Williams v. Banks

The opinion of the court was delivered as follows: By Justice Eccleston :— This bill was filed for the purpose of vacating the voluntary deed executed by Hannah K. Chase, on the 2nd of August 1844, upon the ground of its being void, because fraudulent as to creditors, under the Statute of Vith of Elizabeth, ch. 5. The suit was instituted for the benefit of the complainants and all other creditors of the grantor, who should come in and con ²²⁵ tribute to tlife ‘expenses of the proceeding. Both antecedent and subsequent creditors are claimants. The deed was executed for the purpose of conveying to Nathaniel Williams and Joseph B. Williams all the estate and property, real and personal, of the grantor, in trust “to suffer and permit the said' Hannah K. Chase and her assigns, for and during the period of her natural life, to have, hold, use, occupy, possess and enjoy, all and singular, the estate, chattels, effects and property thereby conveyed and assigned, and the rents, issues, income and profits thereof, during that period, to receive and take, and the same to apply to such uses and purposes as she might think proper; and from and immediately after the decease of the said Hannah Kitty Chase] then in trust, and under and subject to the like powers, limitations, restrictions and conditions as are mentioned, expressed and declared, of and concerning the estate and property generally mentioned in and devised by the last will and testament of the said Hannah Kitty Chase, to the trustees therein named, and in and by the three several codicils by her made to said will.’5 The date of the will, and the dates of the three codicils referred to, are stated in the deed.

With the exception of a lot of ground called “Newington,’* and a ground-rent of $43.50 per annum, according to the provisions of the deed, (considering the will and three codicils as constituting parts of the same,) the trustees were to hold the whole estate of Mrs. Chase, after her decease, for the use of her daughter and grandchildren. By the 10th clause of the will, “Newington” and the ground-rent of .$43.50 were to be for the use of William C. and Samuel C. Barney equally. By the codicil dated the 9th of June 1841, this provision of the will is revoked, and one-half of “Newington” and of the said ground-rent are to be held in trust for the use of Samuel C. Barney; the other half being disposed of in the following language: “And whereas, I am now liable for the payment of large sums of money for and on account of my grandson, William Chase Barney, the payment of which I am gradually effecting during my life, but which may not be wholly accomplished before my death, l ' ²²⁶ direct my said trustees to hold -the other undivided one-half . part of the said property, in trust for the following uses, intents and purposes, that is to say, in trust to apply the rents, issues and profits of the said half part, in the first place,- to the payment of any balance of money due and owing from me at the time of my death, for or on account of my said grandson, William C. Barney.’’ And after such payment the said half is directed to be held in trust for his use for life, and then for his children. Previous to any examination of the proof in regard to the condition of Mrs. Chase’s affairs, at the date of this deed, we deem it proper to notice some decisions with reference to the construction of the Statute of 13th Eliz., ch. 5.

The cases on this subject are numerous, and distinguished jurists have entertained conflicting opinions in regard to the interpretation of the statute in some respects. To undertake an examination of the decisions, with a view of reconciling them, would require much labor without any hope of success. In Reade vs. Livingston, 3 Johns. Ch.

Rep., 481 , Chancellor Kent held, that indebtedness at the time of executing a voluntary conveyance, conclusively fastens upon the instrument a fraudulent character, as an inference of law, with reference to the claim of an existing creditor. But this doctrine has been repudiated in Worthington & Anderson vs. Shipley, 5 Gill, 449. Instead of sustaining Chancellor Kent our Court of Appeals refer' to the opinion of the Supreme Court of Connecticut in Salmon vs. Bennett, 1 Conn. Rep., 525, as enunciating what is to be considered the true interpretation of the Statute of Elizabeth.

