Grove v. Rentch

Bowie, J., delivered the opinion of this Court. The points in this cause turning somewhat upon tho frame of the bill, as well as its matter, it is necessary to ascertain the material allegations. The hill shows that the appellant, the complainant below, on the 26th of September, 1859, was appointed trustee of Samuel Lynch, an insolvent petitioner, was duly qualified, and the petitioner executed and delivered the usual deed of all his property to the trustee. It is further averred, that the petitioner being engaged in boating on the Chesapeake and Ohio Canal, was, in 1858, the owner of two boats, eleven mules, gear, harness, &c., and being greatly embarrassed, borrowed of Andrew Bentch, the appellee, the sum of $512.61, for which he executed to Bentch a bill of sale for the said eleven mules and a canal boat, the “Mehaffy,” which veas executed ie> secure the payment of the money and designed and intended by the parties thereto, at the time of its execution, as and to have the operation of a mortgage, although it teas absolute on its face. That It was contemplated at the time that Lynch should repay the money, and if it became necessary for Bentch, in order to make the money, to sell, he should account to Lynch for all or so much as remained after payment of the principal sum and interest. That the property included in the hill of sale was of the value of two thous- and dollars, and Bentch, understanding that the bill of salo was intended as a mortgage, permitted the property to remain in Lynch's possession, and allowed him to usa [376] and control it as his own until after his application for the behefit of the insolvent laws. It is further alleged, that at the time of executing the bill of sale, Lynch was largely indebted to sundry persons in Allegany and Washington counties, and after the execution, but before it was recorded, several of the creditors of Lynch obtained judgments and levied executions on the property conveyed, without knowledge of the bill of sale, while the property was in possession of Lynch, and which levies are still subsisting and unsatisfied. The bill further charges, that after Lynch applied for the benefit of the insolvent laws, Rentch took into his possession the property mortgaged, ( except some of the mules which had died,) and claimed the same as his absolute property, and afterwards sold a part thereof for the sum of nine hundred dollars, and refuses to account with the insolvent trustee, claiming the absolute property in the chattels aforesaid, which pretence and claim is to the manifest wrong and prejudice of the creditors of Lynch, and contrary to the true intent and purpose of the bill of sale. Wherefore the complainant prayed the bill of sale maybe declared to be what in fact it was intended to he, a mortgage for the security of the money due and owing to the mortgagee, Rentch, and that he may account, &c., and for other and further relief. The respondent’s answer denies all the material allegations of the bill, particularly that the bill of sale was intended to secure money loaned, but avers it was an absolute deed in consideration of money paid as therein set forth. A general replication was filed, commission issued, testimony taken and returned, and the bill upon final hearing dismissed, from which decree this appeal is taken. The appellee’s objections are first-to the form of the bill, insisting it is wanting in such material averments as are necessary to give jurisdiction to a Court of Equity. That [377] neither fraud, surprise, accident, or mistake, is alleged ; “it is simply a bill to change the character of a legal and solemn instrument by parol testimony.” ' This is virtually a demurrer to the hill, and if well founded and taken in time would be unanswerable, for although relief can he had in equity against a deed or contract in writing, founded in fraud or mistake, still it is essential that the fraud or mistake should be alleged in the hill as the ground and object of parol proof. “It is essential, upon every principle of correct pleading, that that which gives jurisdiction to the Court should ho distinctly and substantially alleged.” 6 H. & J., 28. Watkyns vs. Stockett, Ibid., 445. Timms & Wife vs. Shannon, 19 Md. Rep., 312. It is not necessary, however, that the fraud or mistake should he alleged “in totidem verbis,” the charge may ho substantially made by stating the facts from which the fraud or mistake would be necessarily implied. Courts of Equity derive their jurisdiction from the facts alleged, not from the terms used in setting out the fact. Pleadings in equity are not franqed with the same precision and technical exactness as at law. Facts are often indirectly alleged or expressed by implication. 19 Md. Rep., 375. 14 Md. Rep., 73. In this case the allegations are sufficient to give jurisdiction to a Court of Equity, and if proved, to entitle the complainant to relief. The gravamen of the hill does not consist in the omission of the parties to the bill of sale, to execute a mortgage instead of an absolute bill of sale, hut that having executed an absolute conveyance with the express understanding that it should be only nominally, not actually so, the grantee, when called to account for the proceeds of the property sold by him, should repudiate the verbal agreement. The alleged fraud arises from conduct subsequent to the [378] execution of the instrument. The answer insists that the bill of sale was absolute, and refuses to account on that ground. The general rule that parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written instrument, is confined to the parties to the instrument, “as they alone are to blame if the writing contains what was not intended, or omits that whieh it should have contained. It cannot affect third persons, who, if it were otherwise, might be prejudiced by things recited in the writings contrary to the truth, through the ignorance, carelessness or fraud of the parties ; and who, therefore, ought not to be precluded from proving the truth, however, contradictory to the written statements of others. Green-leaf Ev., sec. 279. 6 Md. Rep., 57. 2 Gill, 409. The appellant is in contemplation of law a stranger, he takes “virlute officii,” in the “post,” for the benefit of the creditors of the insolvent. “The trustee becomes the mere officer of'the law, designated not by the insolvent, but by the Court, to effect what the law designs, and nothing more. Waters vs. Dashiell, 1 Md. Rep., 471. The effect of the. proceedings in the Insolvent Court, was to throw upon the appellant all the right, title, interest and estate of the petitioner, in law or in equity, in the pro-perty or effects which he owned, including the equity of redemption in any property mortgaged or pledged, whether returned in the schedule or not, and to impose on him the duty of prosecuting and recovering all sums due to the petitioner for the benefit of his creditors. Alexander vs. Ghiselin, 5 Gill, 138. 1 Md. Rep., 472. The testimony, independently of that of the petitioner, Lynch, in our opinion, sustains the allegations of the bill. There is intrinsic as well as extrinsic proof that the consideration of the bill of sale was grossly inadequate. It is shown that the instrument was executed when the grantor was harass [379] ed by creditors with a view to avoid their claims, with the express understanding the property should be reconveyed when the money was repaid. The grantor was allowed to retain possession of the property for nearly a year, and carry it into an adjoining county, if not out of the State, and was not dispossessed until he had actually petitioned. All these features combined, constitute the indicia of fraud, by which Courts of Equity are usually induced to grant relief. ( Decided February 18th, 1867.) In the interim between the execution of the hill of sale and its registration, some of the creditors of the grantor obtained judgments against him in an adjoining county, and levied upon a part of the property conveyed whilst in the grantor’s possession. These levies are still outstanding and unsatisfied. The power of the sheriff to sell is suspended by the proceedings in insolvency. The creditors can only have relief through the agency of the trustee. The property itself has been converted into money by the appellee. Under these circumstances, we think it is incumbent upon him to account for the same, the hill of sale should be considered as a mortgage, and the proceeds of the property, after satisfying the principal and interest due the mortgagee, up to the time of the account, should he paid to the appellant, the appellee to he charged with the interest from the time of the sale. Decree reversed and cause remanded for further proceedings, with costs to the appellant,