Sangston v. Gaither

Tuck, J., delivered the opinion of this court. This case began by attachment issued out of Baltimore county court, on the 17th April 1848, at the suit of the appellee, Gaither, to recover the sum of $638.20, due him by G. W. Phillips, a non-resident debtor. The original defendant did not appear to the action. But the attachment was served on the appellant, Sangston, as garnishee, who appeared and defended it; and the case went to trial on the issues joined on the said garnishee’s pleas, of non-assumpsit and nulla bona.

Upon these issues a verdict was taken, by consent, in favor of the appellee, for the full amount of his claim, subject to the opinion of the court on a case stated, which admits the citizenship of Gaither, the appellee, and that the debt- or, Philips, was not a citizen or resident of Maryland, but that he resided in the District of Columbia, on the 7th March 1848, when his deed of trust, thereinafter referred to, was executed, and ever since; and also admits that Philips was, and is indebted, to Gaither, in the amount shown by the promissory notes on which the attachment was issued; and that Gaither is entitled to recover the same, as found by the verdict, unless the court should be of opinion, that the property or funds in the hands of the garnishee, Sangston, are not liable to said attachment; or not, at all events, to that extent: he, Sangston, being in possession of said property or funds under the following circumstances, as stated in his answers to the plaintiff’s interrogatories. The garnishee in his answers states, that he was not indebted to Philips, or any one for his .use or benefit, and had not, since the attachment, paid any money, or delivered any property to any one for his use and benefit: and he admits that the debtor, Philips, on the 7th March 1848, and in the city of Washington, executed to him, Sangston, a deed of trust, which is exhibited with his answer, and that he had received from the property thus conveyed to him in trust, $8402.15. He also states, that in accordance with the provisions of the deed, directing ratable distribution amongst such of the creditors as should release Philips, the grantor, within sixty days after the date of the deed, &c,, he, ⁴⁶ •on the 1st November 1848, distributed the amount received amongst the releasing creditors, retaining, however, out of it, the amount of the plaintiffs claim, to await the issue of this suit. The deed of trust referred to in the above answers, was made at the city of Washington, on the 7th March 1848, and there duly acknowledged and recorded.

By it, Philips, after recital of his indebtedness to various firms and persons, and his desire to provide for the payment of it; and specifying the amounts due to each, conveys to Sangston, the garnishee, “all and singular, the stock in trade, goods, wares, merchandize, dry goods, stock and fixtures, and goods and chattels, of him, the said Philips, now in and about the store and premises occupied by the said Philips, at the corner of 7th street, fronting the market space in the city of Washington: And all and singular, the choses in action, debts, claims, bills, notes, bonds, accounts, judgments, books and other evidences of debt whatsoever, growing out of the dry goods business lately carried on by the said Philips in said city, and due, or to become due to him,” in trust for the purposes thereinafter specified, l'n the specifications of these trusts, after giving the trustee various powers as to the sale of the property, and the collection of the debts, and the settling or compounding of the debts in such manner as he, the trustee, may deem advisable, he directs that the trust funds, thus realized, shall be applied as follows: 1st. To the payment of expenses, and the trustee’s commission of five per cent. 2nd. To distribute to each creditor, who “shall have elected, within sixty days from the date of the deed, to come in and share in the trust, and shall have filed a valid and sufficient release of all claims and demands against the said Philips, in consideration thereof, with the said trustee, (and no other creditor or creditors whatsoever,) such a dividend of such assets as he shall be found entitled to, in the proportion of the whole of the debts hereinbefore scheduled, to the whole nett assets; so that the dividends, or proportions, which would have been payable to such creditors, if any, as shall not have released, as aforesaid, ⁴⁷ shall be retained by the said trustee in such distribution, and paid over to the said Philips, his executors, administrators or assigns, leaving such creditors to their ordinary legal remedies against the said Philips.” 3rd. To pay the surplus, if any, after paying the debts aforesaid, to him the said Philips, his executors, administrators or assigns: “Provided, always, and it is the true intent and meaning of these presents, that no creditor of the said Philips shall have any benefit from this trust, or receive any portion of the assets, aforesaid, who shall not within sixty days from the date of these presents, execute a release to the said Philips, &c., of and from all claims, debts and demands, whatsoever, accepting the proportion of effects which would be coming, as aforesaid, to such creditor in full satisfaction thereof, and surrendering to such trustee the evidences of such debt, claim or demand.” The deed is followed by a statement as to the assent of a large part of the creditors to the terms of the deed, and also by a statement of the trustee, as to the distribution made by him amongst the assenting creditors, and the dividends paid to each, from which it appears, that the said creditors had agreed in writing to accept the terms of the deed, and give the release; and had taken their dividends, and receipted for the same; but had given no other release or acquittance.