And there we find it said: “Mere indebtedness at the time will not, in all cases, render a voluntary conveyance void as to creditors, wheie it is for a child in consideration of love and affection.” “Nor will all such conveyances be valid, for then it would be in the power of parents to provide for their children at the expense of their creditors. Nor is it necessary that an actual or express intent to defraud creditors should be proved, for this would be impracticable in many instances where the conveyance ought not to be established.” ■ ²²⁷ In the same opinion it is held, “that a voluntary conveyance may be valid against existing creditors if there is no ac - tual fraud intended, and the grantor is in prosperous circumstances, unembarrassed, and not considerably indebted, and the gift is a reasonable provision for the child, according to his state and condition in life, comprehending but a small portion of his estate, and leaving ample funds unencumbered for the payment of the grantor’s debts. But though there be no fraudulent intent, yet, if the grantor were considerably indebted and embarrassed at the time, and on the eve of bankruptcy; or if the value of the gift be unreasonable, considering the condition in life of the grantor, disproportioned to his property, and leaving a scanty provision for the payment of his debts, then such conveyance will be void as to creditors.” The conclusion of the court’s opinion in Worthington & Anderson, vs. Shipley, shows, that although an indebtmcnl at the time of a voluntary deed, is only prima facie and not conclusive evidence of a fraudulent purpose, even as regards a prior creditor, yet the onus is thereby cast upon the grantee of showing “that the grantor, or donor, at the time of the gift was in prosperous circumstances, possessed of ample means to discharge all his pecuniary obligations, and that the settlement upon the child was a reasonable provision, according to his or her station and condition in life.” See, also, 11 Wheat., 211 , Hinde’s Lessee vs. Longworth; 13 How. S. C. Rep., 99, Parish, et al., vs. Murphree, et al. With the cases of Salmon vs. Bennett, and Worthington & Anderson vs. Shipley, before him, in Bullett vs. Worthington, 3 Md. Ch.

Dec., 105, Chancellor Johnson, we think, very correctly said: “The party who sets up a voluntary conveyance in opposition to the claims of pre-existing creditors, is required to show, by evidence which leaves ilo reasonable doubt upon the subject, that the means of the grantor, independent of the property conveyed, are abundantly ample to pay them all. If there be a reasonable doubt of the adequacy of his means, or if his property be so encumbered, that delays, difficulties and expense, must be encountered before it can be made available to his creditors, then, as I conceive, the ²²⁸ voluntary conveyance must fall, because then it has the effect to delay and hinder his creditors.” We will now endeavor to ascertain whether claims have been exhibited and proved, which, in point of character and amount, are sufficient to justify a decree for vacating the deed in controversy. The claims relied upon by the complainants as antecedent debts, are the following: The note given to N. Williams, on the 9th of December, 1841, for......$250 00, N. Williams’ account for fees, - - - 100 00 Mrs. Oldfield’s debt to Sarah Polk, 6th of May 1843, - 100 00 Note given to C. H. Pitts, 18th of June 1844, - - 250 00 lyote to H. C. Elion, 2nd of J uly 1844, payable six months after daje, - 350 00 Note to W. C. Barney, July, 30th, 1844, payable two years after date, and endorsed to W. P. Mills, - - 300 00 A Note dated the 30th of July 1844, payable two years after da,te, given to W, C. Barney, and endorsed by him to R. B-enwick, 16thof June.1,849,marked ExhibitNo. 3, 2000 00 A note dated the 30th of July 1844, payable to W. C. Barney one year after date, now claimed by D. B. Banks, marked Exhibit No. 4, - 2000 00 A note dated the,30th of July 1844, payable to W. C. Barney one yea,r after d;ate, which is described in the Bill of Complaint as held and owned by D. B. Banks, marked Exhibit D. B. B., No. 1, but appearing under the commission to be No. 5,. - - - - 2000 00 Total amount exclusive of interest, - - - $7350 00 In the examination of the proof by which these claims are. fought to, be established, the evidence of Mr. Pitts must be. held inadmissible. He has been objected to on the ground of interest, because the note given to him by Mrs. Chase was endorsed by him to W. H. Harrison & Co., and has been protested for non-payment.

