Turner v. Hudson Cement & Supply Co.

¹³⁶ Boyd, C. J., delivered the opinion of the Court. The hill of complaint was. filed in this, case by the appellees against the appellants to set aside two deeds made by Frederick E. Tobe to his daughter, Roberta L., who. is now Mrs. Turner, a deed from Roberta L. Turner and her husband to said Tobe and a lease from him to his daughter; and to sell the property described in the deeds and apply the net proceeds to the payment of the claims alleged to be due the plaintiffs. The American Exchange and Savings Bank and the West North Avenue Savings and Loan Association, mortgagees, were also made defendants. A decree wasi passed adjudging, (1) that Frederick E .Tobe was indebted to the Lafayettei Mill & Lumber Co. in the sum of $6,454.00, to the Hudson Cement & Supply Company in 'the sum of $664.94, to George H. Harrington & Brother' in the sum of $187.79, and to A. Weiskittel & Son Company in the sum of $191.39; (2) that the deeds and lease be set aside, and (3) that the properties, or so much thereof as may be necessary, be sold subject to the mortgages thereon.

From that decree this appeal was taken. The evidence shows that Frederick E. Tobe was what is spoken of as a “bonus builder,” and had been for some years. In this instance a Mr. Lauer made an arrangement with Mr. Tobe, and after Mr. Bauer’s, death his wife continued the arrangement, by which she advanced at different stages of completion of the houses built on her property seventy-five per cent, of the cost, and then made leases to Tobe subject to ground rents, varying from $70.00 to $120.00 per annum. He then executed mortgages to her to secure the amounts so advanced.

The appellees furnished Tobe with materials used in the .houses. This had been going on for some years, and the Hudson Cement & Supply Co. and the Lafayette Mill & Lumber Co. had large dealings with Tobe. On May 5th, 1910, Toba assigned to his wife, for a consideration named in the deed as $3;500.00, a leasehold property known as No. 2403 West North avenue, subject to an ¹³⁷ annual ground rent of $120.00. On the same day she gave a mortgage to the West North Avenue Savings and Loan Association for $1,040.

On May 7th, 1914, the Provident Realty Corporation conveyed to her and to her husband, as tenants by the entireties, a property known as 2804 Garrison avenue. On that day they gave a mortgage on that property to the West North Avenue Savings & Loan Association for $1,768.00. Mrs. Tobe died on November 8th, 1914, and her husband qualified as her administrator on November 12th. On, November 24th an, inventory was returned which included the leasehold property on West North avenue, appraised at $2,500.00.

On the same day the administrator filed an account distributing that property—one-third to himself, as surviving husband, and two-tbirds to bis daughter—Roberta L. Tobe (now Turner). On tbe same day he executed a deed as administrator conveying the property to himself and his daughter in the proportions mentioned, and also on that day assigned his third interest in that property to his daughter. On February 17, 1915, Roberta L. Tobe gave a mortgage on the North avenue property to tbe West North Avenue Savings & Loan Association for $1,976.00—the other mortgage having been taken up or paid off. On December 3, 1914, Frederick E. Tobe conveyed to his. daughter the Garrison avenue property.

On Angust 11, 1915, she mortgaged it to the American Exchange and Savings Bank for $3,500.00. The same day she and her husband conveyed it to Frederick E. Tobe, and be leased it to ber, reserving a ground rent of one cent per annum. We do not deem it necessary to discuss the transfer of the Garrison avenue property from Mr. and Mrs. Turner to Tobe and the lease from him to his daughter, as they were evidently made simply for the purpose of making it leasehold, instead of fee simple property. We do not understand the appellees to question the title of Mrs. Tobe to those two properties, and the bill does not attack the deeds to ber.

