Thomas v. Trieber

Tuck, J., delivered the opinion of this court. The opinion on this appeal has been delayed at the request of counsel in the case of Sangston vs. Gaither, in which some of the questions presented by this record were said to arise. The court were disposed to accede to this request, in view of the contrariety of decisions in other courts in which assignments for the benefit of creditors had been contested, and, especially, because of the embarrassing fact, that although the subject oí such assignments had been three times before ²⁶ the Court of Appeals of Maryland, the ultimate judgment was rendered by three of the judges only, the others being of the opposite opinion, by which the question then under review was left, as it was in the first of these cases, in equilibrio. Having carefully examined the authorities referred to in both cases, with the general principles applicable to the subject, we proceed to express our views upon the exceptions in this cause.

John Gamber being indebted to the appellee, an attachment was issued and levied on certain personal property, which had been conveyed, with other personal and a large real estate in Virginia, to the appellants, as trustees. This deed was executed in Virginia, where the grantor and the trustees resided, and where all the property then was. In the progress of the cause the appellants came in, by petition, and claimed to be the owners of the property on which the attachment had been laid, in virtue of this conveyance. The plaintiff proved his debt, that Gamber was a non-resident, that he was insolvent at the date of the deed, and that he thereby conveyed all his property.

The court below decided that the deed was void as against creditors, on account of the reservations in favor of the grantor. This conveyance recites Gamber’s indebtedness to Samuel Brady, and to other parties of the third part named in the deed, and his desire to secure the payment of said debts to Brady, and to such of the olher creditors named in the deed as should sign the same. The property is conveyed to the appellants in trust, for the following purposes: 1st. To permit the grantor to hold possession of all the property, real, personal and mixed, to take the rents, issues and profits, and to possess and enjoy the use and benefits thereof, paying no rent therefor, until a sale should be effected according to the- provisions of the deed, the grantor giving bond, with security, for the delivery of the property at the day of sale, which bond was to be held on the trusts declared in reference to the property. 2nd.

That if the grantor should not pay to Brady, in three ²⁷ semi-annual payments, the debt due to him, and to such of the other parties as should sign the deed, in four semi-annual payments, the amounts due them, and all costs and commission, the trustee should sell the properly, and (if the proceeds of sale proved sufficient,) pay Peabody & Co., then Brady, and such other of the parties of the third part as should sign the deed, and the balance, if any, to pay over to the grantor himself. There is no time limited within which these creditors are required to signify their assent by signing the deed. 3rd. If the proceeds of sale should prove insufficient for the above purposes, then to pay .a certain claim of Peabody & Co., and to distribute the residue ratably to Brady, and such other of the creditors named in the deed as might sign the same. 4th. The deed to be void if Gamber should pay all the debts mentioned in the deed, with costs, commission, &c., &c. 5th.

The creditors named in the deed, by signing the same, covenanted and agreed with Gamber to extend to him a credit of six, twelve, eighteen and twenty-four months on their respective claims, subject to the power to sell in case default should be made in paying these instalments as they might fall due. It will be observed that this deed does not stipulate for releases from the creditors who might sign. In this respect it differs from the instruments which were the subjects of controversy in the cases of McCall vs. Hinkley, 4 Gill, 128 ; Albert and Wife, vs. Winn and Ross, 7 Gill, 446 , and Kettlewell vs. Stewart, 8 Gill, 472 , to which allusion has been made. But the grantor reserves to himself the possession and enjoyment of all the property for at least six, perhaps for twenty-four months, and, indeed, for an indefinite time, if the trustees should not think proper to sell, and none of the preferred creditors should require the sale to be made.

He also reserves to himself the surplus, after payment of the claims of the assenting creditors, and of Brady, (whose assent is not required,) to the exclusion of all other creditors, who can in no event obtain any part of their claims by the provisions of ²⁸ the deed, and these benefits, confined as they are to such of the named creditors as might assent, are extended to them only on the condition that they will, while the debtor is using and enjoying the property, grant further time on their claims against him. Various questions have arisen in the .courts of the several States upon the construction and effect of assignments of this description. The contest, however, has been carried on, principally, between those who affirm and those who deny the validity of preferential deeds requiring releases, as one class of such instruments has been designated in this court. 8 Gill, 506 , With whatever force of argument or weight of authority these have been sustained, there is little difference among the authorities, as to the necessity of the debtor’s conveying all his property for the benefit of his creditors. And although there are cases in which deeds, reserving a part of the property or the whole, for- a limited time, for the use pf the grantor or his family, have been held to be valid, yet much the greater number of decisions have condemned them as fraudulent and void.

