Mundy v. Jacques

Boyd, C. J., delivered the opinion of the Court. This is an appeal from a decree of Circuit Court No. 2 of Baltimore City, declaring a bill of sale from the Balti ¹³ more and Ohio Investment Company to William T. Bridle to be null and void and of no effect, and decreeing that the sum of $4,102.81, with interest, be paid by the Investment Company to the plaintiff. As printed in the record there was apparently no corporate seal attached, but if the word “Seal” opposite the president’s name was intended to represent the corporate seal of the company, the instrument was not acknowledged as required by section 41 of Article 21 of the Code. ISTor was there an affidavit by the vendee that the consideration was true and bona fide as therein set forth as required by section 50 of that article.

It is true that section 41 provides that nothing therein contained shall be construed to extend to any such sale or gift as is therein mentioned when accompanied by delivery, but this instrument purported to be executed for the company by William T. Bridle, President to William T. Bridle, individually, and to permit William T. Bridle, President, to deliver the property to himself individually, and thereby avoid the necessity of executing a bill of sale as required by the statute would make the statute a farce, instead of what it is intended to be — protection of the public against secret transfers of personl property. If the property originally belonged to the Investment Company, the public would not be informed that Bridle was in possession as an individual owner by an attempted delivery to himself. If a bona fule sale is to be made by a corporation to its president of property, the situs of which is not even changed, there should be recorded an instrument of writing which would inform the public of the change in title, and especially should he be ready to make oath to the bona fd.es of the sale. The absence of such affidavit on an instrument which is recorded would cause strong suspicion that it was because he could not truthfully make it.

Wo are of opinion, therefore, that this instrument was not only wholly void, but that there was a total failure to prove such delivery as would avoid the necessity for a bill of sale. ¹⁴ It .is impossible to escape tbe conclusion from this record that the transaction was, an effort to put the property beyond the reach of this creditor. The judgment on which the appellee is relying was obtained against Percy J. Mundy, Alice Mundy, his wife, and the Baltimore and Ohio Investment Company in the Superior Court of Cook County, Illinois. On the 8th of February, 1908, suit was brought on that judgment in Baltimore under the Fule Day Act, and judgment was obtained thereon on the 25th of November-, 1908, against the Mundys. The record is not clear* as to that, but we suppose the Investment Company was not served with process in that case.

At any rate the judgment was not against it. Percy J. Mundy was the son-in-law of William T. Bridle, Mrs. Mundy being his daughter, and was in charge of the property. According to the date in the bill of sale it was executed on March 25th, in Baltimore, and the circumstances all go to show that Bridle knew that the judgment was about to be or had just been obtained against the Mundys, and an attachment against the Investment Company was issued just about the. hour that the bill of sale was put on record on March 26th. Just how long Bridle was in Baltimore is not shown, but the record does show that although he was summoned on March 26th to answer the bill, the injunction, which was ordered on March,28th and served on Mundys on March 30th, was returned non sunt as to William T. Bridle, individually and as president of the Investment Company.

But beyond all that, when it, is attempted to show that there was a valid consideration for the bill of sale, what do we find? The papers which Mr. Sehirm spoke of as being in his possession disappeared and were not offered in evidence. Mr. Schirm’s explanation is that they were in “a very large envelope” which he placed on a box next to his desk in which- papers were filed; and he sometimes threw waste paper on that box and as the janitor would sometimes leave the scraps of paper there he told him to take them-off and his theory is that the janitor had thrown the envelope' with the waste paper, which had been carted away. ¹⁵ Mr,. Mundy testified, in speaking of the consideration in the hill of sale, “The payment was made by check, I believe.

In fact, I know it was. I saw the check.” Then he was asked, “What do you know about the payment; how do you know it was paid ?” and replied, “Why, the cancelled checks for the stockholders Mr. Bridle sent me to go to Mr. Schirm, and I turned them over to Mr. Sehirm.” He said the can-celled checks were payable to the different stockholders of the corporation, that he could remember four out of the five stockholders, hut could not be positive as to the fifth, that he knew the signatures on the checks which went through the bank. He did not state who the stockholders were, how much each check was for, or give the dates of them. So far as the record discloses one of them might have been to Bridle himself for the greater paid of the $6,000.00, the consideration mentioned in the bill of sale.

The judgment in Illinois was then standing against the company, whether valid or not. It is true that the appellants claim that that was not known to the company, but when the relationship between the Mundys and1 Bridle is considered in connection with the proceedings by the attorney in Illinois, it would require more than we have in the record to convince us that it was not known that the judgment by default had been rendered against the Investment Company. In his testimony Mr. Schirm speaks of the checks and various papers which were left with him and were lost as explained, hut it is perfectly manifest that his testimony as to them is hearsay of the most pronounced character. The substance of it is simply that Mundy and Bridle left certain papers with him which he in a very general way described, but he made no attempt to establish the authenticity of any of them.

