) had better go to Washington, Ac., and make inventories, and that five days would suffice for the purpose; and Lewis and Johnson agreed, that in the interim (that is, — 400 — according to their calculation, during five days thereafter,) no legal proceedings should be had. Here then, is a positive contract, that neither Gardner nor Leniis should seize any of the goods, by attachment or otherwise; and the attachment issued in Norfolk Was in fraud of that agreement; so that the only question is, whether the defendant below was bound by such agreement, to which his agent was a party ? If this be' regarded as an agreement with Holton, surely there was a sufficient consideration for it. The journeys which he agreed to take; the time during which he agreed to be employed, in and about the business which they required of him, and the money he must necessarily expend, in journeying to these several places, and while in them, made the agreement a binding one, if for no other reason, it can be invalidated. But the defendant himself was not at the meeting, and his agent, it is supposed, had no' authority from him to enter into such an agreement. What then, was he authorised to do ? He w,as to represent the defendant “in the most favorable manner,” and this, to be sure, did not mean that he was to execute bonds, purchase farms, &c., for him whom he represented; but Mr. Johnson was at that meeting to be Mr. Gardner, while acting upon the business for which they had assembled; and a necessary part of that business surely was, not to dispatch it at once, that evening, when it was to be presumed that some delay would be necessary; and it was in proof that the defendant below supposed those inventories to be necessary, in order to enable the creditors to judge, whether for their own advantage and to secure their own debts, the indulgence asked by the debtor, (that is, that his creditors would not institute any legal proceedings against him, for twelve or fifteen months,) should be given him. Can it be said that such an agent was not authorised, at such a meeting, to act upon, or to make, in behalf of Gardner, every proposition which was made in the course of that evening? For the contract entered into with- the debtor, there was a sufficient consideration. But when creditors assemble for such a purpose, is there no contract, inter se, necessarily implied, — 401 — and a breach of which is a gross fraud ? They convene to transact business, by which each hopes to save — some more, some less — money; and in order to the accomplishment of the object of each, it is essential that each should act with the utmost good faith, do nothing whatever, which, if done, would frustrate the object of the meeting. A negotiation is set on foot,; and pending such a negotiation, can any one of the parties to it be allowed, with impunity,to practise sucha deceit upon the others, and thereby wrong every other person, who, by the practice of such a deceit, suffers a pecuniary loss? The defendant in the court below, according to the testimony, approved of the meeting, and told Holton, and of course, authorised him to say to the other creditors, that there could be no difficulty with him, and that the man who was to be there to represent him, would be there to agree to the most favorable terms. But few of the creditors, however, attended, and is it, usual, or expected, that all the creditors will attend such a meeting? If one chooses to make a promise, which would be obligatory upon him, provided all of them did attend, is that promise utterly null and void, by reason of the absence of some from a particular meeting, and although the promise is not made to depend at all upon the number of creditors who attended, or the amount of debt which was represented ? It is surely binding, until notice is given to all others really interested, that the party who promised is no longer to be bound. How else is such business to be transacted ? How is any one of the parties to know, whether he is yet bound or not bound, if any one has the right, without giving notice, to absolve himself from his promise, and to act in direct violation of it? He may, indeed, by his promise, verbal or written, agree to be bound, only when a certain number of the creditors, or those holding a certain amount of debt, bind themselves also, but the promise being otherwise, he cannot aet as if it were so. Having promised to indulge, if others would, was he under no legal obligations to keep the promise, even one day after it was made, and when no one had authorised him to suspect that, to the the terms, an)7 one of the creditors had any objec — 402 — tion ? And who are the parties now complaining of the breach of faith by the defendant below, whereby they are damnified and deprived of their proportion of the assets of their debtor? All the creditors who are here, suing by him whom the law appoints to institute the suit, and to such an action, is it any defence to say, that any of the creditors lost their right to complain of the fraud, because they had not agreed to indulge their debtor a very few hours indeed after the defendant sanctioned the proposition made by the debtor? He practised a deceit; by the practice of it, he wronged and defrauded the other creditors, and has secured to himself thereby, considerable profits, which it is against equity and conscience that he should retain. Upon what principle then, can it be insisted, that the proceedings at Norfolk did not amount to a fraud, practised, both upon the debtor and his creditors, the defendant himself being one of them, and as such, entitled hereafter to claim his just proportion of the assets in controversy ? Can he (the defendant below,) set up such a defence, in bar, to this action, when, but for the title so acquired, he would have no defence to this action ? As the case is understood, the plaintiff below charged the defendant with more than one description of fraud. The allegation seems to be that the insolvent was sometimes a party designing to cheat his creditors, and then he is associated with the defendant, at other times as the party cheated by the defendant below, then acting single handed. The fraud alleged sometimes to be practised, is statutory, and