Waters v. Dashiell

1 Md. 455
CourtCourt of Appeals of Maryland
DecidedDecember 15, 1851
StatusPublished
Cited by10 cases

This text of 1 Md. 455 (Waters v. Dashiell) is published on Counsel Stack Legal Research, covering Court of Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Waters v. Dashiell, 1 Md. 455 (Md. 1851).

Opinion

Tuck, J.,

delivered the opinion of this court.

The appellee, claiming under a bill of sale from Henry Kennedy, instituted an action of trover, to recover the value of a negro woman from the appellant, who was in possession, and claiming title, as the trustee of Kennedy, under the insolvent laws. The defendant offered evidence to shew, that the bill of sale was void as against the creditors of Kennedy, under the statute of 13 Elizabeth, ch. 5, and under the act of 1846, ch. 271, which requires an affidavit of the fairness of the consideration. The testimony was rejected: the court being of opinion that it was not competent for the trustee to impeach the bill of sale on these grounds.

It is said, that because this deed is valid as against the grantor; it is also good against the trustee, who derives his title under the deed from the insolvent; and that the creditors [470]*470alone can avoid this instrument by proceeding against the grantee, as a trustee for their benefit. The effect of this view, would be, to give to the creditors an interest in a deed which the law pronounces to be void, as to them, and against which they claim. The interests of the grantee and the creditors will always be opposed, and hence, there is good reason for permitting the trustee to take the property, for the benefit of the creditors, whose rights might not be so well protected by another, having a strong motive to defeat their claims. If the property passed to the grantee, charged with an equity in favor of the then existing creditors, and was void, only to the extent of their claims, the grantee, himself, would be entitled to the surplus, after satisfying these debts. But is this the case ? When a deed is set aside for fraud in fact, at the instance of creditors, who were such at the date of the deed, subsequent creditors have been allowed to come in, and participate in the fund. 2 Bland, 35, and the cases therein cited. 1 Story’s Eq., 361. Ede vs. Knowles, 2 Younge and Collier N. R., 172, 178. Such deeds are said to be void, ab initio, and not to be recognised for any lawful purpose — not even as security for advances, and improvements made on the property by the grantee. 2 Harr. and Gill, 261, Starke vs. Macdonald.

The fact, that such deeds are void, as against existing creditors, shews that the title remains in the grantor for their use; and it is on this principle that the property may be seized and sold, after the deed, for payment of their claims. Under such a proceeding, the officer sells only what the creditors have a right to, yet the vendee takes the property by a title superior to that of the grantee, under the deed. If the property may be taken and applied, in this way, in satisfaction of creditors* demands, why may it not, in any other way, (by the insolvent laws, for instance,) be taken and applied to the same purpose ? The argument of the appellee, that the trustee can take no more than the insolvent can convey,- which he says, is nothing, (the deed being good as against him,) overlooks the design of the insolvent laws, as well as the true charac[471]*471ter of the interest that creditors have, in property so situated. Our insolvent system, while granting relief to the debtor, also protects the creditors to the full extent of the property to which they may look for satisfaction of their claims. This is done by taking all his property out of his possession and control, and placing it in the hands of the law, by the agency of a trustee; and by giving to the trustee power to sue for, and reduce to his own possession, all the effects of the petitioner, which are liable for his debts. And so exclusive is this possession and control, that the trustee takes the estate free from the interference of the sheriff, mortgagees or others, having prior liens, subject, however, to all such liens, in the distribution of the trust funds; “ The leading and general design of the insolvent system is, to insure a prompt and complete settlement of all the affairs of the party; and to facilitate these objects, the law has wisely given to the trustee, the entire management of the estate, subject to the control of the court by whom he is appointed, charging him with the duty of paying off liens, incumbrances,” &c. 5 Gill, 178.

One object of the system is to prevent confusion and possible conflict of jurisdiction, by an entire administration of the insolvents estate, in one court.

But the trustee does not claim as an ordinary purchaser, under the insolvent law. In such a case the grantee takes nothing. But here, he cannot be considered as voluntarily conveying their property. In fact it is no part of his design, to pass the title to the trustee for the benefit of the creditors, whom he has attempted to defraud by the previous assignment, But the trustee takes the property against the will of the grantor. The fraudulent intent is thus frustrated. The deed is made necessary to his discharge; and without this he cannot obtain the benefit of the insolvent laws. The trustee becomes the mere officer of the law, designated not by the insolvent, but by the court, to effect what the law designs, and nothing more. And he takes all that remained in the petition, which the creditors themselves could claim, in any form of proceeding, for the payment of their demands. This is the [472]*472design of the law. It is the effect of the proceedings in insolvency. It is conceded, in argument, that if this were the case of an assignee, claiming under the bankrupt laws, the title of the appellant would be good. Looking to the frame and design of an insolvent system, we cannot perceive that there is any material difference between it and the proceedings in bankruptcy, as far as the title to property so situated is concerned. Although the act of 1827, ch. 70, requires a deed to be executed, yet it would seem, that the title to all the property of the insolvent, vests in the trustee by operation of law. 1805, ch. 110, secs. 4, 5. 1808, ch. 71, sec. 3. 1812, ch. 77, sec. 6. Gardner vs. Lewis, 7 Gill, 377. The 8th section of the act of 1827, ch. 70, subjects property not included in the schedule, to execution and attachment; but we apprehend that the effect of such a proceeding, would be only to give the creditor a lien, and not to divest the right of possession of the trustee. All the property passes to the trustee subject to liens and incumbrances. 5 Gill, 178. 7 Gill, 377. This construction does not change, or in any degree impair, the rights reserved to creditors under the statute of Elizabeth, and the act of 1846. The design of these laws was to secure the property, so conveyed, to the use of creditors. Our insolvent system provides a person, whose duty it is to represent creditors, and to assert their claim to property fraudulently conveyed away by the petitioner.

We are not aware that this question has ever been expressly decided by the Court of Appeals of this State. There are cases, however, in which it might have been raised, and we think the recognition of the trustees right to sue, may be inferred from the circumstance, that it has not been denied by any court of the State, as far as we are informed, during the long time that our system has been in operation. Most of the decisions under our insolvent laws, have been made in cases where the trustee sought to vacate fraudulent preferences, which our acts of Assembly declare to be void; and the title vesting in the trustee under these acts, his right to [473]

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1 Md. 455, Counsel Stack Legal Research, https://law.counselstack.com/opinion/waters-v-dashiell-md-1851.