Kettlewell v. Stewart

MagrUder, J., delivered the opinion of this court. We are required, in this case, to assume, that the deed which furnishes the matter of controversy, was a conveyance of all the property of the grantor, for the purposes therein expressed, and the court is asked to say, that all such deeds are fraudulent, if impeached by creditors not parties to them, although nothing like actual fraud was designed. The deed is a deed of trust, for the beuefit, principally, of such creditors as shall release their claims, but securing the surplus to such as do not release. Can creditors, who have been invited, but refused to participate in the trust fund,on the condition thereto annexed, ask that the deed be declared void, to the prejudice of the rights of other creditors who have released their claims, and thereby acquired a title, each one to his proportion of their trust fund? In the case of McCall and others, vs. Hinkley, &c., 4 Gill, 128, I took occasion, to express my opinion of such deeds at some length, and to cite some authorities which induced me to think that deeds like this are valid. I have no disposition again to cite them, or to add to them others. It seems to me, that it is scarcely to be believed that in the courts of England, either before or since the American revolution, it would have been decided, that deeds of this description were forbidden by any common or statute law. I might, indeed, dispose of this question, and would dispose of it, satisfactorily to myself, in these few words:—A debtor, though in failing circumstances, has a right given to him by the common law, and which, it has been decided, is, in this particular, our law, to prefer one, or a class of creditors, to others, by paying, or securing the payment of, the debt due to him, or each of them; and the creditor has a right to receive, in full satisfaction of his claim, a lesser sum than is due to him. This common law right of the debtor, no English statute before our revolution, nor act of Assembly of Maryland, (bankrupt and — 503 — insolvent laws are not here to be noticed,) has taken from such debtor; and until our General Assembly thinks proper to deprive such debtor of this power, our courts cannot deny it, because of their notions of sound policy, or of sound morality, or because judges elsewhere may claim a right so to act. 1 do not now, for the first time, express my fears of the crying evil which, if it be not checked, must result from the practice so prevalent in our courts, of relying on the decisions of courts in the sister States, and of the English courts, since the revolution, as authorities, whence we are to learn the law of Maryland. In these notions and dreads, I am not singular. A distinguished jurist, (the late Mr. Duponceau,) writing upon this subject, asks: “Are we to wait for every spring and autumn ship from England, for cargoes of the decisions of the courts of Westminster Hall 9 This would be derogatory to our national independence, and some States have already shown their sense of this proceeding, by prohibiting the reading, in our courts, of the modern English adjudications. Or, are we to refer to that mass of decisions which daily issue, in the form of reports, from the presses of the different Stales?” Of these latter he says, “ they are often contradictory, and probably will become more so.” It is true, it is sometimes pretended that the books cited are not relied on as authorities. An English judge first cited Phillips on Evidence for what the law was, and then added: “ Which I refer to, not as authority, but as proof of the understanding of Westminster Hall on the subject.” We cannot say this when citing the decisions of the courts of our sister States, for when it is our duty to learn what is the law of the State in which a decision is pronounced, we are positively forbidden to consult for it, the reported decisions of the courts of such States. It is only when the enquiry is, what is the law of Maryland9 that such extra territorial decisions are cited and relied on. With respect to the question now to be decided, the evils of regarding the courts of other States as oracles of this branch of Maryland law, are greater than in the decisions of very many — 504 — questions. In some of the States, the decisions, we are told, (1st Am. Select Cases, p, 79,) seem to be grounded upon the difficulties respecting the powers of the courts to compel the trustees to execute the trust, arising from the want of a chancery jurisdiction. It cannot be proper, then, to collect all the decisions of all the courts of all the States, (except those of Maryland, as is often the case,) upon the question to be decided and then pick and choose from among them such law as is most approved of by the court. It was, with great propriety, said, by the chief judge of a sister State, that “ if we are to take up the decisions of all the States, founded, as they are, upon local customs, colonial necessities, and legislative novelties, and attempt to make them the rule of adjudication, we shall not only disfigure and break down the ancient temple of justice in which we so much glory, but pile up, in its place, a mass of broken fragments, without symmetry, form or beauty. Each of the States adopted some portion; no two of them the same portion of the law of the mother country.” The learned judge might have added, that much of the law of every State, though never to be found in the statute book, is of home manufacture. “ Much of the law of every country depends upon established usage. Legislation can only settle principles, while the application of those