Cross v. Cohen , 3 Gill 257 ( 1845 )

Chambees, J.,

delivered the opinion of this court.

The legal construction of the deed of trust, dated 11th October 1816, is one of the material points on which this cause must be decided, and many authorities have been cited to sustain the different views taken by the respective counsel. After a full consideration of these authorities, we have arrived at the conclusion, that the priority claimed by the appellees for the stock holders cannot be sustained.

It cannot, certainly, be successfully contended, that the origin and nature of their debt gave them stronger claims, in equity, upon the trust fund. The labor and materials furnished by the appellants, contributed to enhance the value of the trust property, which had been purchased with the funds advanced by the stockholders. The improvement of the city, and a desire to introduce theatrical amusements, doubtless operated, in some degree, as inducements for the subscriptions and advances of stockholders, who could not fail to consider the enterprize as one of some hazard. The appellants furnished their materials and labor in the ordinary routine of their respective business operations, and must be presumed to have had at least an equal claim, and it would seem, an equal expectation of payment.

Where it can be done without violating the plain and express terms of the instrument creating the trust, chancery will administer a trust fund which comes into its possession and control, so as to give an equal proportion to each creditor, which is considered but another mode of expressing its purpose to “do equal justice to all.”

There are no such provisions in ibis deed as to require a departure from filis rule.

The trusts of the deed are “to secure the stockholders the right of free admission to performances,” “until Warren and Wood shall pay the stockholders, or their assigns, the full sum of two hundred dollars for each share subscribed;” “and in further trust, to secure the payment of all claims for labor or materials,” &c.

Now it is remarkable, that there is not any where in the deed an express stipulation, to pay the two hundred dollars per share.

It is covenanted, that the stock holders shall not exact payment until the expiration of ten years, and that Warren and Wood shall not be permitted, for that period, to repay the advances of two hundred dollars per share, and thus terminate the right to free admission; and there are covenants securing the possession to Warren and Wood during those ten years, and binding the grantees to reconvey on payment of the money intended to be secured. All parts of the deed indicate the intention to secure the repayment of these advances, but there is no express covenant to pay. This omission seems to be scarcely consistent with the allegation, that the leading object of the deed was to secure a preference for these advances over claims for labor and materials.

It is true, this preference might be made without such express stipulation to pay, but certainly the absence of it is not calculated to impress the belief, that the preferred payment was very distinctly before the mind of those who prepared and executed the deed.

Reliance was placed on the circumstance, that the claims of the stockholders are first mentioned in the declaration of trust, and that the claims for labor and materials are provided for as “a further trust.”

It was well answered, that where more than one claim or claims were provided for, it was necessary to mention them successively, and that the order of enumeration does not give preference. There seems to be no more evidence of intended priority by connecting the two classes, as here, by the words, “in further trust,” than by more brief terms of conjunction. In trust to “pay A his debt, and B his debt”—“in trust to pay A his debt, and in further trust to pay B his debt”—or “to pay A his debt, and also B his debt,” are but different modes of expressing the trust to be for the payment of the two debts of A and B; and neither will, alone, entitle A to receive his claim to the exclusion of B, if the fund be insufficient to pay both.

It is objected, however, that the condition upon which, alone, the claims of the appellants were to be paid, has not been complied with, by producing the certificate of Warren and Wood, or of one, in their joint names.

There is no rule of equity which will afford relief to such a party failing to comply with an express condition, except its performance be prevented by fraud or fault of the adverse party, or by inability arising from unavoidable accident.

This doctrine is ably discussed in the case of Bath and Montague, 3 Cases in Chancery, 55, and is sustained by the authorities cited at bar.

But the matter for consideration here, is whether the condition has been, in point of fact, complied with; and this, it is said, is proved by the evidence of 'William Gwynn.

His competency, as a witness, therefore, was a point much debated. It is unnecessary to say what would have been the opinion of the court, if exceptions had been talien in the Chancery court, according to the directions of the act of 1832, ch. 302.

That act provides, that no point relating to the competency of witnesses, or the admissibility of evidence, shall be raised in this court, unless it shall plainly appear, by the record, that, such point had been raised by exceptions filed in the cause in the Chanceiy court. It is, therefore, quite unimportant that objections can be stated, which, if properly urged, would show the witness incompetent, inasmuch as this court cannot consider or notice the point, unless the act has been pursued.

The material enquiry then, is, have exceptions been filed in this cause, in the Chancery court?

