Miller v. Horowitz

Parke, J., delivered the opinion of the Court. In the case of John W. Henry Miller, appellant, v. Adolph B. Hirschmann, to the use of Jacob Horowitz, appellees, which was decided by this court and was reported in 170 Md. 145, 18 . 3 A. 259 , it was held that a purporting mortgage deed to Adolph B. Hirschmann of John W. Henry Miller’s general legacy of a share in an estate of personalty, contingent on legatee surviving life tenant, is not a “chattel personal” within the statute authorizing decrees for sale of such chattels in Baltimore with the mortgagor’s assent, and the purchaser, Jacob Horowitz, at sale under such a decree, acquired no title. (Code Pub. Local Laws 1930, art. 4, sec. 720.) It was further decided that the purporting mortgage was not obtained by fraud and was given to secure a valid indebtedness from its maker to the grantee; and that the terms of the purporting mortgage are sufficient to transfer unto Adolph B'.

Hirschmann, and his assignee, Jacob Horowitz, a defeasible title to all the interest of Miller in the estate of his .dead father as a security for the indebtedness of Miller to Hirschmann and his assignee under the terms of the purporting mortgage, and- that the document in question is operative as an assignment and may be made effective in equity to the extent of the indebtedness secured in the distribution of the share of John W. Henry Miller in the trust estate of Jacob H. Miller, ⁴²³ subject, however, to any paramount equities. In this manner, it was said, a court of equity protects and enforces in the appropriate proceedings the equitable rights and interests of all the parties concerned. The appeal mentioned was taken in the foreclosure proceedings, and the result of the decision was to set aside the sale there made and to compel the assignee to rely upon the purporting mortgage as an assignment of the legatee’s interest. The appeal now at bar comes from two rulings against John W. Henry Miller, the legatee, in an equity cause in which the trust created by the will of Jacob H. Miller was in course of administration.

Upon the petition of the executors and the trustees named by the will, the chancery court assumed, on December 22nd, 1915, jurisdiction of the trust estate created by the testator. Since that time the trust has been administered under the supervision and control of chancery. The life tenant did not die until September, 1934, and the legatee survived her, and so the contingency has happened upon which he became entitled to receive his share. Jacob Horowitz claims that he is entitled, as the assignee of the purporting mortgage of the legatee to Adolph B. Hirschmann, to receive the legacy and, after the deduction of the indebtedness of the legatee to him as the assignee of Jacob Horowitz, to pay the residue of the legacy to the legatee.

The legatee, however, maintains that he is entitled to his legacy without reduction, because the debt is, he argues, barred by limitations or is insufficiently proved for allowance in the account of the auditor. The chancellor rejected the contentions of the legatee by overruling the legatee’s demurrer to the answer of the assignee, and sustaining the latter’s motion to strike from the record the plea of limitations filed by the legatee after the ruling on the demurrer. The legatee has appealed from the two orders of the chancellor which make these adverse rulings. After chancery had assumed jurisdiction and was engaged in the administration of the trust, and before the death of the life tenant, Hirschmann filed, on April ⁴²⁴ 23rd, 1917, in the cause a petition in which he alleged that, as a holder of the purporting mortgage deed from John W. H. Miller, a cestui que trust in the cause, he was a proper party to the proceedings, and he prayed that the court pass an order making him such a party and grant him such other and further relief as his case might require.

With this petition was a written agreement, over the signature of the legatee and his attorney, that the order be passed making the petitioner a party. On the same day, and because of this petition and the legatee’s assent, the order was passed making the petitioner a party to the cause. Since the legacy was contingent upon the legatee being alive at the death of the life tenant* the interest of the legatee was defeasible, and did not become absolute until he became the survivor on the death of the life tenant. When death occurred in September, 1934, it required the trust to bp terminated by a distribution of the trust estate.

In anticipation of this distribution, Jacob Horowitz filed, on October 27th, 1934, a petition which recited that he was the assignee of the purporting mortgage deed of Hirschmann, and had thereby become entitled to be made a party in his place and stead. With this petition was filed the original assignment, which was dated and acknowledged on November 4th, 1919. The court immediately passed an order making the petitioner a party to the proceedings. After this there were various petitions filed and orders passed in connection with the pending controversy.

