Willison v. First National Bank

Roberts, J., delivered the opinion of the Court. Whilst the parties defendant in this case are numerous, but one has appealed from the judgment of the Court below, and now seeks to have his legal rights determined by this Court. The record shows that one of the appellees, the First National Bank of Frostburg, on February 23rd, 1894, filed its petition in insolvency against William Parker and Josiah Parker, who were then and for many years prior thereto had been partners, trading as merchants, under the firm name of William Parker and Brother, at Eckhart, and also at Vale Summit, in Allegany County, and against the appellants and others, who are alleged to have obtained fraudulent preferences in their dealings with said firm. The proof shows that at the time of filing said petition, said firm was indebted to the petitioners in the aggregate sum of $1,545.00, as evidenced by five several promissory notes then overdue and unpaid, which had been endorsed to the petitioner by said firm, and been duly protested for non-payment. That being insolvent or in contemplation of insolvency and unable to pay their current obligations as the same accrued due, William Parker, one of said firm, executed and delivered to his brother-in-law, Jamesson, a deed of mortgage dated 23rd of February, 1894, and filed for record on May 4th, following, by which he conveyed to him all his real estate for the alleged consideration of $3,50°; $100 of said sum was retained by said Jamesson, with the concurrence of said Parker, to pay to that extent a larger indebtedness due said Jamesson. William Parker, at the time of the execution and delivery of — 208 — said mortgage, informed Jamesson that he was in financial difficulties and wanted the money to pay his debts, which, however, he did not do, but went out of the State to deposit $3,100 of said loan in a bank in an adjoining State, in the name of his wife. Nearly all of the several sums of money obtained by said firm and the individual members thereof, from the sales of their personal and real property and from Jamesson’s mortgage, have been applied by them in violation of the provisions of the insolvent laws of the State, as giving unlawful preferences and hindering, delaying and defrauding the creditors of said firm. The said firm being indebted as aforesaid, and also indebted to sundry persons in various sums of money, which they were unable to pay, on the 2ist of February, 1894, assigned and conveyed to the appellant all of its stock of goods in the store at Eckhart, for the sum of $2,555.00. Of this sum, when paid over, there was immediately returned by William Parker to the appellant the sum of $555.00, with the understanding that he was to apply the same in payment of three several notes of said firm, on which he was the endorser ; which was accordingly done. In December, 1893, said firm being indebted to Walter T. Parker, a son of Josiah Parker, the nominal member of said firm, in the sum of sixteen hundred dollars, sold to said Walter T., who was the clerk of said firm, their stock of goods in the store at Vale Summit, for the sum of $960.00, for the purpose and with the intent on the part of said firm to prefer the debt of said purchaser to the extent of $960.00. The record shows that after filing said petition and while said firm and the members thereof were insolvent, and after committing the several acts of insolvency hereinafter stated, William Parker, one of said firm, executed a deed of trust of all his property and estate, including his interest in said co-partnership, to Austin A. Wilson, for the benefit of his creditors ; which deed is dated February 23rd, 1894, but was not filed for record until the 4th day of May following. This deed upon its face recites that the grantor therein, William — 209 — Parker, is insolvent, and in the answer of said firm to said petition they admit that the said William Parker and Josiah Parker “ were partners in name only." On the'22nd day of February, 1894, the First National Bank .of Frostburg, one of the appellees, issued an attachment on original process, alleging that said firm had assigned, disposed of or concealed their property, or some part thereof; with intent to defraud their creditors, and the same was laid in the hands of the several parties who had received from said firm unlawful preferences as aforesaid, and did also attach the interest of said firm and of the members thereof in certain real estate mentioned in the sheriff’s return. The petition prays for subpoenas against the debtors, the. trustee and the preferred creditors, but none but the debtors, the appellant and Jamesson answered. At the trial below, the parties waived a jury trial, and submitted the issues raised by the petition and answers to the Court for adjudication on the law and facts, without the intervention of a jury. The appellant answered said petition and denied all knowledge of the several fraudulent preferences charged therein against the other defendants, and says that he admits the purchase by him from said firm of the stock of goods in the store at Eckhart, but denies that said firm was then insolvent, or in contemplation of insolvency, or that said sale to him was made with intent to delay, hinder and defraud creditors of said firm. He also admits that about the same time he purchased said stock of goods, and after he had paid the whole amount — $2,55 5.00 — of the purchase money due thereon to said firm, the said William Parker gave to him the sum of $5 55-00, and requested him to apply the same in payment of certain notes upon which he was endorser, and that he so applied said money. Upon the proof offered, at the hearing, the Court adjudged the said partners, both as individuals and as partners, insolvents, and appointed preliminary trustees; and further adjudged and decreed, “ That the payment by — 210 — the defendants of the sum of five hundred and fifty-five dollars to Andrew J. Willison, the appellant, and the transfer of the stock of the store goods at Vale Summit by the defendants to Walter T. Parker, and the payment by the defendant, William Parker, of one hundred dollars to Jacob S. Jamesson, were illegal preferences under the insolvent laws of Maryland; and that each and all of the same be and they are annulled and set aside, and said preliminary trustees or the permanent trustee or trustees, who shall be hereafter elected by the creditors, shall proceed to collect from said Willison and from said Jamesson said sums of .money, and shall take possession of said stock of goods of the defendant at Vale Summit, and hold the same as part of the estates, of said insolvent firm and said insolvents, and said Willison and said Jamesson are hereby directed to pay over said sums of money to said trustees.” The only exception in the record is to the action of the Court below, in granting the plaintiff’s prayers, and in rejecting the second, third and • fourth prayers of the appellant, who