In relation to the alleged exceptions, we learn from the record, in the return of the justice of the peace before whom the testimony was taken, that ho, the justice of the peace, “returned, with the deposition, certain suggestions and protest, left with him by Nathaniel Williams, Esq., to be filed in his own behalf, and in behalf of other trustees therein named.”

In another part of the record, is a paper in the following words: “Cohen and others, vs. Gwynn and others. In Chancery. Under the order of court for the taking of testimony, the majority of the trustees make, before the justice, to be annexed to his return, the following suggestion and protest:

1st. They protest against all evidence to support any claim or claims which is or are unaccompanied by a written acknowledgement signed by Williann Warren and William B. Wood, or by one of them, in their joint names.

2nd. They protest against any evidence, unless it is adduced to prove the claim of the petitioners, and that they are creditors^ secured by the deed of trust.

3rd. They protest against tire evidence of William Gwynn, Esq., as reserved by the Chancellor.

Baltimore, 27th November 1843.”

By whom filed, or when, we only know by the information in the return of the justice. This is the paper, and the only one, which is claimed as the “exceptions filed in the Court of chancery.’.’

Without stopping to ascertain, whether the language of this paper does really import an objection to the “competency of William Gkoynn, as a witness, or to the admissibility of his evidence,” or whether professing, as it does in the justice’s return, to be intended for a case in which Mr. Williams, with others, was a trustee, it could apply to this case, in which Mr. Williams does not appear before the court in the character of a trustee, he having been a trustee only for the term of ten years, ending in 1836, as is expressly alleged in the bill, and stated in the joint answer of himself and others; the necessary enquiry is forced upon the court, whether it be such an “exception” as the act of 1832 contemplates? It is an universal rule of practice in chancery, that exceptions like other formal papers filed in the cause, must be signed by a solicitor of the court. If a bill is not thus signed, it may, in any stage of the cause, be taken off the files of the court. 2 Mad. Ch., 167. So of an answer, lb., 331. A plea must in like manner be signed, lb., 295. And so must an exception, lb., 346. The qualification made by the second rule of the Chancery court, does not affect this case.

This practice is as proper, as it is universal. Without it, every individual in the cause, whether complainant or defendant, might file in the court papers of any and every character, which caprice, prejudice, passion or malignity might suggest, and without responsibility; whereas, a solicitor who should violate the decorum or dignity of the court, could be dealt with summarily, according to the nature and magnitude of his breach of professional duty.

This paper is not only not signed by a solicitor in the cause, but it is not signed by any one.

Nor was it “filed in the Court of chancery,” within the meaning of the act. Its object was to prevent surprise, by raising points here in relation to testimony not raised in the court below. It may very well occur, that in the haste of executing a commission, or an order to take testimony, objections to portions of it may be taken, which afterwards, on consideration, will be abandoned; or, as is frequently the case, evidence is taken without objection, which afterwards is considered inadmissible, thus showing that the taking, or omitting to take objection before the commissioner, is not a sure guide by which to know the points in relation to it, raised in the court below. This case illustrates this position :

The decree says, “it appears from the proofs, that the petitioners, tire present appellants, were at one time creditors,” <fcc., whereby, it appears, the Chancellor did act upon the testimony of Gimjnn, as there was no other such proof in the cause.

In this way, objections suggested at the execution of the commission, and afterwards practically abandoned at the hearing, might be again relied upon in this court, in obvious violation of the design of the law.

The return by an officer, before whom depositions are taken, by consent or by order of court, that objections were furnished to him to be filed in the cause, is not -“filing exceptions in the court of chancery, in compliance with the act of 1832, ch. 302.”

It has been urged that here, by the terms of the order, “all legal exceptions” are expressly reserved. This is not tenable ground.

The order, with this reservation, is passed ex parte, and as matter of course, on a proper application; and according to the English practice, and the former practice in Maryland, all objections were open at the hearing, and then was the proper time for making them, the exceptions being reserved, to be then considered. 2 Ves. & Bea., 401, Murray and Shadwell.

If the order was absolute, to allow the defendant to be a witness, it might conclude the adverse party, but with the reservation, the evidence of a defendant thus taken, came before the court subject to all objections at the hearing below, or if not urged there, the objections might be stated in this court after appeal, as is now claimed. But this is exactly what the act of 1832, intended to prevent, by denying to this court the authority to notice any such objection, unless the record makes it appear, that “exceptions” were filed, not before the commissioner, but “in the Court of chancery.”