As the one-third interest in the leasehold on West North avenue was ¹³⁸ distributed to him, and as the survivor of his wife he became entitled to the Garrison avenue property in fee, they being tenants by entireties, our inquiry will be confined to his right to convey them to his daughter. It would have saved us some labor in ascertaining the amounts of the liabilities and assets of Tobe at the dates of the transfers, if more concise statements giving them had been in the record, but for the purposes of this opinion it will be sufficient to adopt the admission in the appellants’ brief and what Mr. Tobe himself testified to. In that brief is the following: In the examination in chief of Mr. Tobe this appears: “Q. That made your total assets on December 3, 1914, $11,725, is that correct ? A. About that, yes.

Q. And your total liabilities as $7,583.77 ? A. About that. Q. Making you have an excess of assets over liabilities of $4,142.00, is that right ? A. Yes.” The appellants contend that at the dates of those transfers he had ample property to meet his obligations, and hence he had the right to convey the properties to his daughter, but without taking up each item included in the statement of his resources, it is clear that most of them were subject to reductions.

The ground rent and interest on prior mortgages had to be deducted out of the proceeds of sales that he made, but were not allowed in the estimates of resources. There were other items which were at least questionable, and if not allowed, as the appellees contend they should not be, there was no excess of assets at the time of the transfers. But without discussing: them, and conceding that there was the nominal excess testified to by Tobe, the evidence showed that he was ¹³⁹ contracting new debts and making use of the assets he had, which were of a very doubtful character—being dependent upon his ability to sell the property. The mortgages he had were second or third mortgages and the equities in other properties were on unfinished houses, and leasehold lots, the titles to which were not as a rule in him.

That they were of a most unsatisfactory character’ is. shown by the fact that when there was a foreclosure of some of the mortgages the property brought much less than the estimates of Tobe and nothing went to the second mortgages on them. The collection of those which were collected was. postponed until Tobe could make sales, of the properties, which of itself would in m]any instances have delayed the creditors for several years if they had to rely on them. We can have no doubt that when he transferred the properties to his daughter he did not have sufficient assets, or of such kind as authorized him to do so. In one of the latest cases in this Court on the subject— Wilmer v. Placide, 131 Md. 406—we quoted from Goodman v. Wineland, 61 Md. 449 , where it was said that.: “It is a ‘hindrance’ to creditors for a debtor to- dispose of his real property and tangible chattels, which are readily subjected to execution, and compel them to rely upon.merely personal obligations, with, the risks and the necessity for numerous attachments usually incident to such a resource.” In the Wineland case it was contended that he had ample means outside of what he had conveyed to his wife, and immediately preceding what we have quoted above, the Court said: It is further to be observed, that in showing the debts due to Wineland, they are not such means as can he considered equal to real and personal property, such as was. conveyed to his wife, in their availibility to creditors for the prompt satisfaction of their claims.” In Bullett v. Worthington, 3 Md. Ch. 99 , the Chancellor, on page 106, said: “If there be a reasonable doubt of the adequacy of his means, or if his property be so circumstanced that delays, difficulties and expense must be encountered before it can be made available to his creditors, then, as I con ¹⁴⁰ ceive, the voluntary conveyance must fall, because then it has the effect to delay and hinder his creditors.” That was quoted with approval by Judge Eccleston in Williams v. Banks, 11 Md. 198 , and was not disapproved of by the other judges in that case, and was later approved in Warner v. Dove, 33 Md. 579 .

In the latter case, the effort was to set aside three sales of real estate which had been conveyed to the wife by third parties. While under the circumstances there proven the Court refused to set aside the deeds, the decision does not support the contention of the appellant that the appellees are not entitled to relief, because the properties owned by Tobe at the time he made the deeds were of the same character as those he had'when the debts were contracted, as the facts were so different. It was there said: “The evidence in our judgment shows beyond reasonable doubt that the husband at the time of these gifts was in prosperous circumstances, unembarrassed and possessed of ample means consisting .of the same kind of property that he had when the debts.of this firm were contracted, to pay all the debts he then owed, and that the settlement was a reasonable one. He had remaining of such property and assets more than ten times the amount of this, the only pre-existing debt.” In this case Tobe was not "in prosperous circumstances, wvernharrmsedf’ and it is not shown “beyond reasonable doubt” that he was "possessed of ample means,” etc. The Court went on to say: “It is to be observed, this is not a case where a party possessed of real estate and also' of assets of this description conveys the former, which is unencumbered, visible, .tangible and easily accessible to creditors, in settlement upon his wife and family and leaves his creditors to resort to the latter, where their remedy might be more precarious and difficult, and the property, at all events, less readily and conveniently accessible to their claims.