Those in which partial assignments have been thus stigmatized, have but asserted a plain principle of justice — that a debtor, confessedly unable to pay his debts, when he asks to have his future earnings released from liability, must accompany this appeal to the humanity of his creditors, by a tender of all the property that he has, and that if he wishes to retain any portion for the benefit of-himself or family, it must be done with the assent of all those who have a just and legal claim upon it; because if a debtor can rightfully coerce his creditor into releases of this kind, it must be on the principle that the statute of Elizabeth does not operate on one’s time and future labor, but only devotes that which is the subject of assignment — his property — to the payment of his debts, and protects that only from being placed beyond the reach of his creditors by fraudulent conveyances; and that, therefore, while exercising his undoubted right to prefer some creditors to all the others, by paying them in full or by assigning property in satisfaction of their claims, he may so ²⁹ discriminate as to protect his future earnings, provided he parts with all that he has. 5 Rawle, 221 . It is not our purpose to examine the decisions on this point. The subject has been elaborately discussed in most of the States, and in none with greater ability than in the late Court of Appeals. It is much to be regretted that a difference of opinion among the judges should have left so material a question unsettled, and it is because the subject has been fully argued before us, and the counsel in both cases have suggested the importance to the public of having it settled, whether assignments, as common as those are said to have been in this State, are valid or void, for the reasons assigned in those cases, that we feel warranted in saying, that hereafter, as to deeds presenting the question which we understand to have been before the Court of Appeals, we shall follow the decisions in 4 Gill and 8 Gill.

The first of these was decided in 1846, since when the same question arose in 8 Gill, and in the Circuit Court of the United States, in the case of White, Warner & Co., vs. Winn and Ross, in which Chief Justice Taney delivered the opinion of the court, affirming the validity .of the same deed which the Court of Appeals, in 7 Gill, declared to be void. These decisions have probably induced the belief, with the community and the profession, that such .conveyances would thereafter be sustained, and it is not unlikely that, under this impression, much property is now held by titles of this kind. These considerations, and the state in which we find this question in Maryland, are, we think, of sufficient weight to render unnecessary a re-examination of the principles on which the doctrine adverted to has been maintained. We, therefore, content ourselves with recognising the law as declared in the two cases to which we have referred, as more conducive to the public interest, than that these decisions should now be disturbed.

The deed before us does not require releases from the assenting creditors, and it was on this ground, as we understood the appellants’ counsel, that he mainly contended that it is valid; because, as he urged, most if not all such instruments ³⁰ ■which had been declared void, contained this coercive stipulation, while others have been sustained, notwithstanding the possession of the property was reserved to the grantor. Several cases were referred to in support of these positions, and especially that of Estwick vs. Caillaud, 5 Term Rep., 420. This decision has been remarked upon in many of the cases in which the subject has been presented; efforts have been made to lessen its authority, on various grounds, and judges have sought to avoid its effect, either by denying its authority or by distinguishing it from the cases before them. See Senator Golden’s opinion, in Mackie vs. Cairns, 5 Cowen, 569, and Ch.

J. Savage’s, same case, 583. It will be found, on comparing this deed with that in 5 Term Rep., as explained by the judges in their opinions, that in terms and effect they are very different. The names of the creditors were mentioned as here, but the trust was created with the assent of the creditors themselves, and after he had offered payment, out of other property which he retained, to the creditor in whose behalf the deed was contested. It required no release from any of the creditors, it did not exclude any for dissenting, nor impose conditions or restraints of any kind upon them.

It was the case of a debtor securing a portion of his creditors for the full payment of their claims, ultimately, and leaving other property to pay other debts. This was the view taken of the case by Savage, Ch. J., in 5 Cowen, 583. See 1 Hopkins, 397.

