Lambert v. Morgan

Bbiscoe, L, delivered the opinion of the Court. The appeal in this case is taken from an order of the Circuit Court of Baltimore City, passed on the 24th of September, 1908, overruling exceptions of the appellants, to Income Account V, filed in the case of Osmun Latrobe et al. v. Mathilde F. Winans et al., distributing the income of the trust estate of DeWitt Clinton Winans, deceased, among the creditors of Ellen Barbara Williams, one of the life tenants. The exceptions of Thomas S. Bray, a judgment on mortgage creditor of the life tenant, were sustained. The Court below by the order appealed against directed the account to be re-stated and the fund in the hands of the trustees to be distributed in payment'of the claims of the appellees, as follows: (1) To J. P'ierpont Morgan, the balance in full- of his claim, as filed in the case, on December 21, 1901.

(2) To Hotel Rennert Company, in full for claim filed in above case on June 22, 1905. (3) To Thomas Sprackman Bray, the balance in full oi his claim as filed in the above case, on September 7, 1906. (4) To the Hnion Deposit Bank, Limited, of England, on .aeount of claims filed in the above case on March 9, 1907. The appellants and appellees are mortgage creditors of the life tenant, and there is no dispute as to the validity of these claims, but the questions involved relate to their rights and priorities of lien, in the distribution of the fund held by the trustees.

The fund in Court for distribution amounts to the sum of $3,487.56 and is income of the trust estate of DeWitt Clin ²⁵ ton Winans, deceased, collected by the trustees and payable to Mrs. Ellen Barbara Williams, as life tenant, under the will. Mr.'Winans died in 1892, leaving a last will and testament wherein he directed his trustees after the death of his wife to pay the whole of the income of his residuary estate, held by the trustees, to Ellen Barbara Williams during her life, with remainders to third persons. On the 7th day of December, 1895, the Circuit Court of Baltimore City assumed jurisdiction of the administration of the trust estate. Mrs. Winans died shortly after the testator, and it is conceded that Mrs. Williams is the sole life tenant and is entitled to the payment of the income from the estate.

There are six claimants to the fund or income now in Court for distribution and each claim is represented by a mortgage transferring and assigning the interest of the life tenant in the estate as security for loans made to her. It is contended, upon the part of the appellants, that the execution and recording of their mortgages being prior in date gave them a prior lien and no further notice by them or action on their part was necessary to perfect their lien. The appellees contend that the transfers were assignments of a fund, to wit, income accruing in the hands of trustees from the trust estate and payable to Mrs. Williams, and to render such assignments a complete transfer of her interest in the trust estate, to effect a prior lien on the fund, notice of these assignments to the trustees was neeessaiy. The dates of execution, recordation and filing of the various mortgage claims in controversy appéar to be as follows: ²⁶ The fund in Oourt for distribution is the income of the trust estate from July 1, 1907, to January 1st, 1908, derived from interest on railroad bonds, Baltimore City stock and rents collected from real estate and payable to the life tenant under the will.

The Oourt below held, by its order of September 24, 1908, in effect, that the claims here in controversy were mere assignments of a fund or choses in action, to wit, the income in a trust estate, enjoyed by the life tenant, and that they took effect as among the assignees from the date they were perfected by notice to the trustees, and that notice was given by filing the claims in the Oourt proceeding and procuring proper orders thereon. The rule thus applied in the distribution of the fund or income, in this case — that is, that the assignee who first gives notice to the debtor obtains priority — is approved and settled by numerous adjudications of the Courts, both in this country and in England. The eases of Dearle v. Hall, 3 Russ. 1, and Loveridge v. Cooper, 3 Russ. 30, are directly in point. The Lord Chancellor there said: “In cases like the present the act of giving the trustee notice is, in a certain degree, taking possession of the fund; it is going as far towards equitable possession as it is possible to go, for, after notice given, the trustee of the fund becomes a trustee for the assignee who has given him notice.” The English rule has been approved and followed by the Federal Courts.

Judson v. Corcoran, 17 Howard, 612 ; Spain v. Hamilton, 1 Wall. 604 ; Laclade Bank v. Schuler, 120 U. S. 511 ; Methven v. Staten Island, 66 Fed. R. 113; Third Nat. Bk. v. City, 126 Fed. Rep. 413. In 2 Story’s Bq. section 1047, it is said, as the assignee is generally entitled to all the remedies of the assignor, so he is generally subject to all the equities between the assignor and his debtor. But in order to perfect his title against the debtor it is indispensable that the assignee should immediately give notice of the assignment to the debtor, for otherwise a priority ²⁷ of right may be obtained by a subsequent assignee, or the debt may be discharged by a payment to the assignor before such notice.

The same doctrine is also stated in 2 Pomeroy’s Eq. Jurisprudence, sections 695 and 698. And in Robinson v. Marshall, 11 Md. 251 , this Court approved the doctrine laid down by these eminent text-writers, and held that the assignee of a claim or chose in action cannot recover from the original debtor who had paid it to the assignor after, but without notice of, the assignment. While some of the State Courts hold to the contrary, we think the doctrine sanctioned by the English Courts, approved by the Federal Courts and by many of our State Courts, is based upon sound reasoning and sustained by the weight of authority.

But it is earnestly contended that Mrs. Williams had at the time of the execution of the mortgages in question such an interest in the trust estate as she could mortgage, and their recordation gave constructive notice to everyone as to the priority of the liens thereunder. It will be seen, however, that the trust property in this case — “the income arising out of the residuary estate” — was but a money interest and could not be mortgaged as realty. The instruments, being mere assignments of the fund, were not within the ¡provision, of our Registry Act and their recordation could give no greater effect than the law itself gave. In Glenn v. Davis, 35 Md. 208 , the Court held, when an instrument is not entitled by law to be recorded, placing it on record could not of course operate as constructive notice.

In Burch v. Taylor, 152 U. S. 634 . it is said: “It is alleged that the assignments and transfers, under which the defendant claims, were recorded in the Land Office. The argument seems to be that the defendant and his assignors selected filing and record in that office as a means of giving notice to other parties of their rights, and that having made such selection was equivalent to an admission that they would accept a like filing and record as notice to them; but that argument cannot be sustained. The defendant and his assignors may ²⁸ have desired to give as much publicity as possible to the fact of the transfers to themselves, and in seeking to give such publicity may have selected the filing and record in one of the principal offices of the county as a means thereto, but they did not thereby create a new law in respect to notice. They never in terms declared, and their own acts of filing for record carried, no implied declaration of willingness to accept a similar record as notice to themselves.

They had a right to rely upon the law of the State as enacted by its legislature, and were not bound by any constructive notice other than those laws provided. If notice was essential to charge them, actual notice should have been given, at least in the absence of a statute providing some means for