alone has appealed from the judgment of the Court below. It therefore becomes our duty to inquire in TjJfat respect, if any, the Court below has committed error by its action on the prayers. We do not see that the plaintiff’s third, fifth and sixth prayers even remotely affect the rights of the appellant, and have not been referred to in the argument before this'Court, we shall therefore treat the objection as having been waived. We will, however, remark that if it were necessary to pass upon them, we should say that they correctly declare the law applicable to the facts therein stated. No exceptions have been filed to any of the plaintiff’s prayers for want of evidence to sustain them, and after the careful examination which we have given to the evidence in the cause, we unhesitatingly say that the testimony set out in the record conclusively shows that every material allegation charged-against the defendants is satisfactorily established. The plaintiff’s first and second prayers set forth the facts — 211 — requisite to bring the case within the requirements of the Code, Art. 47, sec. 14, 22, 23, and correctly announce the law, which should govern in cases of this character, as decided by this Court in Castleberg v. Wheeler, 68 Md. 277, 279, and in Bowland v. Wilson, 71 Md. 313. The fourth prayer, referring to the first and second prayers for the facts therein stated, adds the further facts connected with appellant’s purchase of the store goods at Eckhart, and the immediate return by Parker to him of $555.00 to pay the notes, which he had indorsed for Parker, the same having been done by Parker when insolvent or in contemplation of insolvency, and with intent thereby to prefer and protect the appellant, then concludes that such payment was an illegal preference to the appellant, which should be set aside, and he be required to refund said sum to the insolvent trustees. This construction is fully sustained by the very terms of the statute supra, as well by the decision of this Court in Brown v. Smart, 69 Md. 331-32. We have nothing whatever to do with the conclusion on the facts reached by the Court below, sitting as a jury, but we do not hesitate to say that the record contains most ample proof of a deliberate effort on the part of Parker & Bro. to shield certain creditors in violation of the provisions .of the insolvent laws, and with intent to hinder, delay or defraud the general creditors outside the list of the favored few. It is scarcely necessary to give separate consideration to the plaintiff’s other prayers, as the principle pertaining to the first and second is in greater or less degree applicable to the remaining prayers. The First National Bank of Frostburg, before filing its petition, issued an attachment on original process, laying it as hereinbefore stated, the legal effect of which is ascertained and correctly declared by the terms of the seventh and eighth prayers, and is sustained by the decisions of this Court in Thomas v. Brown and Lowndes, 67 Md. 515; Buschman v. Hanna, 72 Md. 5; Dumler v. Bergman, 29 Atl. R. 826. (To be reported in 78 Md.) — 212 — The fact that Willison had no knowledge of the insolvency of Parker & Bro., or that they intended the payment to him as a preference, cannot avail to protect him under the provisions of the Code, Art. 47, sec. 22, which says that a merchant or trader, “ when insolvent or in contemplation of insolvency, executes a deed or conveyance giving preferences, creates a lien, making any unlawful preferences as therein stated, or otherwise gives sueh prefeipnces, &c., shall be deemed to have committed an act of insolvency, and by section 32, it is provided that in such cases the creditors can file a petition praying for the adjudication of insolvency, and pending the determination of the application for such adjudication, and pending any question of the .validity of any preference or transfer of any property with intent to hinder, &c., or to give an unlawful preference to any creditor, indorser or suretv, the Court shall issue a restraining order, &c., and when such adjudication has been made and when the Court shall have appointed a preliminary trustee, all the estate and property of the debtor shall be divested out of the debtor and devolve on the trustee, and by section 14 any such lien or preference shall be void.” This Court, construing the meaning and effect of the statutes in Castleberg v. Wheeler, 68 Md. 279, supra, says, “ The second of these prayers is based upon the theory that though the defendant was actually insolvent at the time of making payments and giving preferences, yet, if he honestly believed he would be able to go on in business, and with such belief he paid the debts without a design to give a preference, such payments were not fraudulent as against the-insolvent law, and therefore the verdict should be for him on the third issue. But the statute makes no such provision as is made the basis of this prayer. The defendant might have believed himself able to go on in business, with the indulgence of his creditors, though he might have known himself to be insolvent, and he might be’entirely honest in believing that he would be able to relieve himself of embarrassment by future successes. But that condition — 213 — of things would not deprive the creditors of the right to proceed under the statute. If the party proceeded against belongs to any of the classes of persons mentioned in section 143 of the statute, and being insolvent or in contemplation of insolvency (which means inability to pay debts, when due, in the ordinary course of business), make the, transfer or create the lien, which operates to give the preferences, he subjects himself to the provisions of the statute.” (Decided December 18th, 1894.) The appellant, by the granting of his first prayer, obtained quite as favorable construction of the law as he was entitled to receive, if not more so. The second, third and fourth prayers of the appellant were rejected, and we think the Court committed no error in thus disposing of them. The statute to which reference has been heretofore made, and the authorities heretofore referred to, sufficiently dispose of these prayers. After having exhausted their ingenuity in devising schemes by which they could escape the provisions of the insolvent law of the State, and having failed in accomplishing their purposes, the debtors resorted to a deed of trust, which was executed on the 23rd of February, 1894, but which was withheld from record until the 4th of May following. But this could avail nothing, since they had, prior to the execution of the deed, been guilty of acts of insolvency prohibited by the law. Riley v. Carter, 76 Md. 611; Pfaff v. Pragg, 29 Atl. R. 824 (to be reported in 78 Md.) There are questions in the record which we do not deem it necessary for us further to discuss, but from what we have said, it follows that the judgment of the Court below must be affirmed. Judgment affirmed with costs.