Whedbee v. Stewart

• Decision Date: 23 June 1874
• Citation: 40 Md. 414
• Parties: JAMES S. WHEDBEE and JOHN S. DICKINSON, trading as WHEDBEE & DICKINSON v. JOHN STEWART and BENJAMIN PRICE, Trustees, &c.
• Court: Maryland Court of Appeals

40 Md. 414

JAMES S. WHEDBEE and JOHN S. DICKINSON, trading as WHEDBEE & DICKINSON v. JOHN STEWART and BENJAMIN PRICE, Trustees, &c.

Court of Appeals of Maryland

June 23, 1874

APPEAL from the Court of Common Pleas.

The case is stated in the opinion of the Court.

The cause was argued before BARTOL, C.J., MILLER, ALVEY and ROBINSON, J.

Wm. Shepard Bryan, for the appellants.

The deed makes a preference in favor of such of the creditors of the grantors as shall, within a period of sixty days from its date, release the grantors from their claims and demands. It makes no disposition of the surplus that shall remain after the payment of the favored creditors. This surplus therefore, resulted to the grantors by necessary implication. The deed was, therefore, void upon its face against the plaintiffs, who were subsisting creditors. The fraud is a conclusive presumption of law, not depending upon extrinsic evidence. Nor is it competent to consider extrinsic evidence at all in the consideration of the question of fraud in this case. Malcolm vs. Hodges, 8 Md., 418; Bridges vs. Hindes, 16 Md., 101; Inloes vs. American Ex. Bank, 11 Md., 173.

The thirteenth section of Art. 48 of the Code, has no reference to the question arising in this case. This section is a re-enactment of the Act of 1854, ch. 193, sec. 13, and merely declares the existing law as decided in Sangston vs Gaither, 3 Md., 40, 46, 48. It enacts that certain provisions shall not avoid a deed, but it does not mean that all deeds which contain these provisions shall be good, if they are obnoxious to valid objections. The deed in Bridges vs. Hindes, 16 Md., 101, was made after the passage of the Act of 1854, and contained the provisions mentioned in the Act, but it was nevertheless declared void, because of the objection now urged against the deed in this case.

The fraudulent character of the deed is stamped upon it by the law. The provisions were such as the law condemned. No evidence was admissible in exculpation of the conduct of the grantors in making an unlawful deed. They intended to make this deed and made it, and it is ipso facto a fraud. By this transaction they became obnoxious to the attachment provided by the Act of 1864, ch. 306. Malcolm vs Hodges, 8 Md., 418; Bridges vs Hindes, 16 Md., 101; Inloes vs. Am. Ex. Bank, 11 Md., 173.

Fredk. J. Brown, for the appellees.

There is a distinction between deeds fraudulent in construction of law, and deeds fraudulent in fact, at least so far as regards proceedings under the Act in question or similar Acts, and the Act of 1864, must be strictly construed and some proof of actual fraudulent intent given. The question is not whether, if a deed be obnoxious to the provisions of the statute of Elizabeth, it may not, as to any property intended to be passed by it, be pronounced void, equally for constructive as for actual fraud; nor whether a deed made with honest intentions but constructively fraudulent may not be set aside by a Court of Equity when proceedings are instituted for that purpose; the question is simply whether under the Act of Assembly some mala fides must not be shown before the creditor is entitled to put in motion the summary and extraordinary attachment proceedings. There has been no adjudication of this point in Maryland, but similar attachment laws prevail in other States, and we have decisions to guide us.

The attachment law of Missouri, (Revised Statutes, 1855, Vol. I., ch. 12,) provides for the institution of attachment proceedings in similar cases to those contained in our Act, among others in the 7th clause of 1st section, "where the defendant has fraudulently conveyed or assigned his property or effects so as to hinder or delay his creditors." Gates vs. Labeaume, 19 Mo., 17; Spencer vs. Deagle, 34 Mo., 455; State vs. Benoist, 37 Mo., 500; Beach vs. Baldwin, 14 Mo., 597.

It is to be observed that the words of the Missouri statute are "fraudulently assigned, so as to hinder," &c. of the Maryland statute, "assigned with intent to defraud," &c. So that if anything, a stricter construction of our statute would be necessary. A deed technically fraudulent, which, however unintentionally, would work a certain result might be obnoxious to the Missouri statute, and yet be upheld here, unless actual mala fides could be shown. Attachment proceedings are in derogation of the common law, and should be strictly construed. Thompson vs. Towson, 1 H. & McH., 504.

