First National Bank v. Lindenstruth

McSherry, J., delivered the opinion of the Court. On August the twentieth, eighteen hundred and ninety, Lindenstruth borrowed five thousand and five hundred dollars in cash from The George Bauernschmidt Brewing Company of Baltimore, and at the . same time, and to secure the repayment of the loan, executed and delivered to the lender a mortgage conveying both real and personal property, and likewise all of the mortgagor’s “ stock in trade, such as whiskies, brandies, -wines, liquors of any sort and description.” Amongst other things, the mortgage contained the following'provision: “And it is hereby expressly understood that all stock and goods hereby granted shall be held liable for the said sum of five thousand five hundred dollars, and the interest thereon, until paid; and that all stock of goods replaced after the sale of any or all of the stock, goods, merchandise, and other property hereby granted, shall be substituted for those hereby granted, and the debt hereby secured ¹³⁸ shall be.a lien upon all of said, stock or goods .now on hand or substituted for the stock, goods and other property-granted.” In. November, eighteen-hundred and ninety-two, the First National Bank of Baltimore obtained a judgment against. Lindenstruth upon ,a cause of action which existed prior to the- execution of the mortgage.

A fi. fa. was issued on this judgment, and was returned nulla bona, and shortly thereafter the bank filed a bill of- complaint in Circuit Court No. 2 of Baltimore City, alleging that Lindenstruth was largely indebted, that he was without the means to pay his debts apart from the property covered by the mortgage; that the conveyance was made to hinder, delay and defraud his creditors, and that it contained provisions which were utterly void. Later on an amended bill was filed charging in addition to the averments of the original bill that the mortgage had, in fact, hindered, delayed and prevented the plaintiff from collecting its judgment, and further, that the property was more than sufficient to pay the mortgage debt and the plaintiff’s claim. It also charged that some of the goods and stock conveyed by the mortgage had been sold and replaced by other-goods and stock, and that these latter had been so mixed and intermingled with those covered by the mortgage that they could not be identified, or distinguished from the goods and stock originally transferred by the mortgage. The relief prayed was that the mortgage might be set aside; that a receiver might be appointed; that the mortgaged property might be sold, and that the claim, of the plaintiff might be paid after the debt secured by the mortgage had been first satisfied, There was likewise a prayer for general relief.

A demurrer was interposed to the amended bill, but was overruled, and the answers previously filed to the original bill were adopted as answers to the amended bill. Testimony was taken, and upon.final hearing the Court (Wigkes, J.) dismissed the bill of complaint, with costs; and from that decree this appeal was taken. ¹³⁹ . The testimony shows, beyond a cavil or a doubt, that the cash was actually loaned by the Brewing Company to Lindenstruth in absolute good faith, when the mortgage was executed; and there is. nothing whatever in the record even suggestive of a, suspicion that the mortgagor and mortgagee combined or- confederated to defraud any creditor of Lindenstruth. Indeed, it was not pretended in the discussion at the bar that there was any evidence of actual fraud apart from that which it was insisted the provisions of the mortgage disclosed.

These provisions are the ones we have- already quoted, and they are relied on as sufficient to condemn and avoid the instrument. It is quite true Courts of high authority have held that a mortgage conveying a stock in trade and containing an express covenant, or accompanied by an independent agreement, .permitting the mortgagor to remain in possession for the purpose of selling the mortgaged articles for his own use and benefit, or for the purpose of replacing such of them as he might sell, is null and void as to creditors of the mortgagor because fraudulent in law, without reference to the bona fides of the mortgage debt or the honesty of the mortgagor’s intention. Robinson et al. vs. Elliott, assignee, 22 Wal.,510; Davenport et al. vs. Toulke,68 Ind., 382; Voorhis vs. Langsdorf,31 Mo.,451; Collins and McElroy vs. Myers, 16 Ohio R., 547; Freeman vs.