Zeigler v. King , 9 Md. 330 ( 1856 )

Eccleston, J.,

delivered the opinion of this court.

Inasmuch as we think there was no error in the action of the court below, from which this appeal was taken, we need not decide whether the appellee’s motion to dismiss should be sustained- or not.

G. W. Zeigler, (the appellant,) on the 2nd of May 1856, under the act of 1833, ch. 181, obtained a decree for the sale of a house and lot in Baltimore, upon a mortgage over-due and unpaid, executed by a certain Edward O. Wools.

In conformity with the decree the property was advertised to he sold on the 28th of May 1856.

On the 10th day of the same month, and afterthe advertisement, Wools applied for the benefit of the insolvent law, and the appellee, (P. H. King,) was appointed his trustee. Thirteen days after, the appellee filed a petition asking the circuit court to restrain its trustee under the decree from proceeding to sell; and the court passed an order setting this petition down for hearing on the 10th of June, and directing its trustee not to sell until further order of the court.

From this order the appeal was taken, the appellant having first filed his answer to the appellee’s petition.

Supposing that the order of the court is based upon the doctrine that a trustee in insolvency has tiie exclusive right to make sale of the insolvent’s property, it is insisted, by the appellant’s counsel, that such is not now the law in Maryland, whatever it may have been formerly. Their argument is, that the exclusive authority of such trustee to sell, which has been recognized in Alexander vs. Ghiselin, 5 Gill, 180, and in other subsequent decisions of like character, was based upon the act of 1805, ch. 110, and more especially the 7th sec. of it: which act has been repealed by that of 1854, ch. 193, creating a new system of insolvency. That the latter act-did not re-enact the 7th section of the former law, and by. thus excluding its provisions, the Legislature manifested a design, not to continue but to repeal the system arising from that section. Which design, it is said, is not only manifest “from such exclusion, but from the whole tenor of the new law, and expressly by the 13th section thereof.”

Admitting that the 7th section of 1805 has not, in terms, been re-enacted, still it does not necessarily follow that the provisions of the late act do not, under the circumstances of this case, confer upon the insolvent’s trustee the exclusive right of selling the mortgaged premises.

The 2nd section of the new law provides that a trustee shall be appointed, who is to give bond with surety for the faithful performance of his trust; that a conveyance shall be made to the trustee by .the insolvent, of “all his property and estate of every description.” And it is evident, from the 1st, 2nd and 15th sections, that upon the approval of the bond, “ail the property, of every description, rights and claims of the insolvent,” whether mentioned in the schedule or not, will vest in the trustee, except the necessary wearing apparel and bedding of the insolvent and his family, and such property as may by law be exempted from execution.

By the 10th section, it is enacted, “That the estates of insolvents shall be distributed under the orders of the court, according to the principles of equity.”

For the purpose of carrying this provision into effect, where there is specific property, a sale is essentially necessary, for it cannot be supposed the Legislature contemplated a distribution of the property, in kind, among the creditors. And directing the estate to be distributed under the orders of the court, necessarily includes authority in the court to order a sale, by the trustee, who represents the creditors, and holds the property for their use. It was, evidently, the design of the Legislature to have the estate converted into money, and the distribution then made under the orders of the court.

The 15th section shows the Legislature were so careful of the rights of the trustee, even in regard to property not mentioned in the schedule, as to prevent his authority and control over it from being interfered with to any further extent than to permit a creditor to secure a lien upon it by fieri facias or attachment, after the petition has been filed.

And although the section was introduced for the express purpose of allowing a creditor to obtain such a lien, the proviso declares, “that nothing in this section shall be construed to impair the right and title of the trustee to such property or claims, as provided by the second section, but shall only operate to give the judgment creditor, who shall discover such property or claims, a priority to be paid out of the proceeds thereof.” It cannot well be doubted, that the proviso was designed to prohibit the creditor from having the property sold under his process, but to allow him the privilege of claiming a priority to be paid out of the proceeds of a sale to be made by the trustee. If not so, why say the right and title of the trustee shall not be impaired, and the creditor, notwithstanding he is permitted to levy upon the property, shall only be entitled to a priority when the proceeds are distributed?

The 1st, 2nd, and 15th sections are careful to vest the estate, generally, iu the trustee, and the latter section cautiously protects his rights from being impaired, even by liens created under its sanction, except so far as to give them preference or priority in payment. In addition to which, whilst the law, in broad terms, provides, “that the estates of insolvents shall be distributed under the orders of the court;" property covered by liens or incumbrances are not excepted, unless property conveyed in trust, before the petition, in the manner allowed by the 13th section, can, notwithstanding such conveyance, be considered, after the petition, as part of the insolvent's estate, subject to a lien or incumbrance, and his trustee as having no authority to make sale of the same, for the purpose of bringing the proceeds into court for distribution. And conceding such to be the case, (without deciding whether it is so or not,) even then, upon the principle that “exceptions tend to prove the rule,” such a construction of this section would have the effect of sustaining, instead, as has been suggested, of militating against the general authority of an insolvent’s trustee to sell the whole estate, notwithstanding liens or incumbrances, with the single exception just referred to.

