Diggs v. McCullough

• Decision Date: 09 January 1889
• Citation: 16 A. 453,69 Md. 592
• Parties: DIGGS ET AL. v. MCCULLOUGH ET UX.
• Court: Maryland Court of Appeals

16 A. 453

69 Md. 592

DIGGS ET AL. v. MCCULLOUGH ET UX.

Court of Appeals of Maryland

January 9, 1889

Appeal from circuit court, Baltimore county, in equity.

Suit by Charles F. Diggs, preliminary trustee of John G. McCullough David G. McIntosh, permanent trustee, and Charles F. Diggs in his own right, against John G. McCullough and wife, to set aside certain conveyances as in fraud of creditors of the said John. Decree for defendants. Complainants appeal.

Argued before ALVEY, C.J., and YELLOTT, BRYAN, MILLER, IRVING STONE, and MCSHERRY, JJ.

Charles Marshall, Thomas W. Hall, William H. Dawson, William A. Fisher, and Thomas B. Mackall, for appellants.

Bernard Carter, William H. Cowan, and John N. Steele, for appellees.

MCSHERRY J.

On the 22d of September, 1880, John G. McCullough and wife executed a deed conveying to Charles H. Slicer a farm lying in Baltimore county. The consideration set forth in the deed was "the sum of ten thousand dollars lawful money." On the 4th of June, 1881, Slicer conveyed to Mrs. Annie E. McCullough the same property. for a consideration stated in the deed to be "three hundred dollars, lawful money, and for other valuable considerations." In the spring of 1886 McCullough, being insolvent, made an assignment for the benefit of his creditors to his son George S. McCullough and Wilson Townsend. Proceedings in insolvency were thereafter instituted against him, and he was adjudged an insolvent. Charles H. Diggs was appointed his preliminary trustee. In that capacity Mr. Diggs, on the 13th of December, 1886, filed a bill in equity in the circuit court for Baltimore county, against McCullough and wife, attacking the two deeds referred to as fraudulent, and seeking to have them declared null and void. The defendants answered, denying all fraud; averring that the conveyances were made "for ample and adequate" considerations, which were "actually paid;" and insisting that the farm was purchased with the money of Mrs. McCullough, invested for her therein by her husband. Subsequently Mr. Diggs personally became a party plaintiff in the case, and at a later date Col. D. G. McIntosh, the permanent trustee, was also made a plaintiff. The circuit court dismissed the bill, and hence this appeal.

The two questions presented by the record are whether these deeds are fraudulent, and whether the appellants are entitled to assail them. These questions, though somewhat interwoven with each other, will be considered separately.

