Milholland v. Tiffany
| Decision Date | 27 February 1886 |
| Parties | MILHOLLAND AND ANOTHER v. TIFFANY. |
| Court | Maryland Court of Appeals |
Appeal from court of common pleas.
M A. Mullan and Jas. McColgan, for appellant.
S Teackle Wallace and Henry E. Kennard, for appellee.
The facts in this case are simply these: Hand, in consideration of love and affection, conveyed to his wife the property out of which this controversy has arisen. At the time of the execution of this voluntary conveyance the property was mortgaged to Fredrick J. Brown, trustee, to secure the payment of unpaid purchase money. The appellee, Tiffany, at the request of Hand, paid the purchase mortgage, the same being due, and took from Hand and wife a mortgage on the same property as security. Hand subsequently became insolvent, and upon a bill filed by the insolvent trustees the conveyance to the wife was set aside as being in fraud of the rights of his subsisting creditors. The property was afterwards sold by the order of the insolvent court, and the proceeds of the sale are claimed on the one hand by the creditors of Hand, and on the other by the appellee as a bona fide purchaser under his mortgage, without notice that the deed to the wife was fraudulent.
If the appellee is to be considered as a bona fide purchaser without notice, then there is an end to the question, for it is clear that such a purchase, both under the statute of Elizabeth and under our own Code, is protected. It is not contended that the appellee had in fact any actual knowledge as to the fraudulent character of the deed; but the argument is, that while the wife may, under the Code, acquire property directly from the husband during coverture, provided it be not in fraud of the rights of creditors, yet the voluntary conveyance to the wife is in itself sufficient knowledge to put a purchaser upon the inquiry, and if he fails or refuses to make the inquiry he is chargeable with the knowledge of such facts as the inquiry would necessarily have disclosed; and since the decision in Green v. Early, 39 Md. 225, this is no longer an open question. In that case it was expressly decided that the purchaser of property thus acquired by the wife under the Code "was bound to know that the property was liable to the husband's debts if there was no other sufficient property with which they could be paid, and with this knowledge," say the court, "he was put upon the inquiry as to the existence and extent of the debts for which the property might be liable." We see no reason to qualify in any manner the decision thus made. On the contrary, it is but a just and proper construction of the Code, having regard to the rights of creditors, which the legislature obviously intended to protect.
Conveyances founded upon the consideration of blood or marriage are, we admit, sanctioned by the law, and it has been held that such conveyances are not in themselves sufficient, under the statute of Elizabeth, to put a purchaser upon the inquiry as to their good faith; that he has a right to rely upon the presumption that they were honestly made, in the absence of evidence to the contrary. But there is this difference between the statute of Elizabeth and our Code: the husband could not, under the English statute nor by the common law, convey his property directly to his wife; while under our Code he may do so, provided, however, says the legislature, that such conveyances are not in fraud of the rights of subsisting creditors. He could, it is true, convey his property to a trustee for the use and benefit of his wife under the English statute, but the property in the hands of the trustee was still liable for his debts. And such are the relations between husband and wife that, in dealing with a voluntary conveyance made to the wife under the Code, courts ought to be watchful to see that they are not mere contrivances to put the property of the husband beyond the reach of his creditors; and it seems to us that common justice to the creditors requires that such conveyances should in themselves be sufficient to put a purchaser from the wife upon the inquiry. To hold otherwise,--to say the wife may in the next moment sell the property, and the purchaser is under no obligation to know, or even to make the inquiry, whether the conveyance to her be in fraud of creditors,--would be to put it in the power of a bankrupt and dishonest husband to cheat and defraud his creditors at will. This construction may, we are aware, somewhat embarrass the alienation of property thus acquired by the wife, but this inconvenience weighs but little when considered in comparison with the evils which must necessarily result from the construction contended for by the appellee. We have said thus much, not that it is necessary in the view we take of this case, but because it seems both from the argument of the appellee and the opinion of the learned judge below that there has been a misunderstanding as to the decision in Green v. Early.
We shall not stop to consider whether the appellee did in fact make the inquiry, such as the law requires, except to say, in passing, that the declaration of Hand, on the face of the deed, that he owed no debts except such as were "amply provided for," is not such a declaration as the appellee had any right to rely on. There are recitals in a deed, such as the consideration and other like matters, which for obvious reasons are presumed to be true; but when a deed from a husband to his wife is assailed on the ground of being in fraud of the rights of his creditors, the declaration by the husband, in the face of the deed, that he has property sufficient to pay his debts, cannot be considered even as prima facie evidence of the truth of the statement thus made.
But, independent altogether of these views, the mortgage under which the appellee claims is, in our opinion, fatally defective. No mortgage in this state is valid, except as between the parties, unless the mortgagee makes oath that the consideration is true and bona fide; and if the oath is made by an agent, such agent must, in addition to the above affidavit as to the consideration, make oath also that he is the agent of the mortgagee; the object being, of course, to prevent persons making oath as to the consideration who were not in fact the agents of the mortgagees. But, be the object as it may, such are the plain and imperative requirements of the statute. Now, in the mortgage before us, the justice of the peace certifies that W. Gilmor Hoffman, agent of the within-named mortgagee, appeared, etc., "made oath in due form of law that the consideration set forth was true and bona fide;" but he does not certify that Mr. Hoffman made oath that he was the agent of the mortgagee. The mere declaration on the part of the justice of the peace that he appeared before him as the agent of the appellee cannot be construed as meaning that W. Gilmor Hoffman made oath that he was the agent; and, as the Code requires the agent to make this oath, such a certificate is not a substantial compliance with the statute. We have no right to disregard or fritter away this plain and explicit requirement of the statute. It is the law, not only unto the parties, but also unto ourselves.
But although the appellee is not a bona fide purchaser without notice, we see no reason why he should not be substituted to the rights of the purchase mortgage. The law of substitution is not founded on contract or agreement, but upon the equitable powers of the court. It is in the nature of equitable relief to protect a meritorious creditor who has paid the debt of another against loss and damage. We say "meritorious," because it will not be applied in behalf of a mere stranger who officiously meddles with a matter which in no manner concerns him. In most cases it is applied in behalf of one who was under an obligation of some kind to pay the debt of another as a surety, who is obliged to pay the debt of his principal, or one who is obliged to pay a lien or incumbrance on property purchased by him. But it is not necessarily confined to these cases; but may be applied, on equitable principles, in behalf of one who, at the instance and request of the debtor, pays a lien or incumbrance which he was under no legal obligation to pay, provided he does not interfere with intervening rights and incumbrances. It will not, of course, be applied against superior or equal equities. There being no intervening liens in this case, the question whether the appellee is entitled to be substituted to the rights of the purchase mortgage depends upon whether he is to be considered as a mere volunteer, and, if not a volunteer, whether he is upon equitable principles entitled to such substitution as against the subsisting...
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