If the system is not so interpreted as to allow the trustee such a general right of selling, it will be difficult to perceive how the estate can be effectually distributed according to principles of equity, under the orders of the court." And that it should be so done is the design of the law, there cannot be a shade of doubt.

The advantage resulting from our interpretation of the new system, may be very well illustrated by quoting a part of the opinion of the court in deciding the case of Alexander, et al., vs. Ghiselin, et al., 5 Gill, 179, under the old law, where it is said: “The leading and general design of all bankrupt and insolvent laws, is, to insure a prompt and complete settlement of all the affairs of the party, and an early distribution amongst the creditors, as nearly in equal proportions as a regard to positive and acknowledged preferences will admit. To facilitate these objects, our law has wisely given to the trustee, to be appointed by the court, the entire management of the estate, subject, of course, to the control of the court by whom he is appointed, charging him with the duty of paying off liens and incumbrances to which the estate might be subject. His duty requires him to make the earliest disposition and settlement, regarding the interests of all the creditors, the particular lien creditor included, and brings all the claimants before one tribunal, whereas, by allowing sheriffs and mortgagees to participate in the administration of the trust, adverse interests are created, delays endangered, if not insured, and probably different, and possibly conflicting tribunals consulted.”

In the case of Hurt vs. Stull, 4 Md. Ch. Dec., 391, a bill was filed for the purpose of enforcing a vendor’s lien. A decree directing a sale and appointing a trustee to sell was passed, which, upon appeal, was affirmed. Subsequently to the decree, but before a sale, the vendee applied for the benefit of the insolvent laws, under the old system, and his trustee in insolvency was duly appointed, who, upon the ground that the exclusive right of selling the property was vested in him, applied to the chancellor to stay the execution of the decree. The late learned chancellor, however, dismissed the petition, entertaining the opinion, that the trustee, under the decree, had authority to make the sale, notwithstanding the proceedings in insolvency.

With all due respect for the learning of the chancellor, we cannot help thinking, his decision, in that case, is in conflict with the principles announced in Alexander vs. Ghiselin.

The petition of the appellee, asking that the trustee, under the mortgage, might be restrained from selling, the counsel for the appellant contend, is making the appellee a party to the proceedings, and is a submission to the jurisdiction of the circuit court, in the premises, to such an extent as will prevent him from successfully resisting the right of the appellant to sell. In support of which position, reference has been made to Hutton vs. Hatton & Kendrick, 4 Gill, 124. But that is a very different case from this. There, it appears from the opinion of the court, that after the first decree, a petition was filed, which “recognized, ratified and confirmed, what had been done,” and asking that the purchaser, under the decree, might be required to bring the purchase money into court, or that a re-sale of the property might be made. Then it is said: “After such a proceeding, and a ratification of the sale, and payment to him of the whole purchase money, and a conveyance of the land by the trustee to the purchaser, does it lie in the mouth of Henry D. Hatton to say, that the whole proceedings are null and void, because, at their incipiency, Mary E. Hatton was not summoned and made to appear, as directed by the act of 1816? By his petition t.o the court and receipt of the purchase money, he waived all objection to the irregularity of which he now complains, and should be estopped from asserting it, either at law or in equity.” In a suit at law Hatton was attempting to treat as void, for irregularity, the decree, which, by his own petition in equity, he had recognized as correct, and under which he had actually received the whole proceeds of a sale made by virtue of the authority of that decree.

In the present case the authority of the court to pass the decree has not been disputed. But the ground taken by the appellee is, that by virtue of the subsequent proceedings in. insolvency, the authority of the trustee to sell, under the decree, was superseded, and became vested in him. His petition, certainly, is not an express recognition or ratification, nor can it be regarded as an implied acknowledgment of any authority to sell, then existing, except his own. It asserts his right, and denies, in very explicit terms, any such authority on the part of the trustee under the decree. Nor has the appellee taken or received any benefit or advantage based upon or growing out of the proceedings in the mortgage case, which can be construed as a recognition of the appellant’s authority to sell. See McCarty vs. Gibson, 5 Grattan’s Rep., 307. Norton vs. Cook, 9 Con. Rep., 314; and Phillips vs. Allan, 8 Barn. & Cres., 477.

The position taken by the appellee has not been overruled, but sustained by the court, temporarily at least. The question now presented, therefore, is, whether the action of the court, not in opposition to, but sustaining the prayer of the petition, should be reversed, when such action is consistent with a principle, correct in itself, if considered independently of any supposed applicability of the doctrine of estoppel, arising from the appellant’s petition. To which question we feel constrained to answer in the negative, because we do not think the filing of such a petition is a sufficient ground for reversing the order appealed from, and therefore it will be affirmed, and the cause remanded without costs.

Order affirmed and cause remanded.