Woodville v. Reed

Bowie, C. J., delivered the opinion of this Court. The cases of Woodville et al., vs. Reed, Easton, J. Dixon Roman et al., and Woodville & Others vs. Reed, Price & Others, in the Circuit Court for Baltimore city, were consolidated by an order of the 15th of April, 1862. Subsequently accounts H. & O. were filed, in the former of which the appellee, J. Dixon Roman, as assignee of a mortgage, was allowed his claim in full, and the appellant, J. Philip Soman, as holder of certain notes, dividends “pro rata” out of the residue of proceeds in both accounts. These accounts were ratified by orders of the 11th of March, 1864, (except as to the claims of J. Philip Roman,} which were rejected.

Woodville and others appealed from the ratification and all anterior orders or decrees allowing ¹⁸⁴ J. Dixon Roman’s claims. J. Philip Roman appealed from the rejection of the dividends assigned him. Originating in the same transactions, and being embraced in the same record, these appeals have been argued together and will be disposed of successively in the same opinion. The nature of these claims will better appear from a compendium of the bill and proceedings in the several cases.

On the 10th of March, 1857, the complainants and appellants, Woodville and others, as creditors of the firm of Reed, Easton & Company, filed their bill against the firm, (consisting of Seth Reed, Levi Easton and William Burgess, of the city of Baltimore,) and Hezekiah Easton, of the State of Pennsylvania, and J. Dixon Roman, Esq., charging that the firm being indebted to the complainants in about $50,000 or $60,000, on or about the month of June then past, did agree to give, and did deliver to them and other creditors, their promissory notes endorsed by Hezekiah Easton, the payment of which was extended eighteen or twenty-four months from the 25th of July, 1856, and most of which when due were unpaid. They further charged, that after the execution and delivery of the notes, on the 11th of August, 1856, Levi Easton executed and delivered to Hezekiah a mortgage of certain real estate to indemnify him on account of his endorsement, to the benefit of which they were entitled to he substituted ; that they have since discovered that prior to the mortgage of indemnity, on the 13th of May, 1866, for certain feigned considerations, Levi Easton conveyed by way of mortgage, all the property described in the first mentioned mortgage, to Hezekiah Easton, who afterwards, on the 23rd of February, 1857, assigned the same to J. Dixon Roman, Esq., to whom, afterwards, on the next day, the 24th of the same month, Levi and Hezekiah made and execute! a deed of trust of allsthe same property, with ¹⁸⁵ power to sell and convey the same, and pay, first, the mortgage of May 13th, 1856; secondly, to pay all other liens and encumbrances according to their legai priorities; thirdly, to pay all other debts of Levi Easton ; and fourthly, to pay the surplus, if any, to said Levi. They charged that the said mortgage was fraudulent and void, prayed the same might be set aside, and the premises sold to pay the debts of the. complainants, and that the defendants might answer and make full discovery in regard to all the matters alleged, particularly in regard to the consideration of the mortgage of the 13th of May, 1856, etc., and the consideration for its assignment. Pending these proceedings, on the 1st of May, 1857, it was agreed between J. Dixon Roman, trustee, and one of the defendants in the above cause, and the solicitors of the complainants, that the trustee should proceed to sell all the property conveyed to him in trust by Levi Easton and Hezekiah Easton, and report the same to the Court, and the money arising from said sales should he subject to the final decision of the cause, as the property would have been if unsold.

