Wilson v. Russell

• Decision Date: 31 May 1859
• Citation: 13 Md. 494
• Parties: THOMAS WILSON and Others v. JOSEPH B. RUSSELL and Others.
• Court: Maryland Court of Appeals

13 Md. 494

THOMAS WILSON and Others v. JOSEPH B. RUSSELL and Others.

Court of Appeals of Maryland.

May 31, 1859

A deed of trust recited that W and W & Co. had agreed to loan the firm, of which the grantors were partners, their notes from time to time, as may be desired by the grantors, to an amount not exceeding, in all, at any one time, $36,000, the notes to be payable at six months, and to be regularly taken up and retired at maturity by the grantors and such loans of notes to be made only during the periods of three and four years from the date of the first loan, viz: loans to the whole amount of $36,000 during the period of three years from the date of the first loan, and loans to the amount of $18,000 during one year thereafter. The deed also recited, that the grantors were formerly indebted to W and W & Co., in the sum of $6663.64, which has not been paid, and in consideration of such unpaid indebtedness, the grantors have agreed to pay W and W & Co., to be credited on such old debt, a sum equal to five per cent. of the amount of each note so to be loaned, such amount to be paid as and when each note is loaned, till the transactions under the deed cease, or the whole of such old debt is extinguished. And, in order to save harmless the said W and W & Co., from all loss and injury in the premises, and to secure the payment of the amount of five per cent. as aforesaid, on the face of each note to be loaned, the grantors, by the deed convey certain specified property to the trustees in trust, that upon the failure of the grantees to take up and retire any one or more of such notes as shall be so loaned, the trustees shall sell the property at public or private sale, as they shall see fit, and upon such terms as they shall deem proper, and apply the proceeds to pay, 1st, the expenses of the trust including a commission of five per cent. to the trustees; 2nd, the notes loaned under the deed, and 3rd, the balance, if any, to the grantors. The deed also provides, that until the happening of the contingency, upon which they are to sell, the trustees shall permit the grantors to hold, use, occupy and enjoy the property, and receive the rents, issues and profits thereof, to and for their own use and benefit, and if the grantors perform their part of the agreement set out in the deed, then to re-convey the property to them discharged of the trust. HELD:

1st. That this deed is in the nature of a mortgage, and was intended to secure W and W & Co. the payment of their old debt, and the notes agreed to be loaned under the deed; it is not a conveyance for the benefit of credtors, nor an assignment of the property of the grantees for the payment of some or all of their debts.

2nd. It is not fraudulent in fact because it secures the payment of an old debt which was discharged under the insolvent laws, for the moral obligation to pay such debt remained, notwithstanding the discharge, and is a sufficient consideration to support a promise to pay it.

3rd. Nor does the mode, specified in the deed, of paying this old debt, render it fraudulent, there being no proof that this provision was merely colorable, and a device adopted by the parties to secure usurious interest on the notes loaned.

4th. Nor does the fact, that some of the notes loaned were purchased by W and W & Co., at a heavy discount, render the deed fraudulent, such purchases having been made eighteen months after the date of the deed, and from third parties, in whose hands the grantees had placed the notes, and who held them for sale in the market.

5th. The amount it was intended to secure is expressed in the deed, as required by the act of 1825, ch. 50, and there is no valid objection to it, either under this act, or because it was intended to secure future advances; deeds or mortgages, to secure future advances, if bona fide made, are good at common law.

6th. This deed being in the nature of a mortgage, the provision that the grantors shall remain in possession of the property till default made, does not render it void, as would be the case if the deed was a conveyance of the grantors' property for the payment of their debts.

7th. In the absence of all proof impeaching the bona fides of deeds or mortgages to secure future advances, such instruments are not within the operation of the statute against fraudulent conveyances.

8th. The terms of the deed, in respect to the power of sale conferred upon the trustees, are clear and explicit, and not in contravention of any principle of law, and there is no valid objection to the deed in this respect.

9th. The omission to state, on the face of the deed, the time when the first advances were to be made, does not render it invalid; in the case of a mortgage to secure future loans, it is not necessary to designate, in the deed, the length of time during which the loans are to be continued.