Some of these were countermanded or revoked, and their recital is not necessary. The proceedings which control are those beginning with the petition of the legatee filed on March 23rd, 1936. By this pleading the legatee sets forth that the petition of Hirschmann, which was filed on April 23rd, 1917, was not prepared in accordance with article 16, section 157, of the Code of Public General Laws because it was not accompanied by the mortgage as an exhibit; and, therefore, the order passed thereon making Hirschmann a party was not properly passed. Similarly, it is asserted ⁴²⁵ that the order making the assignee Horowitz a party was error, since the petition of Horowitz, while filing the written assignment to him, failed to file the purporting mortgage as an exhibit.

The petition further shows that an account of the auditor was filed on November 14th, 1934, in which was distributed a portion of the trust estate. The auditor distributed his one-seventh share to the legatee, subject to the operation of the purporting mortgage deed, whose legal effect and the amount due thereunder the auditor stated he was unable to determine from the papers filed, and so suggested that the sum payable to the legatee “be excepted from the final ratification and the sum retained by the trustees until the mortgagee files appropriate pleadings and proof of claim.” A few days thereafter Jacob Horowitz, in the belief that the deed to him as the purchaser in the mortgage foreclosure sale had granted to him all the interest of the legatee, and that he was entitled to receive the whole thereof, filed a petition, with the deed as an exhibit, and obtained an order of November 16th, 1934, directing that the trustees pay to Horowitz as purchaser all sums of money which the legatee would have been entitled to receive under the provisions of the will of Jacob H. Miller, and also directing that the auditor so amend his report and account, subject to all proper objection. On November 22nd, the legatee excepted to the reservation made by the auditor on the account filed on November 14th, 1934, on the theory that there was no mortgage filed nor exhibit which would cause the trustees to withhold from the legatee any portion of the trust estate distributed under the audit. There were further proceedings which culminated in a stay until the validity of the foreclosure proceedings and the sale thereunder could be determined.

These proceedings resulted in a decree of the chancellor establishing the validity of the sale. An appeal was taken, but no bond was filed to stay the effect of the decree, and the chancellor in the cause at bar gave effect to the decree, confirming the title of Horowitz as pur ⁴²⁶ chaser to the entire interest of the legatee, by passing, on October 14th, 1935, an order directing the auditor to amend his report and account so as to distribute the whole legacy in question to Jacob Horowitz and the trustees to pay out the money accordingly. As has been before stated,, the decree in the foreclosure suit was reversed, and the title of the purchaser was declared void by the decision of this court in the case of John W. Henry Miller v. Adolph B. Hirschmann, to the use of Jacob Horowitz, supra. On this statement of the facts, the petitioner and legatee prayed that the orders, previously passed adversely affecting the petitioner be rescinded, and that he might have general relief.

The chancellor passed an order directing an annulment of the orders of October 27th, 1934, November 16th, 1934, and October 14th, 1935, unless Horowitz show cause to the contrary. . The amended answer to this petition admits the formal allegations but denies those of substance. The answer, also, admits that the orders of the chancellor of November 16th, 1934, and of October 14th, 1935, which directed that the whole legacy of Miller should be distributed and paid to Horowitz, are in effect, but denied that the court had relied solely upon the deed to Horowitz in passing these orders. The respondent avers that he depends for the establishment of his claim against the legatee’s interest upon the assignment by way of mortgage executed by the legatee to Hirschmann on March 31st, 1917, and by the latter subsequently assigned to Horowitz; and that this assignment is a security for the indebtedness of Miller to Hirschmann, which has been assigned to Horowitz, and is the basis of the respondent’s claim, whose amount appears in the proceedings.

With this answer a certified copy of the mortgage deed is filed as an exhibit, so that there is a complete chain of paper title shown by the record in Horowitz. It appears from this purporting mortgage, and is admitted by the demurrer, that on March 31st, 1917, J. W. Henry Miller, the appellant, was indebted unto Adolph B. Hirschmann in the sum of $700, ⁴²⁷ for which the debtor had executed and delivered to the creditor the former’s twelve promissory notes of even date with the mortgage deed; and that the first eleven of these notes is for $20, with interest, payable respectively from one to eleven months after date, and the last or twelfth note is for the sum of $480, with interest, and payable twelve months after date. The purporting mortgage was declared to be given to secure the payment of these notes as they became due. All the interest of the debtor in his defeasible legacy under the will of his father was assigned to the creditor, “his heirs and assigns,” and the said debtor or mortgagor expressly directed “the testamentary trustees in said will named, their survivors, survivor or successor to pay and deliver unto the said mortgagee all of said above named property without any further order, direction or assent from the said mortgagor.” It was to this answer that the legatee demurred.