We think he is. trot competent to prove the existence of a claim, to be used for the purpose of authorising a decree to set aside the deed; a?, his evidence would be to. ¡jssift ip creating a¡ fund,, or in, rendering property liable for the payment of the note,, which he, as endorser, would otherwise haye to pay; and withopt the least prospect of his ever being repaid* unless this deed is, declared void; ²²⁹ for if valid Mrs. Chase’s estate is largely insolvent. See Owens vs. Collinson, 3 G. & J., 32 , 33, 34; Clagett vs. Hall, 9 G. & J., 96, 97 . The testimony of this witness being the only proof to establish either the execution or the indorsement of the note of the 30th of July 1844, marked Exhibit No. 4, it must be regarded as having no proof to sustain it. The signature of Mrs. Chase to each of the notes mentioned in the foregoing list of claims has been proved by the witnesses, Alexus B. Wolfe and Joshua Cockey.

Her signature to the claim of Sarah Polk has also been established by the same witnesses. Upon the note to Elion he obtained judgment against Mrs. Chase, on the 28th of March 1846. The complainants filed the following interrogatories, to be answered by W. P. Mills: “First. — When did you receive the promissory note referred to in your petition, filed with the papers in the aforesaid case of Banks and Stewart against Williams and, others 9 From whom did you receive it? and was it after it was overdue? File the original note, or a copy of it, with your answer. “Second. — What consideration was paid for it, in money or otherwise, by the payee to the pretended maker of said note?

Did the payee ever state to you the consideration he had paid for it, or that he had paid no consideration therefor? “ Third. — What consideration did you pay for said note; in money or otherwise? To whom did you pay any consideration? “Fourth. — Has any other person than yourself,. and if any, what person, any interest in said note?” Interrogatories similar to these were propounded to, R. RenWick, in reference to his claim, exhibit No. 3. D. B. Banks was also required to answer like interrogatories in regard to his claim, spoken of in the bill as exhibit D. B. B., No. 1, but which is exhibit No. 5, according to its description under the, commission. The interrogatories to Banks are omitted in the. record, but it is conceded they were like ²³⁰ those propounded to Mills, raid the answers to them show the propriety of the concession.

Under the act of 1785, ch. 72, sec. 21, the answers to such interrogatories are “evidence in the cause, in the same manner, and to the same effect, that the defendant’s answer to the plaintiff’s bill is evidence.” Mills answered as follows: “1. I received the note in question from William Chase Barney before its maturity; the precise day I cannot state; the original is already filed. “2. 1 do not know what consideration was paid for said note by the payee to the maker; the payee did not state to respondent any thing about the consideration he paid for said note; never stated that either he or the maker had had no consideration therefor. “3. Í paid the full value of the note in question to William Chase Barney, partly in money, partly in clothes. , “4. No one but myself is interested in said note.” R. Renwick’s answer to the first interrogatory is, “that the note filed in this cause came into his possession on the 16th day of June 1849, after it became due, from William Chase Barney, the payee.” To the second interrogatory he says, he “does not know what consideration was paid for said note by the payee, and he never informed him, and never told him that he had paid no consideration.” To the third interrogatory he answers, “that he paid the sum of fifty-five dollars and fifty cents, in cash and furniture, on the 16th day of June 1849, and receipted a bill of furniture, due to this respondent from payee, amounting to one thousand sixty-seven dollars and twenty-nine cents, with interest thereon, making a sum total of $1306.12, paid for said note by this respondent to said payee, William Chase Barney.” The fourth interrogatory is answered by saying, “that no other person than this respondent has any interest in said note.” D. B. Banks answers the interrogatories in the following manner: To the first he says: “That he does not recollect the time when he received the promissory note mentioned in the said ²³¹ interrogatory, as lie received at different times several notes of similar date and amount with the one mentioned in said interrogatory, and drawn and endorsed by the same parties; that he thinks he received the note mentioned in said interrogatory from George W. Earhart, from whom this respondent purchased it. This respondent thinks he received the said note after its maturity.” To the second interrogatory he answers: “That he cannot recollect the sum paid by him for the note mentioned in said interrogatory, because there were several notes of same date and amount received by him at different times; nor does he know what consideration was paid to the maker of said note by William C. Barney or any other person, but that the amount of the different notes drawn by Hannah K. Chase, and held by this respondent, were acknowledged by her to be due to this respondent by her.” To the third interrogatory he says: “That he is under no engagement to pay Wm.