Mr. and Mrs. McCullough were married on the 24th of February, 1856. She was then, and for nearly two years previously had been, engaged in the dress-making business. She continued it until 1865 or 1866. According to her testimony, she realized large profits, which, after deducting her household and her business expenses, she placed in the hands of her husband, to be invested by him for her. Mr. McCullough put this money, as he received it, along with his own, to his credit in bank, checked upon it in the course of his business as a wood and coal dealer, and used it precisely as he did that which he earned himself. There was no promise or agreement made by the husband to repay to the wife the money so given by her to him. During the course of her examination, after she had testified that she gave this money, in various sums and at various times, just as she received it, to McCullough to invest for her as he saw fit, she was asked: "Was Mr. McCullough at liberty, from what you told him when you gave him the money, to use it, or such portion of it, as he saw fit, in his business, or not?" She answered: "I did not restrict him in any way at all." "What understanding, if any, or agreement, was there between Mr. McCullough and yourself, in reference to the money you gave him? Answer. No agreement whatever. He was to make the most of it in my favor. It was mine, and he was to make as much out of it as he could for me." It was decided in Bank v. Jenkins, 65 Md. 248, 3 A. 302, and in the still more recent case of Jenkins v. Middleton, 68 Md. 540, 13 A. 155, that under such circumstances as these the wife had no claim to the money so received by the husband from her. It ceased to be hers, and became his. Mrs. McCullough cannot, therefore, maintain the position taken in her answer, that the farm was purchased in the first instance with her money, and consequently belongs to her. Not long after their marriage Mr. McCullough began to purchase real estate, the title to which he took in his own name, though he alleges that he paid for it with the money received from his wife. He exchanged this for a part of the farm now in controversy, and for the residue of that farm he gave his notes, which were paid by him when due; and in this instance, also, he took the title in his own name. The farm was acquired in this way during the years 1861, '68 and '70. He purchased other real estate, of which he was likewise the ostensible owner. In September, 1880, he conveyed the farm to Slicer. He testified that he received from Slicer in payment $10,000 in bonds. These bonds he treated as belonging to himself, and included them in a statement of his assets made up to show that he was solvent in May, 1881. Upon his examination as a witness he swore that in May, 1881, he "owned seventeen thousand dollars in bonds; ten thousand of the seventeen thousand were those I received for the farm,"--though in a former portion of his evidence he had distinctly stated that "the said bonds I considered the property of Mrs. McCullough." He kept these bonds in his possession, treated them as his own, however he considered them, until June, 1881, when, at his instance and request, Slicer conveyed the farm to Mrs. McCullough, and received back in payment from McCullough these identical bonds which Slicer had given McCullough the preceding September. Thus Slicer in June, 1881, had exactly the bonds he possessed before the conveyance of the farm to him in September, 1880. Mrs. McCullough had title to the farm, and McCullough had diminished his apparent assets $10,000, and parted with the ownership of the farm, without receiving a single cent in lieu thereof. Slicer never took possession of the farm, and he received no rents for it. McCullough occupied it after the conveyance to Slicer in the same manner as before. This was the first step in a systematic scheme to defraud. In the face of these uncontroverted facts it would be idle to contend that the deed to Mrs. McCullough may be upheld by reason of an actual purchase having been made by her from Slicer in good faith and for a valuable consideration. The bonds, if they ever belonged to Slicer or to McCullough, were certainly not Mrs. McCullough's; and it is not pretended that she paid any money or delivered anything of value to make up the consideration named in the deed from Slicer to her. Upon neither ground relied on in her answer can the deed be supported against a creditor whose claim was then a subsisting one. It becomes necessary now to ascertain with what intent, as to subsequent creditors, these conveyances were made.

Closely following the conveyance of the farm by Slicer to Mrs. McCullough, and almost concurrently with it, property on the north-west corner of Park and Fayette streets, in Baltimore, standing in McCullough's name, was conveyed by McCullough and wife to the same Charles H. Slicer, for a consideration of $6,000 in bonds; being part of the very same $10,000 of bonds which had been availed of to effect a transfer of the title to the farm. About two years afterwards McCullough bought this same city property back for his wife from Slicer; the consideration being $6,400,--$400 in cash, and Mrs. McCullough's two promissory notes for $3,000 each, signed by herself and her husband, bearing 5 per cent. interest, and both being payable several years after their date. Before the conveyance of this piece of property to Slicer, McCullough had his coal-office on the premises, and he has continued it there ever since. He collected the rents from the dwelling after the deed was made to Slicer, and he paid the taxes. While the title stood in Slicer's name, McCullough paid to the Gay-Street Savings Bank the interest on a mortgage held by the bank on this identical property. This was, to say the least, very singular conduct, if Slicer in fact and in good faith owned the property.

Early in 1882 McCullough sold to his sister a house situated on McCullough street, in Baltimore, but conveyed it to her husband, John H. Meyers. McCullough alleges that in 1872 he received from his deceased brother's estate $2,500 in bonds which belonged to his sister, Mrs. Meyers; that he held them for her, collected the interest, and invested it until the original principal and the invested interest aggregated four thousand four hundred and some odd dollars. In consideration of these bonds, which McCullough admits he did not dispose of until 1884, the deed was executed in 1882. At the date of this conveyance McCullough and his family occupied this house, and they have continued to do so ever since. He has paid no rent for it; his sister and her husband residing with him during every winter and fall, which, McCullough says, "I suppose was equivalent to the rent." Upon this property there is a ground rent of $300. This, together with the taxes, amounting to $100 a year, McCullough has continued to pay, notwithstanding the conveyance to Meyers. Why he parted with the title to this property in exchange for bonds which he had no use for until two years later, though he had use for the house and did continue to occupy it, and to make payments of ground-rents and taxes which only an owner would have done, is not explicable upon any theory of good faith in the transaction. In 1883 he sold for $800 his...