That if the said deed of trust shall be finally decreed to be void, then the trustee shall bring into Court the whole proceeds of sales (after deducting costs and expenses incurred,) to be paid to the parties entitled, and he shall not claim, or be allowed, any commissions as trustee ; otherwise, he should he allowed, and the residue distributed to the persons entitled. The answer of Hezekiah Easton, after admitting the execution of the mortgages of May and August, 1856, and that the latter was made to indemnify him as endorser of the notes of the firm of Reed, Easton & Co., to a very large amount — between fifty and sixty thousand dollars — as to the consideration of the first mortgage, says, all the stocks, bonds and securities therein mentioned, were in fact loaned to the firm in the vain hope of enabling said firm to mgin ¹⁸⁶ tain its credit and obligations, the firm expecting to be able to use them, but being disappointed in that respect, the stocks were returned ; as to the cash loaned, being the sum of fifteen thousand dollars, as recited and secured by said mortgage, he avers, in April or May, 1856, he received from his brother, Levi, most urgent solicitations to aid him in sustaining the firm, which he represented as in serious danger, and he immediately borrowed from the Hagerstown Bank and other hanks in that region large sums of money, and went to Baltimore and paid over to his brother the said sum of fifteen thousand dollars. . Mr. J. Dixon Roman’s answer to the original hill, filed on the 13th of November, 1857, after admitting the execution of the mortgages, states, that as president of the Hagerstown Bank, the respondent knew that Hezekiah Easton borrowed from that bank five or ten thousand dollars in April-or May, 1856, and be was informed and believes he obtained a like sum from two neighboring banks, which loans he understood were designed to aid Levi Easton, his brother, in sustaining the house of Reed, Easton & Oo., which was in a tottering condition, etc. That in the fall of 1856, the respondent beard from the friends of Hezekiah that be was deeply involved in debt of his own, and in liabilities for bis brother, to a serious amount, and knows his credit was thereby much impaired, and his facilities for obtaining discounts materially diminished. That in December last, and again in January, Hezekiah applied to him to borrow a large sum of money on'judgment binding his land in Pennsylvania, which respondent refused.

Again in February he made another application and produced the first mortgage, dated May 13th, 1856, and was willing as to that part which secured the repayment of the $15,000 to pledge it as security or to sell it'absolutely. The respondent refused to loan, but finally agreed to purchase if he should find on examination that it was a ¹⁸⁷ just incumbrance or clear title. The following week they met in Baltimore, and the title proving satisfactory, the respondent “then and there finally and bona fide paid to him the fall and fair valuation agreed upon, and took the assignment as purchaser, and placed it upon record. Seeing that a trustee must he eventually appointed to sell the mortgage premises, thesaid Levi and Hezekiah, the next day, vested in the defendant the full legal title to it, by executing the deed of trust mentioned in the bill, and thereby •conveyed all the property to be sold, etc. The appellants, on the 3rd of May, 1858, filed their supplemental bill, charging that J. Dixon Roman was not a bona fide purchaser for a valuable consideration without notice, hut that the consideration was insufficient and illegal, and the assignment colorable with notice of the •equity of the complainants and others, and prayed he might discover the true consideration, how and when paid, ■and that they might have the same relief as prayed in the original hill, and the mortgage and assignment might be declared void.

The answer to the supplemental hill, after denying all fraud charged or imputed, responding to the interrogations, what was the actual amount of the consideration given or promised to be given for the mortgage, and whether it was paid in money or by check ? says, Hezekiah Easton produced the mortgage of May 13th, 1856, for $15,000, and offered to sell the same for thirteen thousand •dollars, stating he could well afford to make such a sacrifice, as he would certainly make twice as much by purchasing his endorsements before they became due, at the heavy discount at which they were offered, etc. The defendant ■agreed to purchase it at the price asked for it, provided when he should go to Baltimore he should find it a just incumbrance. Further answering, he says, he proceeded to Baltimor# ¹⁸⁸ and made a satisfactory examination, etc., and when Heze° kiah arrived a day or two afterwards, he announced to him that said examination was satisfactory, and he was prepared to pay the price of $18,000, at which he had offered it. The assignment was prepared and executed, and “this defendant thereupon wrote and signed and delivered to him a check upon the banking house of Johnston, Bro. & Co., of Baltimore, for $13,000. “In answer to the enquiry as to what was the object or design for which said check was to be used, this defendant understood and believed it was intended to be used in anticipating the payment of the endorsements of said Hezekiah as aforesaid, and thus avail himself of the heavy discount at which they were offered, and this defendant is informed and believes, and perhaps was present and saw,, the said Hezekiah endorse and deliver the said check to J. Philip Roman, then sojourning in Baltimore, to be used by him for such - purpose from time to time as said notes might be offered.” The answer further shows, that a few days after returning to Hagerstown, the respondent was summoned to answer the original bill of the complainants, (the appellants,) and thereby being first informed the mortgage of the 13th May, 1856, was impeached for fraud in its inception, he wrote to J Philip Roman requesting him not to present the check, (if not already done,) or not to use the money until the validity of the mortgage could be further ascertained; a short time afterwards he met Hezekiah, much disappointed at the frustration of his plans, and although the defendant had scarcely a doubt of its validity, yet he declined to let the check be paid, and thus risk the uncertainty of a law suit. Finally it was arranged that J.^Philip Roman should, with his own money, purchase said endorsed notes, taking a judgment