The court overruled the demurrer, and then the legatee filed a plea of limitations, which, on motion, was struck from the record. 1. One of the grounds relied on in support of the demurrer is the defense of limitations, which would be available under a general demurrer should it appear on the face of the answer that the bar applied, and no facts were stated sufficient to make the defense inapplicable. Campbell v. Burnett, 120 Md. 214, 226 , 87 A. 894 ; Belt v. Bowie, 65 Md. 350, 355 , 4 A. 295 ; Biays v. Roberts, 68 Md. 510, 511 , 13 A. 366 ; Meyer v. Saul, 82 Md. 459, 462 , 33 A. 539 ; Gephart v. Taylor, 124 Md. 111, 115 , 91 A. 772 . The legatee, therefore, must bring the assignment within the statute.

The argument is made that the assignment is a specialty and bears date March 31st, 1917, and that, as the indebtedness on the promissory notes became due twelve months after this date, more than twelve years have passed since the maturity of every one of the twelve notes given, and, therefore, the enforcement of the assignment is barred by the provision of the statute that “No bill, testamentary, administration or other bond (except sheriffs’ and constables’ bonds), judgment, recog ⁴²⁸ nizance, statute merchant, or of the staple or other specialty whatsoever, except such as shall be taken for the use of the State, shall be good and pleadable, or admitted in evidence against any person in this State after * * * the debt or thing in action is above twelve years’ standing.” The quoted portion of section 3 of article 57 of the Code embraces all of the statute which bears any relation to the present inquiry, and it does not appear that the assignment is within its purview. The record is not of an action at law or a suit in equity to enforce the payment of all or any of the twelve promissory notes, which were given to evidence the indebtedness, and which do not appear to be writings obligatory. Nor is the record one of an attempt to recover on the covenant, in the assignment of the assignor, to pay the indebtedness to the assignee and his assigns. If such were the case, different conditions would arise than those of this record and other rules would control.

If either the notes or the covenant were the cause of an action, the limitation of three years from ithe dates of the maturities of the notes or from the time of the last acknowledgment of the debt or promise to pay the debt would bar a recovery on any of the notes (a) ; and the limitation of twelve years from the date of the assignment would be a good defense on the covenant. Earnshaw v. Stewart, 64 Md. 513, 516 , 2 A. 734 ; (a) Code, art. 57, sec. 1; Young v. Mackall, 3 Md. Ch. 398, 399 ; Murdock v. Winter’s Admr., 1 H. & G. 471 . It is true that the assignment is a specialty, but it is one of unusual features. A contingent legacy was assigned by way of security for a debt, with a direction to pay and deliver the legacy to the assignee if and when the assignor became entitled to it.

The assignment provided that it became void if the debt were paid, and, if not, any residue remaining after the application of the proceeds of the legacy to the discharge of the debt was plainly intended to be paid to the assignor. So, the problem is not primarily in reference to a debt or thing ⁴²⁹ in action, but of the title and rights created in a transfer of interest in a contingent legacy of money by an assignment in the form of a chattel mortgage with the design to secure the payment of a debt. Here the requisites concur for equitable cognizance, and equity will enforce the assignment as a valid transfer of title to the legacy upon an express trust which will continue until its uses are fulfilled. The legacy is contingent upon the survival by the prospective legatee of the life tenant; so, until the indebtedness is paid or tendered, the equitable lien and trust for the benefit of the assignee endure until the happening of the contingency upon which the legacy depends.

As the contingency is uncertain and may occur long after the expiration of more years than would be within any term prescribed by the statute, and as the interest is defeasible, and there can be no immediate right of possession nor any debt or thing in action accruing to the legatee by reason of this defeasible legacy until the happening of the contingency, it is plain that the limitations of actions would not begin to run until the future event happened and the legacy became payable to the legatee or his assigns. Bogart on Trusts, sec. 950, p. 2756; Jones on Collateral Securities (3rd Ed.), secs. 582, 583; Fidelity & Deposit Co. v. State, 164 Md. 304, 315 , 165 A. 176 . See Marshall v. Marshall, 164 Md. 107 , 163 A. 874 ; Young v. Mackall, 3 Md. Ch. 398, 407, 408 ; Subers v. Hurlock, 82 Md. 42, 45 , 33 A. 409 . Consequently, the trust and equitable lien here created in favor of the holder of the debt will continue, notwithstanding the present liability of the debtor and assignor on the promissory notes, and a covenant to pay the debt, may become barred by