Gosnell v. Flack

McSherry, J., delivered the opinion of the Court. In 1814 Thomas J. Flack died intestate leaving a widow, several children and some grandchildren surviving him. Administration upon his estate was granted to James W. Flack, his eldest son. Henry H. Flack and David Hudson Flack, two of his other sons, were indebted to their father in large amounts.

These debts remaining unpaid, and Henry H. and David Hudson Flack becoming indebted also unto their brother James W. conveyed to him in 1811, by a deed absolute upon ⁴²⁴ its face certain valuable real estate owned by them and known as the “Canton property” or the “Distillery property.” At the same time there was also executed and acknowledged by the grantors and the grantee in the deed referred to, an agreement in writing setting forth the purposes for which the deed had been-executed, and. providing for the application to be made of the purchase money arising from a sale of the Canton property when a sale thereof should be made by James W. Flack. The deed was at once placed upon record but the agreement never was. James W. Flack as administrator stated several accounts in the Orphans’ Court, between the date of his appointment and the middle of October, 1883. During all that time and until 1890, he collected rents belonging to the estate of his father and expended thereof upwards of twelve thousand dollars upon the Canton property for taxes, repairs, and other purposes.

In 1890, having become heavily involved, and insolvent,, he executed a deed of trust for the benefit of his creditors to Frank Gosnell, Esq.; and on the ninth of November in the same year his letters of administration were revoked by the Orphans’ Court, and David Hudson Flack and William E. Hoffman, Esq., were appointed administrators in his stead. Mr. Gosnell claimed that the Canton property passed to him under the deed of trust;, but the administrators of Thomas J. Flack disputed this and filed a bill in the Circuit Court for Baltimore County against Mr. Gosnell and sundry creditors of James W. Flack, alleging that under the limitations and provisions contained in the unrecorded agreement James W. Flack held the title to the Canton property in trust to secure the indebtedness due by Henry H„ Flack and David Hudson Flack to the estate of their father, Thomas J. Flack, and praying that the trustee of James W. Flack be restrained by injunction from making sale of the property. In that case this Court ⁴²⁵ decided, Hoffman and Flack, Adm’rs vs. Gosnell, Trustee, et al., 75 Md., 577 , that the unrecorded declaration of trust could not operate to the prejudice of James W. Flack’s creditors who became such in good faith and in ignorance of its existence, and that the administrators were not at liberty to set up any secret equity to the exclusion of those creditors, but that they, the administrators, were entitled “to share pari passu with the other creditors in the distribution of the proceeds of the property.” In March, 1892, James W. Flack, in obedience to the order passed when his letters were revoked, propounded his seventh account in the Orphans’ Court, and in that account he charged the estate of his father with the sum of $13,494.06 for expenses on the Canton property and for excess of interest. This charge was excepted to by one of the distributees of Thomas J. Flack.

A hearing was had before the Orphans’ Court, and in April, 1892, the exception was sustained, and the Register of Wills was directed to state another account, omitting that charge altogether. This was done in June following. The new seventh account was sworn to by James W. Flack, and he was shown to stand indebted to the estate in the sum of $13,425.84. The new administrators had in the mean time stated an account, distributing the proceeds of a sale made by them of certain leasehold property belonging to the estate of Thomas J. Flack, but retained in their Hands the sum of $2,851.79, the amount distributable to James W. Flack.

Subsequently they filed a petition and'the Orphans’ Court, passed an order thereon fixing a day for making distribution of this sum, and ordered notice to be given. On the day appointed some of the distributees filed a petition, praying that the above named sum should be distributed to them and insisting that no part of it should be paid over to James W. Flack or to any ⁴²⁶ person claiming under him. Mr. Gosnell appeared and answered and claimed that the share of James W. Flack in his father’s estate, and amounting as above stated to $2,851.79, was payable to him, the trustee, under the deed of trust, and was not liable to be applied in reducing the alleged indebtedness of the former administrator to the estate. Evidence was adduced and after a hearing the Orphans’ Court of Baltimore City passed an order dated July 19th, 1892, directing the administrators to credit upon James W. Flack’s indebtedness of $13,425.84, due to his father’s estate, the sum of $2,851.79 which would otherwise have been payable to him or his trustee, and to distribute the latter sum amongst the other distributees.

From this order Mr. Gosnell, the trustee of James W. Flack, has appealed. It will be seen from this outline of the previous and the pending litigation between these parties that the question now involved and upon which we are required to pass is whether, under the circumstances stated, the distributive share of James W. Flack in his father’s estate and now in the hands of the new administrators of that estate, is liable to be set-off by them against the alleged debt due by him to