Cole v. Albers , 1 Gill 412 ( 1843 )

Archer, J.,

delivered the opinion of this court.

The bill in the present case has been filed to vacate a deed of mortgage given by Brecht and Uhthoff to Albers and Runge, on the 2nd day of December, 1839, to obtain an account and payment for the goods and promissory notes delivered over to Albers and Runge in pursuance of said deed, and for the payment. over to the complainants of the sum of three thousand two hundred and forty dollars, with interest, which was applied by Uhthoff (in contemplation of a partnership to be entered into by him with Brecht) to the payment of a debt due by Brecht to Albers & Co.

The deed in controversy is alleged to be void as in violation of the insolvent laws, to be condemned at common law, and inoperative under the act of Assembly of 1825, ch. 50, entitled “An act to limit the operation and effect of mortgages.”

There can be no pretence for considering the deed void by the insolvent laws existing anterior to the law of 1834, ch. 293, because, in our view, the evidence, taken in connexion with the answers, it is, by no means, satisfactory that the mortgagors, at the time of executing the deed, contemplated taking the benefit of the insolvent laws. The deed could not, therefore, be condemned as made with a view, or under an expectation, of being or becoming insolvent debtors, and with intent thereby of giving an undue and improper preference. Nor could it be set aside, within the meaning of those laws, since the decision of this court in the case of Crawford & Selman vs. Taylor, being made at the request of the mortgagees.

It is, however, contended that the deed is void as being made in contravention of the act of 1834, ch. 293, which, so far as regards the present question, appears to be a local law, confined to the city and county of Baltimore. This law provides that although the transfer shall be made upon request, yet, if the bargainor, at the time of conveyance, had no reasonable ground for believing that he would be exempt from execution or liability for his debts, without applying for the benefit of the insolvent laws, such conveyance should be considered as made with a view or under an expectation of being or becoming an insolvent debtor, and with intent thereby to give an undue and improper preference, provided the creditor obtaining the conveyance should appear not to have had notice of the condition of insolvency of such debtor.

Without stopping to enquire whether the debtors in this case had any reasonable exp#ctation of exemption from lia. bility or execution, on account of their debts, otherwise than by taking the benefit of the insolvent laws, it will be sufficient for us to say that we are satisfied that the mortgagees had not notice of the insolvent condition of the mortgagors. Our belief on this subject is derived from the fact that money was loaned and goods sold after the date of the deed, and that notes were taken for the payment of their debts to the creditors, Albers & Runge, in semi-monthly instalments; all which circumstances would not be likely to have occurred if the mortgagors had been considered as insolvent, or in such a condition that they had no reasonable expectation of being exempt from liability or execution for their debts, except by taking the benefit of the insolvent laws. No inferences can be drawn, prejudicial to the mortgagees, from the examination of the books of the mortgagors, by one of the mortgagees, because, as far as the character of that examination is disclosed by the testimony we cannot perceive that it was calculated to impart information in relation to the condition of the firm either as to solvency or insolvency. We have no evidence that enquiries had been made into the extent of the assets of the mortgagors, or the extent of their liabilities, by enquiry into which alone could any judgment have been formed, or any notice be attributed. And here we must be permitted to remark, that according to our construction of the act under consideration, the notice which is to vitiate a conveyance is not a technical or constructive notice, but an actual notice, derived from a knowledge of the condition of the mortgagors.

The next subject submitted for enquiry is the validity of this deed at common law. Its invalidity on the mere ground of preference, cannot, upon legal principles, be urged, for a debtor has a right to prefer one creditor to another by the common law, and independent of our statutes, in relation to insolvent debtors.

The consideration proved, if the proof be admissible, establishes clearly a good and valid consideration to support the deed. The evidence dehors the deed is that the deed of mortgage was made to secure advances made, and to be made, to the extent of $10,000. The consideration stated in the deed is $10,000, in hand paid ; and it is averred the deed is taken as a mortgage to secure that sum. The only question, in this branch of the ease, is whether this evidence is admissible. Evidence cannot be admitted which would have the effect of changing the character and legal operation of the deed, as in the case of Hern & Soper, where a deed purports to be made on a monied consideration it cannot be shown that money did not constitute the consideration, because this would have the effect to change the character of the deed ; and in Betts and the Union Bank, it was decided that where a deed is impeached for fraud, and the consideration stated is money, it will not be allowable to set up a different eonsideiation, as marriage, to support the deed. In such a ease the effect of the evidence, if admitted, would have been to change the deed from a deed of bargain and sale to a covenant, to stand seized to the use of the grantee.

In the case now before us the admissibility of the evidence would produce no such result. The bill admits, and it is fully proved, that a monied consideration existed for the deed. Advances had been made to the mortgagors, though not to the extent mentioned in the deed ; so that the instrument would, in contemplation of law, be a deed of bargain and sale, standing on the consideration proved in the same way as it would be if standing on the consideration expressed in the deed. In the case of Belts and the Union Bank, the evidence could not be received, because by the disproof of the consideration expressed, the deed had been rendered inoperative and void, and parol evidence of a different consideration could not be received to set up the deed thus impeached. But here the deed is not impeached or rendered inoperative and void, by the evidence offered, but the evidence is adduced to rebut any idea of fraud, by showing, not a different consideration, but the same kind of consideration, differing only in amount, and the circumstances under which it assumed this shape. And this, it will be per' ceived, was the view of the case of Betts and the Union Bank, taken by this court, in 9 Gill & John. 91, and 10 G. & J. 248

The design of the law-makers in the passage of the act of 1825, ch. 50, was to prevent liens on property, to the prejudice of creditors, for amounts and claims never contemplated by the parties at the time of its execution, and of which the deed, by its terms, gave no notice: as if a deed were executed to cover a mortgagee against all future liabilities of any and every description, which the mortgagor might incur or be responsible for, to the mortgagee. Under such a deed, what would have prevented the mortgagee from purchasing up claims at a depreciation against the mortgagor, to indefinite amounts, and thereby acquiring priority, to the prejudice of creditors. A practice prevailed anterior to the act of 1825, ch. 50, of taking mortgages for specified sums of money, greatly below the value of the mortgaged premises, with a clause or clauses providing that the mortgaged premises should' be held as a security for all future liabilities or advances by the mortgagee to the mortgagor, by which means the creditors of the mortgagor were defrauded, sometimes by fraudulent combinations between the mortgagor and mortgagee, or by the acts of the mortgagee alone, who, after the known insolvency of the mortgagor, purchased up liabilities of the mortgagor at depreciated rates, and held them as liens on the mortgaged premises for their nominal amounts; thus excluding a portion of the creditors from an equal dividend of the mortgagor’s estate. Creditors becoming such after the date of such mortgage, were deluded and suffered loss, which no precaution could guard them against. Such transactions the law was designed to meet; but not a case like this, where the amount is stated; where the world is apprised of its limits, and where the parties design to cover all advances which may be made, to the extent of the sum limited in the mortgage. In the mortgage now under consideration, no one could be deceived or prejudiced.

The views which we have above taken, disposes of the various questions raised in the case, and concurring with the Chancellor in his judgment, we affirm his decree.

DECREE AFFIRMED,