Chase Barney the consideration, or further consideration, in the event of a recovery of said note in whole or in part; the said note was bought and paid for as the property of this respondent, and is absolutely his without any contingent consideration connected in any possible way with it whatever.” These answers of Mills and Renwick show the sale and transfer, from Wm. C. Barney, of the notes claimed by them respectively. So likewise the answers of Banks are evidence of the sale and transfer, from Barney, of the note marked exhibit No. 5, but cannot be regarded, under the act of 1785, as proof in support of the note, marked exhibit No. 4. The interrogatories relate alone to No. 5, and what is said in the answers respecting any other note cannot be evidence, because not responsive to the interrogatories.

In their statement, or brief, the defendants say: “Before we proceed to examine these claims in detail, to ascertain who are prior creditors, and the amount of their claims, we inform the court that we have excepted to some of them, and objected that they are subject to be dismissed from the case or’ reduced in amount on the following grounds: ²³² «1st. That they are not properly in the case, or authenticated, or proved, and are ante-dated. «2nd. For being tainted with usury. Notes given to raise money on, create no debt or liability until passed away to a third person, and under the facts proved, many, if not all these notes were obtained upon usurious terms. «3rd.

Because they are barred by statute of limitations, pleaded in answers, and relied on in exceptions, and limitations applies to the time of filing claims. «4th. Because they were obtained by fraud, imposition and undue influence practiced upon a veiy aged woman, and such contracts, if not annulled, will not be enforced by a court of chancery. «5th. Because they claimed under the deed to Talbott, and received their dividends, and are estopped from impeaching the deed to appellants, which is recited in Talbott’s deed — which was operative solely upon the life-estate reserved in the deed to Williams.” Under the first objection it has been contended that some of the earliest claims are not properly in the case; because the claimants did not file them} and are not insisting upon their being paid. But surely the complainants have a right to show the existence of those claims at the date of the deed, when they are seeking to invalidate it upon the ground of the grantor’s indebteness at the time of its execution* And we suppose it cannot be seriously insisted, that the claims of those who came in as parties after the bill was filed are not properly in the case, merely because they did so come in.

As regards the want of authentication or proof, the objection is a good one in reference to the claim =} exhibit, No. 4. But that we entertain á different opinion as regards the other claims mentioned in the foregoing list will appear from what has already been said. With reference to ante-dating, we see no proof sufficient to establish it in this case, in opposition to the legal prima facie presumption that each note was executed by the maker at the date upon its face. The second ground of objection is usury.

Without deciding ²³³ whether this defence is properly presented by the answers and exceptions, in regard to all the antecedent claims, we will treat it as if it were so. Usury has not been relied upon against the claims of N. Williams, S. Polk, C. H. Pitts or Hs C. Elion. The last being a judgment against Mrs. Chase, on a note dated the 2nd of July 1844. The defendants, in their statement^ say: “These are undisputed debts, but are all subject to our .third objection on limitations as they were none of them filed in this case until returned with Mr. Pinkney’s commission, under which they were proved on the 17th of February 1851.” Mills’ claim cannot be defeated upon the ground of usury.

His answers to the interrogatories, in the absence of contradictory proof, must exclude such a defense. R. Renwick’s claim, (exhibit No. 3,) came into the cause after the answers to the bill were filed. The 5th exception of the defendants, as set forth in the record, objects to this claim in the following language: “And they further except to the note filed among the proceedings and proved by the affidavit of Robert Renwick, because the same was executed long subsequently to the deed of the 2nd of August 1844, and ante-dated so as to appear antecedent to said deed, and because, even if the same were not ante-dated, the said note remained in the hands of W. C. Barney, who held the same for his own accommodation until long after the date of said deed, and after the death of said H. K. Chase, when the same was paid to said Renwick, at the time and for the consideration stated by said Renwick ■ and the said rióte then, and not prior to the execution of said deed, became available as against the estate of said H. JK. Chase, and because the said note was concocted and originated in usury to which said Renwick was a party, and nothing is due thereon except the amount so staled by him to have been paid thereon.” By this exception the defence of usury is presented, in regard to the claim.