principles must either be left, in all cases, to the discretion of the magistrate, or must be modified or governed by judicial decisions.” I have thus spoken of the evils which must be the result of using, as authorities here, the decisions of the courts of our sister States; not because a majority (indeed it would seem that very few) of them have pronounced such deeds to be void, but because, that but for one or two such decisions which here would be regarded as judicial legislation, it is not at all probable that this would ever have been considered an unsettled question in Maryland. The question before us is often regarded (it was so regarded by Justice Story, 4th Mason, 206,) as one of those questions to be decided, to be sure, by local decisions, if they exist; but in the absence of any such decisions, to rest, in a great measure, — 505 — upon local opinions and local practice, if therefrom evidence can be furnished of such local law. For this reason, in the decision of the case to which I have already alluded, I spoke of the learned judge who pronounced that decision, and the peculiar respect which is due to his opinion, in the decision of such a question. Since that decision, Chief Justice Taney has pronounced deeds of this description to be valid. We have, then, the opinion of the three oldest lawyers in our State, (speaking rather as witnesses than as jurists,) whose localities, during their unusually long professional lives, enabled them to say with some confidence, that “whilst they were at the bar, it was generally understood, and in their experience as members of the bar, they had never heard it doubted, that deeds like the present were valid in this State.” We have also the further fact made known to us, that in the various periods of great commercial distress, deeds of this description were very common, were approved of, and so far as we can learn, were never contested in this community. This communis opinio, then, has been made “the groundwork and substratum of practice;” and the case before us, is one of the cases spoken of by a learned judge, in 3 Maul. & Sel., 316, as evidence of what the law is, and evidence, too, which our courts must regard, or they will deprive our citizens of much that is valuable law. Of this, there is very much, not to be found in our volumes of reports, and not there simply because it was never formerly doubted, but for which we must depend upon “experience and traditionary knowledge.” Others, however, may choose to think and reason quite differently, and because our reports furnish us with no express adjudication, may conclude, that the question is to be regarded as res nova, and being so, it must, they would tell us, be settled upon principle. Perhaps, however, it would be difficult to refer to any legal principle which would authorise a court to deny the validity of such deeds, unless it would choose to make a law, which will take from the citizen the common law right of the debtor, to settle the claim of one creditor, leaving unsatisfied that of others. Even the learned judge, with whose opin — 506 — ion we are furnished in 1st Select American Cases, 73, (and which is treated as the leading case upon this subject in this country,) while he evidently is not partial to such deeds, and declares, that it is difficult at a glance to reconcile the mind to a decision in support of these conditional assignments in any case, is constrained to admit, that it is not easy to point out a defect in the argument by which they have been sustained, and declared the deed to be valid. An attempt was formerly made, to distinguish between preferential trusts and preferential payments, in dealing with those deeds: but this mode of assailing them, seems now to be abandoned. It is said, that such deeds practise upon the hopes and fears of the creditor, and put the property beyond his reach, except on terms prescribed by the debtor. For such reason, deeds of this description are to be declared void in Maryland, “ although,” in the language of Chief Justice Gibson, “the immense amount of property held by the title, would make it dangerous to pause as to the validity of them.” If, to use the language of the objection, the hopes and fears of all the creditors are practised upon with success; if all of them assent to the terms prescribed by the debtor, then it is universally conceded, that the deed is valid; that neither creditor nor debtor can object to it. And yet, if only one creditor, (no matter how trifling in amount is his claim,) refuses thus to be practised upon, and will not assent to the terms of the deed of trust, he may object, and by objecting, may deprive all the other creditors, (though to a vast amount,) of the fund to which they have consented to look, and insist upon being permitted to look, for their just and undisputed claims. This right of objecting is confined to the creditors, who are not parties to the deed; and if admissible, upon what ground can a similar attempt be resisted, to vacate a mortgage to any of the creditors, if it was prescribed by the debtor as the condition of the deed, that a considerable credit should be given, after the debts were, by the terms of the original contract, due? The debtor might have conveyed the same property in trust, — 507 — to pay every creditor, by name, every debt but that of the objecting creditor; and to such a deed the latter could make no objection, but because the deed enabled him, if he chose, to make himself a party, he acquires by his refusal to be a party, a right to deprive all others of the benefit of it. Surely this cannot be, because his hopes or fears