A conveyance of that character would of necessity operate to hinder and delay creditors in the collection of their debts, and for that reason would be void, though enough might be shown to remain for their ¹⁴¹ eventual satisfaction, as was decided by the Chancellor in Bullett v. Worthington, 3 Md. Ch. 99 .” The Court in another part of the opinion referred to the fact that it did not appear that the husband owned any real estate. There can be no doubt that these deeds were voluntary and without sufficient consideration to support them. Tobe said, in reply to the request of his attorney to state why he transferred those properties: “The principal consideration and the whole consideration was that my daughter had taken care of my wife, taken care of the house, looked after everything in general and my wife wanted her to have it,” and in reply to another question said: “The primary interest in that was the service my daughter rendered my wife and myself during my wife’s illness, of nearly three years.” The daughter stated the consideration to he that, “The properties were bought with my mother’s own money and by her request they were given to me—by her request 1 was to receive everything that was her’s.” A sufficient answer might be, as far as the Garrison avenue property is concerned, that it was not her mother’s to give, as it was conveyed to her and her husband, as tenants by the entireties, and that too only six months before her death. A wife and husband can not tbus hold property, and then during the illness of the wife, when there is every probability of the husband surviving her, claim as a valid consideration for the transfer of the property, a request that the husband give it to their daughter, if the husband’s creditors, will thereby be injured.

It is very commendable in a, husband to carry out tbe wishes of his wife, if he is in such, financial condition as he can properly do so,'hut not if it is at the expense of his creditors. According to the evidence of the daughter, her mother dealt very generously with her in her lifetime—gave her nearly $3,000 in cash, hank stock and some other property, hut she did not either give her the North avenue property in her lifetime or leave it to her by will. The daughter was just twenty-one years of age when her’ mother died, and had lived with her parents all of her life up to that time. ¹⁴² Since then she has lived with her father, or, as she says, her father lives with her. Even when a child is over age and, while residing with his parents without any agreement for compensation, renders them services, that does not constitute a valuable consideratiain for a conveyance, as against creditors.

Sunderland v. Ebling, 125 Md. 686 . There can be no doubt in this case about the knowledge of the grantee of her father's financial condition. She kept his accounts, drew checks 'and notes for him and in most respects seemed to be as familiar with his affairs as he was. She is clearly chargeable with such knowledge as is necessary to bind a grantee, in a proceeding to set aside deeds and we will not discuss that branch of the case further.

It is said on the part of the appellants that the credits were not given on the faith of the ownership of the properties in question. From the 7th of May, 1914, the creditors had the right to look to some interest of Tobe in the property on Harrison avenue and Lafayette Mill & Lumber Co. accepted renewals of some of its notes between that date and the transfers to the daughter, but we do not understand that to be a material question in this case. He had the titles to the properties in him, and he was largely indebted when he transferred them to his daughter. It could scarcely be contended that if a man is in debt and inherits property, or it becomes vested in him as a tenant by entireties, he can give it away and deprive his creditors of it, merely because he did not own it when the debts were contracted.

The law in this State is well settled as to the rights of creditors against debtors making voluntary deeds. In Kane v. Roberts, 40 Md. 590 , after citing Williams v. Banks, supra; Cooke v. Kell, 13 Md. 469 , and Moore v. Blondheim, 19 Md. 175 , the Court said: “These cases hold that a voluntary deed, which is fraudulent 'in law, is void as against preexisting creditors, and also that a voluntary deed, which is made with the design to defraud subsequent creditors, may be impeached by those so defrauded. But they also hold ¹⁴³ that where a voluntary deed is made without design to defraud subsequent creditors and is recorded, it