As the debt existed prior to the adoption of our new constitution the provisions of that instrument, on the subject of usury, can have no effect upon it. And under the act of 1845. ch. ²³⁴ 352, a contract tainted with usury was not void in toto, but only void to the extent of the usury, and valid for the amount actually paid or lent. The proof has fully convinced us, that no consideration for the note in question was given by the payee to the maker;— that it was purely for the accommodation of the former; and that Renwick took it from him nearly three years after it fell due, paying only $1306.12 for the same, it being a note for $2000. The complainants contend, that conceding the note was purchased, as above stated, still it was not usurious, because there was a valid consideration passing between the maker and payee.

In support of which they rely upon the fact, that at Mrs. Chase’s death, there was, amongst her papers, a note to her from W. C. Barney, for $4000, dated the 30th of July 1844, payable one year after date. The existence of such note, it is said, shows a mutual exchange of notes, constituting a valid consideration for each; and consequently the purchase by Renwick, although at much less than the amount of the note he received, did not render the transaction usurious. Whether, under the circumstances of this case, such would be the effect of a mutual exchange of paper, we need not stop to inquire, because we do not think there was any such exchange as would make each note an available consideration for the other. That this sort of exchange, which the authorities sometimes call “cross-notes,” will amount to a sufficient consideration has been frequently held.

But to do so it must appear that it was the intention of the parties to make a mutual exchange of paper. And whether such was their design will depend upon the “particular circumstances of each case. ’ ’ Chitty on Bills, 565, (Ed. of 1821.) In the case before us Barney was known to Mrs. Chase to be an extravagant spendthrift of the means she was furnishing him with; in cash, by sales of her stocks and by loans or gifts of her notes, totally insolvent, and indeed without funds to procure food and clothing for himself, without her assistance. And we have yet to see the proof that he ever paid her back one of the many notes he received from her. In view of such facts we cannot, for a moment, suppose that ²³⁵ Mrs. Chase either gave her note in consideration of Barney’s, or that she intended the transaction between them should be what the law will regard as a mutual exchange of notes.

In Munn vs. The Commission Company, 15 Johns. Rep., 55, Mr. Justice Spencer says, in delivering the opinion of the court: cíIf a bill or note be made for the purpose of raising money upon it, and it is discounted at a higher premium than the legal rate of interest, and where none of the parties whose names are on it, can, as between themselves, maintain a suit on the bill when it becomes mature, provided it had not been discounted, then such discounting of the bill would be usurious.” See also Sauerwein vs. Brunner, 1 Har. & Gill, 477, and Williams vs. Reynolds & Smith, 10 Md. Rep., 57 , in regard to the subject of usury. When the note now in question came to maturity it had not been disposed of by Barney, the payee, and a suit upon it. could not have been maintained by him against the maker, Mrs. Chase, as it was merely for his accommodation. Subsequently it was purchased from him by Renwick, at the large discount mentioned in his answers.

Such a transaction is usurious,- and, therefore, on this claim, he is only entitled to the sum of 01306.12, with interest thereon, under the act of 1845. The complainants’ counsel have contended that the decision in Renwick vs. N. & J. Williams, Ex'rs of H. K. Chase, 2 Md. Rep., 355, should exclude any defense upon usury against this claim in the present suit. But although, in that case, usury was pleaded, there was no proof to sustain the plea, and no question on that subject came before the court. Their attention appears to have been confined chiefly to the question, whether proving a note to be an accommodation note, and its not being endorsed until over-due, will constitute a sufficient defence to the suit upon the note by the endorsee?