But supposing that the Act of 1864, in the absence of other legislation would have embraced such a constructive fraud as is here objected to, the Act of 1854, ch. 193, (Code Pub. Gen. Laws, Art. 48,) saves this deed. See the 13th section of the Article, as also of the Act--they are identical.

There had been great conflict of decisions of the Court of Appeals, as to the validity of deeds of trust containing a clause excluding non-releasing creditors. Green vs. Trieber, 3 Md., 29. Such clauses being finally held invalid, and fatal to the deed. (Sangston vs. Gaither, 3 Md., 40, decided December term, 1852.)

When the Act of 1854, ch. 193, was passed, the clause in question, the 13th, must be taken to have been inserted for the purpose of settling this question in a contrary sense. [ Both in Pennsylvania and Virginia, assignments expressly excluding non-releasing creditors, and permitting or directing payment of surplus to the assignor, are valid. Livingston vs. Bell, 3 Watts, 198; Mechanics' Bank vs. Gorman, 8 W. & S., 308; Skipwith's Exec. vs. Cunningham, 8 Leigh, 271; Phippen vs. Durham, 8 Grat., 457.]

The language of this clause could not be more explicit, and would seem to be conclusive of the case.

It is admitted that Malcolm vs. Hodges, 8 Md., 418, (decided in December term, 1855,) reaffirms the doctrine that a deed is void if it reserves the surplus after payment of releasing creditors; but the deed attacked in that case was made in 1849, and the bill filed in 1850, and the Act of 1854, was accordingly not discussed.

Same remark applies to Peters vs. Cunningham, 10 Md., 554, in which case moreover, there was an admission of record, that the deed was void.

The next two cases, Triebert vs. Burgess, 11 Md., 452, and Maennel vs. Murdock, 13 Md., 164, may be quoted to show that the Act of 1854, ch. 193, only applies to cases of technical insolvency--cases in which there have been petitions for the benefit of that Act. But the first case will be found to have been decided simply as to the effect of sections 6, 7, 8 and 10 of that Act, which were separately and carefully discussed by Judge ECCLESTON, (pp. 462-3.) "The sections in the Act of 1854, which have been referred to," says the Court, relate "only to cases of insolvency, in which there have been petitions for the benefit of that Act." "The provisions of the Insolvent Act of 1854, ch. 193, which make void conveyances, &c., for fraud, or for giving undue preferences, relate only to cases of insolvency in which there have been petitions for the benefit of that Act." The one clause in that Act which makes good conveyances, was not discussed. This being so, the statement in Maennel vs. Murdock, 13 Md., 178, that " the Act of 1854, ch. 193, was declared in Triebert vs. Burgess, to have no application to a case in which there has been no petition for the benefit of the insolvent laws," is manifestly too unqualified.

But the case of Maennel vs. Murdock, involved the construction of the 13th section, and may be relied on by the appellants as settling that the whole Act, including that section, applies only to "cases where there has been a petition," &c. The head note, and even a cursory reading of the opinion of the Court, would lead one to that conclusion. A careful examination of the precise point decided will show that it is still an open question.

From the argument of counsel (pp. 170 and 173,) and opinion of the Court (p. 177,) it will be seen that the 13th section was used to establish constructively, a meaning very different from its plain and direct one. The deed in Maennel vs. Murdock, while it was open to an objection to which our deed is not open, inasmuch as by its 12th clause it preferred certain creditors by name, was not obnoxious to the other objection, now made against our deed, of expressly or impliedly excluding non-releasing creditors, for they were specially taken care of by the 14th clause. So the 13th section of the Act was not invoked to protect the deed--it needed no protection on that side-- but to attack the deed, the opponents of it founding their argument solely on the use of the word "generally," in that section. The argument was simply this:

The 13th section of the Act of 1854, saves all "deeds for the benefit of creditors generally, notwithstanding certain questionable clauses; this is not a deed for the benefit of creditors generally, inasmuch as an individual and a firm are preferred in it; ergo, such a deed as this is, by that section, impliedly condemned."

The very obvious answer to this was made. "This law [Act of 1854,] does not declare that all other deeds than those mentioned in its 13th section shall be void," and the opinion of the Court, sustains the answer. "Neither the case in 9 Gill, nor the Act of Assembly, is sufficient to invalidate this part of the deed." This is all that it was necessary for the Court to say in deciding the question before it, and the dictum as to the effect of the whole Act seems to have been made solely on the authority of Triebert vs. Burgess, without a careful examination of that case.

It is admitted that the case of Bridges vs. Hindes, 16 Md., 101, decided in 1860, affirms the doctrine of Malcolm vs. Hodges, that a reservation of the surplus to the grantor after paying releasing creditors avoids a...