It is also admitted, that, of these creditors, the plaintiff Gaither, and Smith and Dyer, two of them, had refused to accept the terms of said deed; and that their dividends, which under the provisions of the deed are to be paid over to Philips, because of their refusal, amount to $230.58; (to wit: $171.18, to the plaintiff, and $59.40 to Smith and Dyer,) are still in the hands of the said garnishee, Sangston; and that the plaintiff’s was the first attachment issued. The case stated, then concludes with the following agreement : “If the court shall be of opinion that the said property, or funds, which came to the hands of the garnishee in manner aforesaid, or any part thereof, is liable to said attachment, then judgment shall be entered for the plaintiff on the verdict in this case, for the amount of said verdict, with in ⁴⁸ terest from 12th February 1849, or for such sum as the court shall decide is liable therefor. But if the court shall be of a contrary opinion, then judgment accordingly to be entered, and either party shall have thé right to appeal from said decision.” On this statement, the court gave judgment for the plaintiff on the verdict, and for the amount found by the verdict, and from that judgment the present appeal was taken. The case stated does not plainly show whether this was an assignment of all the debtor’s property or not; nor is it stated that h'e' was insolvent at the time, and the counsel for the appellant contends, that the onus- of showing such a state of case is' on the party claiming against the deed.

We have said, in'the case of Green and Trammell vs. Trieber, (ante, 11,) that an assignment for the benefit of creditors, exacting releases, as the condition on which they may participate in'the fund, must transfer all the debtor’s estate. It would seem, therefore, to be the duty of the party, who sets up the deed, to show that the' debtor had done what the law requires to give it validity and effect.- If we assume that the grantor had other property the deed would be void, for the reason that it stipulates for releases from the creditors, on a conveyance of part, only, of his estate; And if in- fact he had no other property his insolvency is apparent, because there was not enough to pay even the preferred creditors, and out of that he reserves certain dividends to himself.- But the validity of such instruments does not depend on the-insolvency of the grantor. His property may equal all his debts, and yet the deed be good, if it does not contain provisions- obnoxious to the' statute. The authorities say,, that a reservation to the grantor of the surplus, after paying all his debts, will not avoid the assignment; which implies that a party, not insolvent, may execute such a deed, if it be in all other respects free from objection. 9 Gill, 216 .

Conceding the deed to be valid, but for the reservations in favor of the grantor, what is their effect? Philips reserves to himself the surplus after satisfying the creditors- named in ⁴⁹ the deed, and also the dividends, in case of deficiency, of those who may have rejected the terms proposed. We see no objection to a reservation to the grantor of what may remain after payment of all his debts. He may properly enough take to himself what, in such case, the law would grant, as a resulting trust.

The argument on the part of the appellant, is, that a similar trust arises in a case like the present, and that for the same reason these reservations do not avoid the deed. Assignments, with provisions of this character, have been sustained. Halsey vs. Whitney, 4 Mason, 206 . 2 Fairfield, 41. 5 Pick., 28 . 5 New Hamp., 113. But there are other cases in which, with the weight of Judge Story’s opinion, in 4 Mason, before them, eminent jurists have stated the law to be otherwise, and, as we think, with greater reason.

In Burd vs. Smith, 4 Dall., 76 ,