were practised upon. It is certain, that he is not the person to complain of any wrong done to the other creditors. It is an objection to such a deed, that the terms aroprescribed by the debtor; yet oftentimes the creditors, themselves, prescribe the terms. Then, too, would the deed be void? By such a deed, the debtor, instead of placing his property out of the reach of his creditors, deprives himself of all control over it; puts it out of his own power to waste it; while creditors, who, perhaps, have not as yet instituted suits, are seeking to obtain judgments against him. Even the creditors who have refused their assent to the terms of the deed, have an interest in the trust fund, and in a court of equity can compel an administration of it. We sometimes, indeed, are told, that men in failing circumstances, are under a moral obligation to distribute their property equally among their creditors. Now granting this to be true, it may furnish a reason for changing the law, which it must be admitted allows them to pay one creditor, and to leave another unpaid: but the courts are not to enforce any such obligation. But in what school is this morality taught? It must be the system of some Shyiock ! It cannot receive the deliberate sanction of those, who claim a right, to believe, that there is some little difference between a heartless creditor, who, in making his bargain, profits by the necessities of his debtor, and gets every advantage which those necessities enable him to obtain, and the noble-hearted benefactor, who, in aiding his debtor in his difficulties, seeks no gain, and could obtain no reward, save only the luxury of doing good. There are, it is true, objections to this right of a debtor, when in failing circumstances, to prefer one creditor and postpone another; but they are of a very different character, and it is not for courts to say what — 508 — weight they shall have with those, to whom alone they can be addressed. Equality, too, it is sometimes said, is equity. Without stopping to enquire whether this, which is called a maxim of equity, is not sometimes misunderstood, it is sufficient here to say, that if it be a maxim of equity, it is not a maxim of law;—and we are now in a court of law. The rule of law which has the sanction of the community, is: “ Vigilantibus non dprmientibus, leges subveniunl” A maxim n,ot very favorable to those, who, in such cases, are offered, but refuse to take, the dividend which others agree to accept. When such a case occurs in equity, then the maxim of equity, applicable to it, will be: uJEquitas sequitur legem.”- If our courts of law or equity be authorised to set aside such arrangements as these, then let the law from which such authority is derived, be produced. An arrangement such as this, in which nothing is done but the adjustment of bonaJide claims, to the satisfaction of both creditor and debtor, cannot be malum in se. Surely it cannot be questioned, that every man who has a legal capacity to make a contract, has a right to dispose of his own property in satisfaction of debts which he honestly owes; unless the arrangement whiph is made, be forbidden by some law of the land:—not a law of any court’s enactment. This prohibition is not to be found in the common law. For the power which, in this case, the court is required to exercise, it seems to be admitted, that there is no legislation, unless it be found in the statute 13ih Elizabeth, or in our insolvent laws. The statute of Elizabeth, unquestionably does not take from the debtor his common law right, to prefer a particular creditor, or class of creditors, to others: it does not interfere with the legal right of the debtor to pay, or secure the payment, of the last cent which he ov/oo to one creditor, before he makes any payment to another. It does not annul every conveyance which may have the effect to hinder and delay other creditors, or acts done with that intent. Hence the decision of the court in the case of Holbird and Anderson, 5 D. & E., 235. And also in 3rd Maul. and Sel., 372. See, also, Newland on Con — 509 — tracts, 381, (1st Am. Ed.) 2nd Starkie on Evidence, 494, (7th Am. Ed.,) for expositions of this statute. For acts which hinder and delay creditors: See ls¿ Select American Cases, 80. 1 Smith’s Select Cases, 11, 12. Any fi.fa., which one creditor may issue, or a mortgage, which is given by a debtor, will probably have the effect to binder and delay other creditors. I shall not examine the various supplements to oar insolvent law, declaring under what circumstances a preference given by an insolvent applicant, to particular creditors, shall be void. These laws do not interfere with the common law right of debtors, in general, to give a preference; but are restricted to those insolvents, who besides being insolvents, apply for the benefit of the insolvent law. The various supplements to the act of 1805, furnish an answer entitled to considerable weight, in favor of the validity of the deeds, such as we are speaking of. The act of 1834, chap. 203, sec. 1st, relates to persons, who, at the time of executing any deed whatever, and with intent to prefer any creditor, shall be hopelessly insolvent.