American Exchange Bank v. Inloes

Mason, J., delivered the opinion of this court. We are of opinion that the question of the validity of the deed of trust from the Messrs. Turnbull to Inloes, is properly presented on this appeal. The objection raised by the appellees to the present proceeding, namely, that the court of equity having assumed jurisdiction over the subject, has thereby ousted the court of law of the jurisdiction which it now seeks to exercise, cannot be sustained. The equity proceeding which has been set up as a bar to the present action, does not propose to assail the deed of trust, but on the contrary, it rests upon the assumption that the deed is valid, and was intended merely to invoke the aid of a court of equity to carry out and enforce the trusts — 388 — contemplated by said deed. The present proceeding is based upon the contrary assumption, namely, that the deed is null and void; the objects, therefore, of the two proceedings being entirely opposite in their character and purposes, cannot be said to conflict with each other. And further, to this chancery proceeding the plaintiffs in this action were no parties, and therefore they should not be bound by it, even if it had .contemplated in its range the exigencies of their case. The appellants in the court below offered two prayers, each .designed to present to the mind of the court the invalidity of the deed of trust. Both were rejected. The first prayer assigns a number of reasons why the deed should be vacated, and it is now urged by the appellee that if any of those several reasons should not constitute a legal ground for declaring the deed void, it was the duty of the court to reject the prayer iq its entirety, notwithstanding it should appear that the deed was void for some ope, or more, of the reasons assigned, In this view we do not concur. These several legal propositions should be treated as so many'separate prayers, and if one presented a valid objection to the deed, it was error in the court to reject it, It was not proposed by the prayer that all the several objectiops urged to the validity of the deed should concur, in order to make the deed void; and the prayer would have sufficiently raised the point of the viciousness of the deed upon any ground, if no particular reasons at all }md been assigned in the prayer itself for vacating it. Is the deed of trust void or not, is the question to be determined on this appeal. If void for any reason, it interposes no impediment to the appellants’ right tp recover in this action, but, on the contrary, if valid, the plaintiffs have no case in court. Although it has been more than once decided in Maryland that a debtor, by the common law, and apart from our insolvent system, may, by assignment of his property, or by payment, secure one creditor to the exclusion of others; yet such a provision in a deed of trust is only permitted by a court of equity, but so far from commending the transaction to the — 389 — court as one of honesty and fair dealing, should rather throw a cloud of distrust upon it, and where such a preference is followed up by other provisions, equally suspicious in their character, the court will have little difficulty in discovering such a fraudulent design on the part of the debtor, as to render it imperative upon them to vacate the deed. The present deed creates preferences in favor of particular creditors, to the exclusion of others, and in addition provides as follows, viz: Third. That said “Inloes, his executors or administrators, shall, at his discretion, sell as aforesaid, all or any part, or parts, of said goods, wares, merchandise, chattels and effects, by public or private sale, and by wholesale or retail, or in parcels, as may by him, as to all or any portions of said property, be deemed eligible, and it being understood that said property may be gradually sold in the manner and on the terms in which, in course of their business, said Turnbull & Co. have sold and disposed of their merchandise. “Fourth. It is further as aforesaid declared, that said Francis H. Inloes, his executors or administrators, may, at their best discretion, appoint and employ any agent, agents and clerks, for selling as above provided, at such compensations as the said trustees may deem proper, and causing such sales to be made in any store or warehouse that from time to time, as he may see fit, he may rent and have occupied. “Fifth. It is further declared as part of the trust of these presents, that the said Inloes, or his executors or administrators, shall not, as trustees aforesaid, or in any matter of or relating to this trust, be deemed in any wise liable as for any violation of said trust, or as for any omission or neglect, save only for their own personal, and actual and wilful wrong or default.” There is no express provision in this deed that the trustee shall sell on credit. The right to do so, however, might undoubtedly be exercised under the power conferred by the deed, “ that said property may be gradually sold in the manner and on the terms in which, in course of their business, said Turnbull & Co. have sold and disposed of their merchandise,” — 390 — We do not wish to be understood as pronouncing the present deed void upon the isolated ground alone of its empowering the trustee to sell upon credit. We do not deem it necessary to pass expressly upon that point. Until latterly deeds of assignment containing such a provision have been held generally not to be thereby vitiated, on the ground of hindering and delaying creditors. But very recently a different doctrine has been established by the Court of Appeals of New York, and so far as that State is concerned it may now be said to be settled, that a deed of trust containing a clause conferring upon the trustee or assignee power to sell on credit, will not be sustained. For this principle the very cogent reason may be assigned, that a debtor cannot, by the creation of a trust, avoid the obligation of immediate payment, or extend the period of credit, without the assent of the creditor. Nicholson vs. Leavitt, 2 Selden, 510. Barney vs. Griffin, 2 Comstock, 365. We are not aware that this question has ever been expressly brought to