The claim of Banks, filed with his bill, has also been resisted as usurious. The affirmative of this charge by the defendants, rests upon them, under the act of 1845. .And they have not sustained it by evidence which can enable the court to decide, that less than the nominal amount of the note was paid for it, and how much less, so that under tire 3rd section ²³⁶ of the act, the court may ascertain the amount really due and decree accordingly. ( The defendants’ third objection is, that the claims are barred by limitations.' We need not decide whether the claims of Williams, Polfe and Pitts, should be excluded under this defense, because without them there are debts enough to invalidate the deed,, and because they were not decided upon below, but were expressly “reserved for further consideration.” For these reasons we may also refrain from expressing an opinion as to th© effect of the fourth and fifth objections so far as those claims, are concerned. In the case of McDowell, et al., vs. Goldsmith, 6 Md. Rep., 337 , this court say: “We can express no opinion as to the last of these claims.

The chancellor has neither allowed nor rejected it, but on the contrary, has reserved it for further directions.” Limitations cannot bar Elion’s claim, as he obtained a judgment upon it against Mrs. Chase, on the 28th of March 1846. The note held by Mills is dated the 30th of July 1844, payable two years after date. He filed the same on the 7th of July 1849, with his petition, asking to be admitted as a co-complainant j at which time the note had not been due three years. And ip their second exception, whilst the defendants are insisting upon the statute of limitations as barring other claims, they except the claim of Mills from its operation, in express terms.

Renwick was not an original complainant, but came in as. a party by filing his petition and claim on the 20th of March 1850, which was subsequent to the filing of the answers to the bill. These answers, relying upon limitations, can have no effect upon this claim subsequently coming in. Speaking in regard to persons who were made parties complainants after the filing of the original bill in the case of McDowell vs. Goldsmith, 2 Md. Ch. Decisions, 390, it is true the chancellor says: “Notwithstanding, however, the claims of these parties have been proved, the plea of limitations, relied upon in the answer,, must bar the remedy upon them, unless the fraudulent charac .'. ²³⁷ ter of the transaction saves them from the operation of the statute.” But the statement of the case shows, that the parties, who came in after the filing of the original bill, and the answer to the same, filed an amended bill.

Then followed an agreement that the amended bill should be treated as an amendment “filed by the whole of the parties, originally complainants, and subsequently made so, or applying to be made so, and that the answer of the defendant already filed, should be taken as an answer to said amended bill.” Under this agreement the chancellor might well consider the plea of limitations, contained in the answer, as applicable to the claims of those who became parties after the original bill had been filed. As against Renwick’s claim, the statute of limitations has not been relied upon in either of the exceptions filed by the defendants, as contained in the record. We say as contained in the record,, for the purpose of distinguishing these exceptions from objections spoken of as contained in the statement or brief of the defendants. As this claim cannot be affected by the plea of limitations in the answers of the defendants, and as it has not been resisted by such a plea in the exceptions, it is not subject to such a defense.

When Banks’ claim, “D. B. B., No. 1” or “No. 5,” was filed with the bill, which was on the 29th of July 1848, it had not been barred by limitations, three years not having expired since it fell due. The fourth objection, stated in the brief, alleges “fraud, imposition and undue influence practiced upon a very aged woman.” During the argument, we understood this objection as designed to apply exclusively to the notes given to Barney and endorsed by him. The proof, in our opinion, fails to establish a participation, on the part of the endorsees, or any of them, either separately, or in connection with Barney, in the use of means for the purpose of defrauding, imposing upon, or exerting an undue influence over JVIrs. Chase.

The evidence shows they purchased the notes from the payee, but how, or in what manner they were instrumental in enabling ²³⁸ him to obtain them from the maker, or that prior to, or at the time of executing the notes, the endorsees had any communiI cation or intercourse with her, verbally or in writing, either directly or indirectly, there is not the slightest proof. And indeed it would seem to be strangely inconsistent with the usual course of human transactions, to suppose that, the allegation contained in this objection is true, with reference to participation on the part of Renwick as to his note, or of Banks as to his, No. 5, when it is certain that the former did not obtain his until several years after it fell due, and after the death of the maker; and that Banks became possessed of his when over-due. That Barney had great influence over his