—“when such insolvent” shall have no reasonable expectation of being exempted from liability, or execution for his debts, without applying for the benefit of the insolvent laws, and afterwards becomes an applicant. In cases like this, the deeds and preferences are only declared void: “provided the creditors shall appear not to have had notice of the condition of insolvency of said debtor.” All these supplements are legislative expositions, of the supposed defects of the then existing law. How absurd is all this legislation, if it be already the law of this land, that no insolvent debtor, whether applicant or not, can make such arrangement with one or more of his creditors? Surely the act of 1834, embraces conditional, as well as absolute assignments. An objection derived from our insolvent system, is, that in those conditional assignments, the debtor prescribes terms more favorable to himself than the insolvent law offers to him, upon surrendering up all his property. It would be difficult to prove, that the debtor, himself, always — 510 — prescribes to the creditor, the terms of the arrangement; and it will scarcely be insisted, that the creditor ought not to be regarded as a free agent, at liberty to reject, as well as to accept of those terms. It would seem to be the-regular order of proceeding, first, to execute the conditional instruments, and after-wards, those which are absolute. The terms of the deed may be, and no doubt often are insisted upon, by the creditors. In such cases is the deed valid, and yet otherwise, if in truth the debtor, and not the creditor, proposes them? But the terms are more favorable to the debtor, than those which our insolvent law offers to him. Be it so. And can this furnish any reason for declaring an arrangement to which both parties consent, to be void? Was it ever understood, that our insolvent system was designed to prevent debtors from arranging with their creditors, except upon less favorable terms than those which the insolvent laws offered to the former? The insolvent law is made for the relief of persons who are unable to pay their debts, and cannot get from their creditors better terms than it offers to (hem. If this notion be correct, then the condition of an unfortunate debtor would be deplorable indeed, if there were no insolvent laws. Then his creditors could not be merciful to him, and however disposed, could not release their claims, upon the surrender of his property. The insolvent law only subjects to the payment of his debts, property which the debtor afterwards acquires by gift, devise, &c.; whereas, if no insolvent law existed, the law of the land would make property acquired in any way by him, so long as he lives, answerable for his debts. Will it be argued, that with, or without any insolvent law, creditors may not, if they please, offer to their debtors, terms more liberal than it is in the power of the legislature to offer them? Every creditor is at liberty to refuse to be thus merciful to his debtor;—but if he chooses to be so, what right have other creditors to object to it? In the very conclusive argument which has been submitted by the counsel for the appellee, we are furnished with late English decisions, which shew, that these arrangements “arc — 511 — very common;” and it is considered by the courts, “that it would be very injurious to disturb them;” that “such a deed ought not to be avoidable, by any particular creditor not excluded from the benefit of it;” and this was declared by the English judges, although reminded, that the condition annexed to the assignment, might “ compel the creditor to accede to a composition, which the bankrupt laws could not force him to do.” See 'The King vs. Watson, 3rd Price, 6. These things were said in a country which has a bankrupt system, which is designed to force an insolvent trader to surrender up his property for the benefit of his creditors; and which, in cases of bankruptcy, admits no right in the bankrupt, under any circumstances, to prefer one, and postpone another creditor. If this be the law in a country, which values highly its bankrupt system, a fortiori, must it be the law here, where men are permitted, but never compelled by the law, to seek the relief which our insolvent laws offer to them. I have however thought it best to rely, upon what I insist has been from time immemorial, our own understanding of our own law upon the subject, rather than upon any decision, in regard to the validity of such conditional assignments, expressed elsewhere. Entertaining, myself, no doubt, that, such instruments have always been considered valid in Maryland; believing that now to decide otherwise, would destroy the title to much property which has been purchased, and the title to which, depends upon the validity of deeds of this description, I cannot feel over-curious to know, what would be the decision of this question, if it were to be decided elsewhere. In the course of the last half of a century, many periods of great commercial embarrassment have been known in this State, and many deeds like this have been executed. In most arrangements like this, there will be some creditors, who will be dissatisfied with terms of which others approve; and if there had been any distinguished lawyer of former days, who doubted the validity of such assignments, those doubts, and those dis-satisfactions, would have given rise to litigation, which could only have been determined by a decision of the court of last resort. — 512 — I shall dispose of the subject with a remark, which has been met with:—“Yastly important it is,-to the well-being of this community, that in the decisions of our courts, this ancient and irádiiiondry knowledge of the law, should not be lost sight of; and that our judges be not at liberty to select at random, from American, and recent English reports, the doctrines that may suit their momentary fancy.” I am for an affirmance of the judgment. Chambers and Sf'ence, J., concurred. Martin and Frick, J., dissented. Dorseí, 0. J.,- did not sit in this cause. JUDGMENT AFFIRMED.