Haugh v. Maulsby

Bryan, J., after stating'the case, delivered the opinion of the Court. A careful consideration of the testimony convinces us that the deed in question was executed for the purpose of defrauding the creditors of Jesse H. Haugh, one of the grantors; and that the grantee participated in the fraudulent scheme. It would answer no good end to discuss the details of this transaction. But it is necessary for us to. state the reasons for the opinion which we hold on another question in the case. By the Act of 1880, chap. 172, sec. .2, it was provided that when the bond of the preliminary trustee of an insolvent debtor was- approved, all the insolvent’s property (with the exceptions mentioned in the first section) should vest in him ; and precisely the same provision was made in reference to the permanent trustee when his bond was filed and approved. The devolution of title was to take place from the preliminary to the permanent trustee without the slightest change in any respect, as soon as the bond of the permanent trustee was filed and approved. 'In the present case as the bond of the permanent trustee was.never approved, the title to the insolvent’s [427] property always remained in the preliminary trustee. It happens that both trusteeships are represented by the same individual. When, therefore, Charles E. Eink was made a party defendant, every interest in the property in controversy was represented before the Court. The grantors and grantee represented every interest which could be passed under the deed; the preliminary trustee held for the benefit of creditors every interest in the property, which the creditors could claim for the payment of their debts, that is to say, the entirety if the deed should be adjudged fraudulent; and the creditors were present actively urging their own claims. When all the parties interested in a controversy are before a Court of equity, there cannot possibly be any reason why a decree should not be made determining their rights as they appear in the case. Although the trustee held the title to the property for the benefit of the creditors, yet it must not be forgotten that the creditors are the cestuis que trust, and that they have an undoubted right at all times to appeal to the Court for the protection of their own interest. It has been frequently stated that the trustee is the person appointed by law to represent creditors, and to assert their claim to property fraudulently conveyed away by the insolvent. Undoubtedly this is true. But the trustee, when made a party defendant in equity, can as efficiently maintain his rights, as if he were complainant. In Gibson vs. McCormick, 10 Gill & Johnson, 101, it was held that a decree might be passed in favor of one co-defendant against another, and the Court recognize it as familiar practice. And moreover the right of equitable claimants to file a bill to protect their own interest could not be denied without infringing some of the best settled principles of practice. In Swan vs. Dent, 2 Md. Chan., 111, a bill was filed to set aside a deed fraudulently made hy a grantor who after-wards applied for the benefit of the insolvent laws, and the trustee was made a defendant. The Chancellor set [428] the deed aside, amj. the decree was affirmed in 7 Gill, 278. In Jamison vs. Chesnut, 8 Md., 34, it was held that the trustee should have been made a party to a suit in equity to set aside a fraudulent d_eed made by an insolvent; hut it was not said that it was' necessary to make him a complainant. In Syester vs. Brewer, 27, Md., 288, the Court speaks of it as an undoubted right of the creditor, to file a hill to set aside a fraudulent conveyance made by a debtor, who afterwards went into insolvency. No one doubts that the permanent trustee might file a hill to set aside this deed.’ If he is brought before the Court as co-defendant with the grantors and grantee, he can have the same relief against them, and consequently he is' not in the slightest ■degree prejudiced by such a proceeding.’ The title of a preliminary trustee is given by the statute in the same terms as those which give title to the permanent trustee; ■and consequently he is as competent to represent the estate, when made a co-defendant with the parties named. Eink is described in the proceedings as permanent trustee in insolvency ; hut as his title' in such capacity never 'vested, this designation of him must be regarded as a mis-description. The bill intended to implead him in • the capacity with which he was invested by the insolvent proceedings; that is to say, as preliminary trustee. This variance is too trivial to have any effect in the case. (Decided 14th March, 1888.) In our opinion the decree of the Circuit Court was in all ■respects correct. We think that the title to the property, on the vacation of the deed, vests in the preliminary trustee; and that it will devolve on the permanent trustee when he files an approved bond. Decree affirmed, with costs in both Courts.