In 10 G. & J., 414, Jones and Hardesty, one witness had been examined, without any notice to the adverse party, and another witness was a defendant in the cause, who had been examined under the commission, without any previous order; yet the court was prohibited from noticing these objections, which, but for the act of 1832, would have been conclusive.

William Gwynn’s testimony, then, being in the case, does it prove a compliance with the terms of the deed? It leaves no doubt of the fact, that at one time, the claims of the appellant were authenticated, as the deed required; but the certificates signed by Warren if Wood, were, at a subsequent period, surrendered on an agreement, to receive in lieu thereof the certificate and promise of Warren alone, the claimants “consenting to make no claim on Wm. Wood, personally, but on the express condition, they should still hold their claim and lien, under the mortgage to the trustees.” Now it has been conceded, that a strict compliance with such a condition, must be proved by a parly claiming under it. There is, however, no rule which authorises a court of equity, to add other or more rigid restrictions than those contained in the contract.

As in all other cases, the object and intent of the parties, as expressed in the instrument, should be ascertained, and such an interpretation given to the whole and each part as will best effect that intention.

The condition was apparently intrtiduced to protect others having an interest in the integrity of the fund, against claims not properly chargeable against it. As Warren & Wood being partners, had authority, each, to üse the names of both, it may be difficult to discover how that protection was increased, by requiring either to subscribe “in the name of both,” rather than for himself alone. It is sufficient, however, that it does plainly and clearly so require, and when the claim was authenticated by the required signature, the claimant had an immediate and positive right, as a cestui que trust under the deed.

If afterwards the acknowledgment had been destroyed by accident, would it destroy the pre-existing right? If even lost by the claimant’s negligence, could that fact put an end to such right ? Certainly not, while it Was admitted, either that he had before the deed, or afterwards, procured the acknowledgment as required.

ft is riot said the acknowledgment must be preserved, and be at all times ready to be produced with the claim; there is nothing in the object or meaning of the parlies that requires an interpretation, such as these additional terms would give to their contract; and dierefore, it is not requisite to prove any such additional fact.

It only remains then to be seen, whether the appellants have surrendered their rights, under the deed, by the surrender of the certificates of Warren and Wood, and by receiving the individual notes of Warren, with the express condition, that they should not thereby lose their claim and lien under the deed. None of the cases referred to on this branch of the case, are precisely similar in principle to this.

Tire debt was hero due, originally, from Warren and Wood. They executed the deed of trust to the appellees, as trustees for their creditors, of the very property, for the improvement and increased value of which, they became debtors to the appellants, and which, it appears by the recital in the deed, was at the commencement of the enterprise agreed to be conveyed to the trustees for the purposes mentioned. The property thereby, became legally and equitably bound for the payment of these claims, and the trustees could be compelled so to apply it. They had voluntarily assumed the liability, in respect to this property which had previously attached to Warren and Wood. When the joint notes, or acknowledgment of Warren and Wood were passed to the appellants, does not appear; nor is it, perhaps, at all important.

In fact, the original agreement, as recited in the deed, would seem to indicate, that the property in the hand of the trustees was to be regarded as the primary and principal fund.

It is said to have been pledged as the consideration for the subscriptions, and, of course, before the claims of the appellants arose; and tire deed was the execution of that pledge. The acknowledgments were not required to be in terms which should make Warren and Wood personally liable, it was to be an evidence of debt against the trustees; against the fund. In this view of the case, the trustees representing the fund might well be considered as principals.

But it is not necessary to put the case on that ground. The authorities referred to, are sufficient to sustain the proposition, that where a creditor has a lien on a specific fund, an agreement “to make no claim” against one of two principals in the debt, “on the express condition, that he shall retain the lien, will not defeat his remedy against the fund.”

There has been no such long continued silence, or laches, as to amount to presumptive payment. The facts in the case account for the delay; and show repeated efforts to enforce the claim.

The only other ground on which the appellees claim that the remedy has been lost, to wit, the order dismissing the bill filed by the appellees, cannot be sustained.

The bill was dismissed, not upon its merits, but under a rule further to proceed in ihe cause, and in such cases it is not necessary to qualify the order by saying, that it shall be without prejudice to the rights of complainants. See Sto. Eq. Pl. 611. See 793. 1 Barbour’s Ch. Pr. 246. 2 Ib., 200.

The court will sign a decree reversing the decree of the Chancellor and remanding the cause, to be proceeded on in the Chancery court according to the principles herein declared.

DECREE REVERSED AND CAUSE REMANDED.