Brown v. Deford

Briscoe, J., delivered the opinion of the Court. On the 19th of May, 1891, Henry C. Brown and Mathew S. McKinney, trading as Brown & McKinney, made an assignment of all their property to the appellants, Brown and Trail, in trust for the benefit of their creditors. This firm was engaged in the tanning business in Frederick, Maryland, and for some years prior to their failure shipped their leather to the appellees, Deford & Co., of Baltimore, who sold the same on commission, but permitted the consignors to draw drafts in advance of the sales of the leather. In this way, Brown & McKinney became largely indebted to Deford & Co., and on the 24th of July, 1888, the following agreement was entered into between the two firms : “It is understood and agreed between Deford & Co., of Baltimore City, and Brown & McKinney, of Frederick City, ³⁰⁹ all in the State of Maryland, that all money advanced to Brown & McKinney by Deford & Co., is for the purpose of purchasing hides and bark which is contained in the tannery and on the premises of Brown & McKinney, situated at Frederick City, Md.; and that the said hides are to be tanned into leather, and the leather is to be sent to Deford & Co., Baltimore, to be sold on commission, and after Deford & Co. deduct their commissions and charges, the net amount is to be placed to the credit of Brown & McKinney to pay the indebtedness due Deford & Co. “ It is further understood that the hides and leather referred to above is the property of Deford & Co., and they are authorized at any time to come forward and take possession of the same, and there are no other parties furnishing us money for the purpose of buying hides or bark.

Brown & McKinney. Baltimore, July 24th, 1888. Weaccept the above. Deford & Co. Witness : H. Hough, W. II.

Russell.” It is admitted that there was at the time of the execution of the deed of trust a large balance due Deford & Co. which was, however, subsequently reduced to the sum of $5,631.28 by sales of leather then on hand and which had been shipped by Brown & McKinney. There was on the premises of Brown & McKinney, at the time of the assignment, a large number of hides, which were afterwards sold by an agreement between the parties, and the fund derived therefrom- is now the subject of this controversy. The appellees contend that the hides, in their green state, were purchased with money furnished by them, and under the terms of the contract of July 24th, 1888, continued their property at the time of the assignment to the trustees. This claim is, however, contested on the part of both the trustees and the Farmers’ and Mechanics’ National Bank, one of the creditors of Brown & McKinney.

The sole question in the case, then, is whether the appellees are entitled to the fund, under the agreement of July, 1888, to the extent of their claim. By an agreement between the parties, ³¹⁰ this fund is to be dealt with here, as if no sale of the property had taken place. It is manifest that the trustees have no standing in a Court of Equity to contest the validity of the appellee’s claim. Conventional trustees claiming under a deed of trust for the benefit of creditors cannot impeach a prior conveyance executed by his grantor, even though that conveyance be fraudulent against- the grantor’s creditors.

They stand in the shoes of the assignor and take the property subject to all the equities against the assignor. Ratcliff v. Sangston, 18 Md. 391 ; Devries v. Hiss, 72 Md. 564 ; Riley v. Carter, 76 Md. 610 . There is nothing in the case of The Building Association v. Willson, 41 Md. 506 , in conflict with this view as applicable to the facts of this case.