10th. To show the actual amounts loaned, and to fix the duration of the transaction by showing the time when the first loan was actually made, extrinsic proof is admissible, for such proof does not contradict the deed, or alter, in any respect, its legal operation and effect.

11th. This deed being to secure future loans, and having been recorded, the advances made under it are a lien on the property in preference to claims under a junior intervening incumbrance, though such advances were made after, and with notice of, such junior incumbrance.

APPEAL from the Circuit Court for Baltimore City.

On the 15th of February 1856, William Mason and wife, and William Mason, Jr., (the said William Mason and William Mason, Jr., constituting the firm of William Mason & Son,) executed a deed of trust to St. George W. Teackle and William A. Talbott, in which it is recited as follows:

" Whereas Thomas Wilson and the firm of Thomas Wilson & Co., of which the said Thomas Wilson, Robt. W. Allen and Wm S. Peterkin are partners, have agreed to loan to the firm of William Mason & Son, their promissory notes, from time to time, as may be desired by said firm of Mason & Son, to an amount not exceeding in all, at any one time, the sum of $36,000, in the manner and upon the terms following, to wit:--The said Thos. Wilson is to loan his individual notes to an amount not exceeding in all, at any one time, the sum of $18,000, and the notes of said firm of Thos. Wilson & Co., are to be loaned to an amount not exceeding in all, at any one time, the like sum of $18,000, said notes, so to be loaned, are to be made payable at six months after date, respectively, and are to be regularly taken up and retired at maturity, by said firm of Mason & Son; such loans of notes to be so made by the said Wilson and Wilson & Co., only during the periods of three and four years from the date of the first loan made by said Wilson and Wilson & Co. respectively, to wit: loans to the whole amount aforesaid, during the period of three years from the date of said first loans, respectively, and loans to the amount of $18,000 during one year thereafter. And it is hereby understood and agreed, that in case either the said Thomas Wilson or the said William Mason should die, before the expiration of the period above limited, within which the said promissory notes are to be loaned, then no other or further loans of any of said notes shall be made, and said agreement shall cease, so far as it might otherwise require any loans of notes after such death, but the notes then outstanding shall be taken up and retired by said Mason & Son, or the survivor of them, as they severally fall due; and upon any default in taking up any one of said outstanding notes, the parties of the second part hereto, or the survivor of them, shall execute the trust hereinafter conferred on them, in the same manner as though such default had been made in the lifetime of the party who shall have died. And it is also agreed, that when any of the notes so loaned shall be taken up and retired by said Mason & Son, such notes, so retired, shall be cancelled and returned to said Wilson and Wilson & Co., as the case may be, before said Mason & Son shall be entitled to any further or other loan of note or notes. And it is also agreed, that said Mason & Son shall, so long as any of said notes may be outstanding and unpaid, at their own expense, insure and keep insured, in the names of the said parties of the second part, the buildings and machinery and property comprised in this deed, to the amount of $36,000, and if they fail or neglect so to do they shall not be entitled to any loans of notes, under this agreement, until such insurance shall be made, and said Thos. Wilson and Thos. Wilson & Co., shall have the right to cause such insurance to be made and charge the said Mason & Son with the money paid therefor, which shall be payable immediately, by said Mason & Son, and shall be a lien on said property, and be paid therefrom by the trustees hereby appointed, on a sale of said property, after default in taking up any of said loaned notes. And whereas the said William Mason, and William Mason, Jr., and Henry A. Barling, under the firm of William Mason & Son, were formerly indebted to the said Wilson, in the sum of $3014.67, due on the 15th of July 1848, and to the said Wilson & Co. in the sum of $3648.97, due on the 7th of August 1849, which sums have not been paid. And the said Mason & Son, in consideration of such unpaid indebtedness, have agreed to pay, to said Wilson and Wilson & Co., to be credited on account of said several sums of money, so formerly owing and unpaid, a sum of money equal to five per cent. on the amount of each note, so to be loaned, by said Wilson and Wilson & Co., vaid amount to be paid as and when each note is loaned. And it is hereby expressly understood and agreed, that the said firm of Mason

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