If it he admissible to have a client deliver to an attorney ’papers purporting to be a certified copy of the records of a corporation ratifying the sale of its property, can-celled checks to various stockholders, releases and receipts of the stockholders, etc., and then when the papers are lost to permit the attorney to testify to them as such papers as ¹⁶ they purported to he, there would- he no- protection against fraud — however honest the attorney may be. We will assume that Mr. Sohirm believed' that these papers were what they purported to be, but he does not pretend to say that he knew the signatures of the parties, or that he had any knowledge as to what they were excepting what he got from Bridle and Mundy. He does not attempt to give their contents, but simply said what they were. Bridle was not called as a witness, and although it was stated at the argument that he was at some remote'point, the record does not disclose that any effort was made to have the case postponed until he or his deposition could be procured.

Over two years had elapsed between the filing of the bill and the hearing of the ease. Bridle not only had a considerable sum of money involved in the controversy, but he was charged with such fraud as ought to cause an honest man to make great, sacrifices in order that he might meet the charge. The circumstances undoubtedly tend to show that the bill of sale was given, when and as it was, with the intent to hinder and delay the plaintiff, and that there was every reason to believe that the plaintiff would proceed against the investment company by way of attachment! If the law permitted a president of a corporation to, buy all of its property just as it is likely to be seized by a creditor, and even pay the consideration to the stockholders instead of into the treasury of the company, where it might be reached for its debts, it would sanction and encourage fraud instead of condemning and cheeking it.

It is well settled that as against creditors a transfer of property must be bona fide as well as for value, Chatterlon v. Mason, 86 Md. 236 , McCauley v. Shockey, 105 Md. 641 , and other cases, and it wo-uld require very strong evidence to overcome the presumption of fraud that it raised by the conduct of Bridle and the circumstances of this case. So without prolonging the discussion on this branch of the case, we would have no hesitation in declaring this attempted transfer of the property formerly held by the Investment Company null and void against a subsisting creditor of that ¹⁷ company, even if the hill of sale had been executed in accordance with the requirements of the statute, or if there had been sufficient evidence of such delivery of the property as would have made a hill of sale unnecessary, as the law will not permit- a president of a corporation to thus take over all of its property to the prejudice of its creditors — especially when, according to the evidence offered in his behalf, he paid the consideration to the stockholders and not to the company. The next question presented by the brief of the appellants is whether the Illinois Court had acquired jurisdiction over the Investment Company — it being contended that it had never been served with process. Assuming for the present that the records of the proceedings in that State offered in evidence are sufficient, let us see what they show.

The summons against the Mundys and the Investment Company was issued on July 12, 1907. The return of the sheriff as to that company was “Served this writ on the within named Baltimore and Ohio Investment Company, a corporation, by delivering a copy thereof to Percy J. Mnndy, director of said corporation, this 19th day of July, 1907. The president of said corporation not found' in my county.” On the 7th of August, 1907, what is spoken of as an order of default was entered, in which, together with other things-, is the statement that “it appearing to the Court that due personal service of process of summons issued in said cause has been had on the defendants for at least ten days before the first day of this term.” Then on the 10th day of August, the following proceedings took place, “This day comes the defendant by their attorney, and enter herein their motion to set aside and vacate the order of default heretofore entered herein of record on the 7th day of August, A. D. 1907, which motion is entered and continued to the 16th day of September, A. D. 1907.” On the 24-th of October on motion of defendants’ attorney, it was ordered that leave be given the defendants to file an additional affidavit by October 31st and that a hearing of said cause he set for November 2nd. On that day it was ordered that the defendants’ motion to set aside ¹⁸ and vacate the order of default he overruled and that said cause he set for hearing to assess the damages for Monday, December 9th, 1907.

On December 7, 1907, there was another order “that the defendants’ motion to set aside and vacate the order of default heretofore entered herein of record on the 7th day of August, A. D. 1907, be and is hereby overruled and denied.” An order of December 13th, 1907, is set out in the record which shows that reference was had to. a jury to assess the plaintiff’s damages against the defendants. The names of the twelve jurors are then given, and the order concludes that they “after hearing of the evidence adduced, say: ‘We, the jury, assess the plaintiff’s damages at the sum of thirty-five hundred dollars.’ Thereupon the defendants éntered herein motions in arrest of judgment.” On the 4th of January, 1908, a formal order was entered under a titling of the plaintiff against the three defendants which begins, “This cause coming on to be heard upon the defendants’ motion entered herein for a new trial in said cause, after arguments of counsel and due deliberation by the Court, said motion is overruled and a new trial denied. Thereupon the defendants enter herein their motion in arrest of judgment, which motion is also