We do not deem this case as entitled to the authority, on the present appeal, ascribed to it by the appellants’ counsel, for it is manifest that there are several stipulations in the deed of Gamber, which do not appear in that of Lord Abingdon, and which, in our opinion, render it void. The appellants’ counsel has also referred to the cases of Rose’ Adm’x, vs. Burgess, 10 Leigh, 186 . Claytor vs. Anthony, 6 Randolph, 285, and Kevan vs. Branch, 1 Grattan, 274. The deed in the first of these cases was executed by an administrator, to indemnify the sureties in his official bond; and the property might, without objection, remain with the ³¹ grantor until it became necessary to take it for the purposes of the trust.

In the second the deed was for personal property to secure a particular debt, with power in the trustee to sell, and did not, in any sense, partake of the character of an assignment for the benefit of creditors. The last of these cases, however, is very much like the one before us, as respects the reservation of the property to the grantor, and does sustain the view taken, on the part of the appellant, of this branch of the case. But there is no opinion of the court, nor statement of the grounds of the decision; under which circumstances, and being opposed by nearly all the cases in which the subject has been discussed, we cannot acknowledge its authority. The counsel for the appellant has also relied on the case of Halsey vs. Whitney, 4 Mason, 218 , to show that the assignment need not transfer all the debtor’s property.

It was suggested at the bar that the debtor had no other property; but Judge Story did not deem it material, in that case, to introduce the fact by amendment of the pleadings. The only reason assigned by the judge is this: “But if he has other property, then the presumption of fraud is less cogent; for a debt- or, conveying part only of his estate to certain privileged creditors, does not thereby necessarily impair the rights of other dissenting creditors. The argument has generally come from the other side, as repelling any inference of fraud, such was the reasoning of Estwick vs. Caillaud, 4 Term. Rep., 420, and Wilkes vs. Ferris, 5 Johns.

Rep., 335.” We have shown the character of the case, in 4 Term Rep., 420, and that it does not in our opinion, apply to cases like the one before us. The case in 5 Johns., 335 , also referred to by the learned judge, was decided on the authority of Estwick vs. Caillaud, and has been followed by scarcely any case in New York, since, while most of them have adopted the opposite doctiine. It is worthy of remark, also, that Judge Story in deciding Halsey vs. Whitney, sustained a deed exacting releases from the creditors, against his own judgment, upon the authority ³² of cases, in which it was held that the transfer of all the debt- or’s property is necessary to the validity of such assignments. In the case of Riggs vs. Murray, 2 Johns.

Ch. Rep., 565, Chancellor Kent pronounced against a deed which reserved to each of the insolvent grantors two thousand dollars per annum, for the support of their families, until the creditors executed releases, or until one year after they were discharged by law, for the reason that this and other conditions were onerous and oppressive to creditors, using in his opinion (pag 582,) this language: “If an insolvent debtor may make sweeping dispositions of his property to select and favorite creditors, yet loaded with such durable and beneficial provisions, for the debtor himself, and incumbered with such onerous and arbitrary conditions and penalties, it would be impossible for courts of justice to uphold credit, or to exact the punctual performance of contracts.” This decree was subsequently ( 15 Johns., 571 ,) reversed by the Court of Errors. Afterwards Ch. J. Spencer, in sustaining a similar deed, (20 Johns., 447 , Austin vs. Bell,) on the authority of this case, said. “We are bound by that decision,” (the decree of reversal,) “whatever our private opinions may he as to its accuracy and solidity.” Later decisions in the courts- of New York have gone so far in vacating deeds containing such reservations to the grantor, that Chancellor Kent, in his Com., 2nd Vol., 535, note, says, that the decision of the Court of Errors, in Murray vs. Riggs, may be considered as justly exploded, Mackie vs. Cairns, 5 Cowen, 547, was a deed reserving $2000 per annum for tile benefit of the grantor, until he should be discharged from his debts.

Golden, senator, thus states this case:- “Mr. Cairns being insolvent, assigned, by several instruments, all his property to S. and L., in trust, that they should allow him out of the proceeds, or out of the rents and profits, $2000 a year, till he should be discharged from his debts, but the allowance was not- to extend beyond four years; and upon the further trust, that the residue should be distributed among certain of his creditors.” This is not very dissimilar to the deed before us,- the material difference ³³ is, that here all the property, with the income and profits, is reserved to the grantor, for six, twelve, eighteen or twenty-four months, according as the debtor might or might not meet his engagements in the deed, with a reservation, after paying certain debts, of the entire residue to himself. In the one case the creditors would receive payment out of the income after deducting the $2000, annually; in the other they could get nothing, however large the profits might be, until the time