the mind of our own Court of Appeals, and passed upon by them. In the case of Beatty vs. Davis, 9 Gill, 211, the deed of trust, the validity of which was the question involved on the appeal, contained the provision that the trustee should have power “to sell the said real and personal property, either at public or private sale, and upon such terms and notice as he may deem most expedient, &c., and in case he shall deem it necessary for the purposes of this trust to mortgage the said real estate or any part thereof, he is hereby invested with full power so to do.” This deed was sustained. It might appear, at first view, that the power to sell upon such terms as the trustee might think proper, was equivalent to an authority to sell upon credit, and therefore our Court of Appeals may be regarded as having sanctioned such a provision in deeds of trust. But in the case of Macham vs. Stearns, 9 Paige, 398, the trustee was directed by the deed to sell the trust property at such reasonable times as should seem proper to him; and in that case, though the deed was sustained, yet it was held that this did not authorise him to sell at retail and on credit: and it is by no means impossible that our own — 391 — court, in Beatty vs. Davis, might have said, if the question had<- been directly brought to their view, that they did not regard the deed in the case as conferring the power to sell on credit. But omitting the further consideration of this point, (which we repeat we do not wish to be understood as deciding,) we regard the deed now before us as void upon another ground. It expressly empowers the trustee at his discretion to sell the property covered by the deed, gradually, in the manner and on the terms in which, in course of their business, said Turnbull& Co. have sold and disposed of their merchandise. Without adverting to other objectionable, if not fatal, provisions in this deed, the one to which we have just referred is sufficient, in the judgment of this court, to render the deed null and void as against creditors. It simply seeks, through the instrumentality of a trustee, to provide for carrying on the business of the concern in the same manner in which it had been before conducted, and for an indefinite period, free of all control or interference on the part of creditors. Surely, if such a provision in a deed is not calculated to hinder and delay creditors, we are at a loss to know what could have such an effect, short of a conveyance in trust for the benefit of the" grantor himself. A debtor cannot thus postpone his creditors to an indefinite period, without their assent. A conveyance W'hich thus attempts to deprive creditors of their just rights to enforce their claims against the property of their debtor, by placing it beyond their control, for an uncertain and indefinite period, must be regarded, in conscience and law, as a fraud.This subject has been very fully considered by this court in' the case of Green & Trammell, vs. Trieber, 3 Md. Rep., 11, and the general principle distinctly announced, that the law will not tolerate any hinderance in assignments for the benefit of creditors, beyond what may be necessary for the purposes of the trust. There are cases, it is true, in which deeds of trust for the benefit of creditors, have been sustained as valid, which contain provisions for- the continuance of the business of the — 392 — debtor or grantor, either by himself or by his assignee or trustee. Janes vs. Whitbread, 5 Eng. Law & Eq. Rep., 431. Nunn vs. Wilsmore, 8 Term Rep., 521. Cunningham vs. Freeborn, 11 Wend., 240. De Forest vs. Bacon, 2 Conn., 633. Kendall vs. Carpet Company, 13 Conn., 383. Hitchcock vs. Cadmus, 2 Barb. S. C. Rep., 381. Foster vs. Saco Company, 12 Pick., 451. Woodward vs. Marshall, 22 Pick., 468. Ravisies vs. Alston, 5 Ala. Rep., 297. But it will be found, on examination of those cases, that most, if not all of them, rest upon the important principle, not applicable to the present case, that the stipulation in question was designed more effectually to promote the interests of the creditors, and not intended for the benefit of the debtor; or, where it was intended to be ancillary to the winding up of the debtor’s business, as where he had on hand at the time of the assignment unmanufactured material in the way of his business, or the like. In the case of Janes vs. Whitbread, 5 Eng. Law & Eq., 431, the deed which was of this character, was sustained .expressly upon the ground, that the carrying on the trade being ancillary to winding up the affairs of the debtor, did not avoid the deed. And in the present case, if the grantors had been manufacturers of oil-cloths, carpets, and the like, we would not be prepared to say that a deed containing a provision authorising the assignee, or the debtors themselves even, to work up any unmanufactured or raw material on hand at the time of the assignment, would vitiate the assignment. But such is. not the fact, and as this case at present stands, we can regard it in no other light than an attempt to place the assignee in the place of the debtors, for the purpose of carrying on the latter’s, business as it had been previously conducted by them before the deed of trust, without any special benefit to be derived thereby by the creditors, and without limitation or restriction upon the trustee. We will not attempt a review of the numerous authorities which-wmuld bear upon the questions involved in this case. As far as cases have gone in sustaining voluntary deeds of trust, few, if any, can be found, which have advanced princi — 393 — pies sufficiently comprehensive or flexible to embrace a case like the present. The appellant’s first prayer asks the court to pronounce the deed void, and to instruct the jury so to find. This prayer was improperly rejected. The deed appearing to be void upon its face, it was the duty of the court so to pronounce it, and there was nothing left for the jury to find. Having, as we suppose, disposed of the whole case, by declaring the deed void, we deem it unnecessary to pass upon the appellant’s second prayer, or upon any other of the questions raised in the course of the argument. Judgment reversed and procedendo awarded.