Maughlin v. Tyler

Miller, J., delivered the opinion of the Court. This suit was brought against three persons as partners, for lumber sold to them by the plaintiff. There was no dispute as to the claim sued on and whatever may have been the relations of the defendants inter sese it was clearly proved, and in fact conceded, that they were partners as to third parties, and that the plaintiff dealt with [549] and trusted them as such. The defence was rested entirely upon a release executed by the plaintiff in pursuance of the terms of a deed of trust for the benefit of creditors, made by one of the defendants. This deed conveys “all the lands, tenements, goods and chattels, dioses in action, book-accounts, bills receivable, moneys, and other matters and things whereof the” grantor “is seized or possessed, or in any manner interested in or entitled to,” and exacts releases, and creates a preference in favor of the releasing creditors. It is proved the other defendants not only did not assent but objected to its being made. The release under seal signed by the plaintiff and others in consideration of the preferences given by the deed, is to the effect that the plaintiff does £ £ hereby release the said ’ ’ grantor “ from all claims or demands he may have against him, and. agrees to accept of such sums of money or dividends as may accrue to him under the deed of assignment, in full satisfaction of said claims or demands.” The plaintiff admitted that at the time he signed this release, he had no other claim of any kind against the defendants, or any one of them either in their joint or individual capacity, except the one sued on. Is this release a bar to this action? In our opinion, and for the reasons we shall briefly state, it is not. It has been settled by a series of decisions in this State, that a deed of trust for the benefit of creditors, creating preferences and exacting releases, is void unless it appears on its face, to convey all the property of the debtor, and where such a deed is executed by partners, it must so appear to convey both their partnership effects, and their individual estates. Maennel vs. Murdock, 13 Md., 177; Citizens’ Ins. Co. vs. Wallis, et al., 23 Md., 173. In the case last cited, the deed was held void because it did not convey the individual property of the grantors. Here the deed also creates preferences and stipulates for releases, but conveys only the individual property of the grantor, [550] and does not in terms profess to convey partnership property. If these parties were actual partners inter sese and the terms of the deed should be regarded as broad enough to include the property of the partnership, still it was not signed by the other partners who were present at the time, but was executed against their protest, and in that case, even if it had professed to assign all the partnership property, the decided weight of authority is against the power of one partner to make such a disposition of the partnership effects. 1 Amer. Lead. Cases, (5th Ed.,) 551; Burrill on Assignments, secs. 68 to 86. But assuming these parties were not actually partners inter sese and that the grantor in this deed owned in his own right all the property of the ostensible partnership, and that the terms of the deed embrace it, still as we have said, they occupied towards third parties the relation of partners, and this deed is set up as against the claim of a creditor of this ostensible firm. Occupying that relation, the deed to be .operative as against such a claim must convey the individual property of all the ostensible partners. Claims of creditors whom the law regards and treats as creditors of a firm, cannot be affected by such a deed, unless it professes to convey the individual property of all the parties'whom the law regards and treats as partners with respect to such creditors. Here the deed was not signed by the other ostensible partners, and it cannot for a moment be contended that it conveys their individual property. Whether therefore these defendants were partners inter sese, or only such as to third parties, we are clearly of opinion this deed is inoperative and void as to this claim of the plaintiff. But there is another fatal defect in this deed. It authorizes the trustees to sell, either at public or private sale, and on credit, and to make the sales in part, or in whole immediately, “or to retain the property to await a rise in price, or a more favorable market as they may think most advisable.” It has been settled beyond controversy, that [551] in a deed of this character no provision which is manifestly calculated to hinder and delay creditors can be tolerated. Thus in Inloes’ Case, 7 Md., 340, and 11 Md., 173, a deed like this, conveying a stock of goods and merchandise in a store, contained a provision empowering the trustee in his discretion to sell the goods “ gradually, and in the manner and on the terms in which, in the course of their business, the grantors have sold and disposed of their merchandise,” and it was held that this provision was fatal to the instrument, and that it could not he aided by parol proof, that the clause was inserted for the benefit of creditors, and was designed to, and did, in fact, operate to their advantage. The clause in the deed now before us is far more objectionable that this. The power to retain the property to await a rise in price or a more favorable market, clearly places the property of the debtor beyond the reach and control of his creditors, “for an uncertain and indefinite period.” If such a provision is not calculated to hinder and delay creditors, it is hardly possible to conceive of one that is. The clause in the deed in Maennel vs. Murdock, which was held as not unreasonable, empowered the trustees to sell “whenever they shall think proper, and most conducive to the interest of the trust.” But a general sound discretion like this to he exercised in the interest of the trust; and in the exercise of which the direction of a Court of equity may be invoked, is a very different thing from an express power to retain property to await a specified event which can only occur at some indefinite future period. A “rise in price” may not take place for many years, if it ever does, and until it does the trustees are expressly authorized to retain the property. A debtor cannot thus postpone his creditors to an indefinite future period without their assent. In view of what this Court has so frequently decided on this subject, it is, in our judgment, quite impossible to hold that this provision does not render the [552] deed fraudulent in law and void ; and as was said in Citizens’ Ins. Co. vs. Wallis, “the deed being void, the releases must fall with it, the consideration upon which they were executed having wholly failed, they were inoperative.” (Decided February 22nd, 1878.) Having thus disposed of the sole defence relied on by the defendants to defeat this action, we find the rulings of the Court below free from material error, and the judgment must therefore be affirmed. Judgment affirmed.