at other times, other fraud. In the second instruction given by the court below, the charge, is that the agreement, although the insolvent was particeps criminis, is declared to be fraudulent by our insolvent system. We will now examine this transaction in order to ascertain if the law of 1834, does not condemn it. Certain conveyances, &c., made or allowed, or caused to be made, whether upon request or otherwise, shall be declared to be made with intent to give an undue and improper preference. Whose conveyances are by this act declared to be so made ? The conveyances of applicants for the benefit of our insolvent — 403 — laws. Are all conveyances <fcc., made by them, declared to be so ? No: only those which are made in favor, or with a view to the advantage of or security, or with intent to prefer, any creditor or creditors, security or securities, of such applicant; and provided such applicant shall have no reasonable expectation of exemption from liability or execution for, or on account of his debts, without applying for the benefit of the insolvent laws. The conveyance, assignment, &c., must not be for valuable consideration; and that law is not to apply to any case where the said creditor or security (receiving the conveyance, &c.,) shall appear not to have notice of the condition of insolvency of said debtor. The language of the act of Assembly, is certainly sufficient to comprehend the instrument, which the defendant below says is his title paper. The facts, which if they exist will make this paper fraudulent and void, must be proved to the satisfaction of the jury; only de jure respondent judices. We are not now disposing of a motion for a new trial. We need not then stop to enquire what proof the record furnishes of a valuable consideration for this instrument of writing, or whether defendant below had notice of the debtor’s condition of insolvency; whether the alleged promise to dismiss the proceedings in court, was any consideration for an agreement, which made the party promising, the owner of every thing which he could properly recover by prosecuting the suit. Neither are we to enquire whether there was any thing like certainty in the result of the suit, wherein the plaintiff in order to obtain an attachment and seizure of the goods, swore that he was the owner of the notes, which constituted so large a portion of his claim, when in truth he was not; and although not tire owner, he was claiming the amount of them, when not one cent of that amount could rightfully be demanded by or paid to him; and without due diligence on the part of the owner of them, in demanding payment and giving notice of the non-payment, the defendant below never would be responsible for one cent of them. These and many other matters of fact might be considered by the jury, in judging of the matters in issue, which are now settled by their verdict, unless that verdict was the result of a misdirection or improper refusal to instruct the jury in — 404 — some matter of law, needed to assist them in finding the matters in issue. What question then does the second instruction present to this court? what are the objections to this instruction as given by the court below? We are told in one of the points filed, that it takes from the jury the intent to prefer by the transfer of the agreement; puts the validity of the transfer solely upon the fact of the transfer, the want of reasonable expectation of being exempted, on the part of Holton, and the notice of his condition by Gardiner, and asks the court to declare that the intent to transfer is the legal consequence of these. The jury are to find the intent to transfer, as stated in the testimony of Holton and Tucker, and in addition thereto, that at the time of the agreement, Holton had no reasonable expectation of being exempted from liability or execution for, or on account of his debts, without applying for the benefit of the insolvent laws; that the defendant had notice of Holton’s condition of insolvency. If they found those facts, they were instructed, that such transfer was made under a view and expectation of becoming an insolvent debtor, with intent thereby to give an undue and improper preference to the defendant, and vested in defendant no title to said property. It is not, and cannot be denied, that there was testimony before the jury, which had a tendency to prove the facts of which they were to be satisfied. There is no doubt, that if any transaction necessarily produces the effect which a statute declares to be fraudulent, as against creditors, the court may pronounce such act to be fraudulent. Whatever is the necessary consequence of an act deliberately done, that the law presumes every man to intend. It is said, Conn. Reports, 296, that “when the effect of an act, understandingly done, is necessarily injurious to the rights of another, the quo animo is not a matter of fact, it becomes an inference of law.” It is one question, whether the facts and circumstances, which, if they exist in a case, constitute a fraud, are proved to exist in that ca,se. If their existence be shown, the law says, and it is the province of the court to pronounce the law — 405 — to be, that they constitute a fraud. This appears by the authorities which were cited at the bar. When the insolvent executed a deed, by which he designed to transfer to one of his creditors so large a proportion of his effects, and in satisfaction of the whole of his debt, and had at the time no reasonable expectation of being exempted from liability or execution for, or on account of his debts, the court may well say, that such deed vested no title in the defendant, and if they find, that when Holton became the debtor of defendant, they were citizens, residing in Maryland, and have continued to be such up to the present time, the plaintiff is entitled to recover. The instruction does not make the validity of the transfer to depend upon tire fact of the transfer, but upon the want of reasonable expectation at the time of being exempted from liability or execution for his debts but by applying for the benefit of the insolvent laws, and the knowledge then had by the creditor of the condition of insolvency of the debtor. JUDGMENT AFFIRMED.