Hammond v. Lyon Realty Co.

As indicated by the per curiam opinion, the five judges who concur in an affirmance do so upon distinct grounds, in none of which a sufficient number agree to constitute a majority. In this situation, Offutt, J., has set forth his views in a full and forceful manner and Sloan, J., wholly concurs in them. In view of the division of the court and of the importance of the questions involved, the writer of this opinion believes a statement of his position should, with deference for the convictions of his brethren, be expressed.

The two appeals on the record are from the decrees of the chancellor dismissing the exceptions to the ratification of two separate sales made by a trustee in mortgage foreclosure proceedings and finally confirming the sales. The mortgagor, in both instances, is the Milburn Realty Company, a corporation; and the Lyon Realty Company, a corporation, is the mortgagee in both deeds of mortgage. The exceptants are the personal representatives of a general lien creditor under a decree obtained against the mortgagor, after the execution of the two mortgages, for the amount of the deficit arising from the foreclosure of a first mortgage lien held against the mortgagor by the creditor, and the receivers of the mortgagor under a decree of the Circuit Court No. 2 of Baltimore City, passed in proceedings for the dissolution of the corporate mortgagor, and the complete administration of its assets There is no exception on the ground of an irregularity or defect in the foreclosure proceedings or in the making of the sale; nor because of an inadequate purchase price. The sole objection to the sales is the alleged invalidity of each of the deeds of mortgage. The lienor under a judgment or a decree usually has the right to object on this ground, and so would his committee in lunacy or other personal representative. Miller's Equity Proc., sec. 468;Albert v. Hamilton, 76 Md. 304, 307, 308, 25 A. 341; Bentleyv. Beacham, 91 Md. 677, 679, 47 A. 1024; Bainder v. Sound Bldg. Loan Assn.,, 161 Md. 597, 604, 158 A. 2. The exceptions on the part of the creditor under the decree in equity are, however, superseded in these proceedings by those of the receivers for the dissolution of the corporation and the winding up of its affairs, since the receivers here represent the corporation, its stockholders, and creditors. Infra; Machen on Corporations, sec. 1594.

One of the major questions is the right of the receivers to except, and this will be the first question considered. The receivers in this cause did not have the status of mere custodians under the court, but were, at the time of the authorization by the court and the filing of the exceptions to the ratifications of the sales, receivers to wind up the affairs of the mortgagor as an insolvent corporation, under a decree which had been passed in a suit instituted by a creditor for an involuntary dissolution, and which had resulted in a decree of dissolution that had conferred upon the receivers full powers of administration. Code, art. 23, sec. 92. The powers of such statutory receivers are greater than those of the ordinary receiver of a court of chancery, whose duties are generally limited to those of a conservator of assets. Gaither v.Stockbridge, 67 Md. 224, 9 A. 632, 10 A. 309. Compare PrentissCo. v. Whitman Co., 88 Md. 243, 41 A. 49; Clark Co. v. Colton,91 Md. 202, 46 A. 386; Knave v. Johnson, 107 Md. 620,69 A. 420. The statutory powers are, however, not to be taken in limitation of the usual powers and duties of a chancery receiver, but in addition. This is illustrated by the case of Mowen etal., Receivers, v. Nitsch, 103 Md. 685, 62 A. 582, 583, where it is found among the memoranda of cases designated by the court not to be reported. A resort to the record of that case will disclose that the original bill was begun in Baltimore County by certain creditors of an insolvent corporation for the benefit of themselves and of all other creditors who would come in and participate in the proceedings. The bill of complaint was for the appointment of a receiver, the dissolution of the corporation, and for general relief. The court appointed receivers to take charge of all the books, property, and assets of every kind and description until the further order of the court. In the course of the administration, the receivers applied for and obtained an order directing them to institute a suit to set aside a mortgage deed which the defendant corporation had executed to a third party. This suit was begun, and much testimony was taken, and the cause was submitted to the late Judge Nicholas Charles Burke, then an able member of this court. At the time of the hearing no decree of dissolution had been made in the primary suit; and the receivers had been appointed in the exercise of the general powers of a court of chancery upon the allegations of the bill of complaint and the admissions of the answer. The assailed mortgage deed had been delivered for a past due debt, at a time when the corporation was insolvent, and within four months preceding the filing of the creditors' bill against the corporation. The chancellor held that, as neither the principal office or place of business of the corporation was located in Baltimore County, nor its certificate of incorporation there recorded, the court had no jurisdiction to determine whether or not the mortgage was an unlawful preference within sections 376 and 377 of article 23 of the Code of 1904 (now sections 88, 92, 94 of article 23 of the Code of 1924); and decided that the only question which the court could entertain was whether or not the mortgage was void under Statute 13 Elizabeth, ch. 5. His decision on this point was in the negative, and on appeal the decree was reversed upon the express ground that the facts did show, contrary to the determination of the chancellor, that the mortgage was fraudulent and void under the Statute of 13 Elizabeth, ch. 5. Before proceeding to the ground of the decision, McSherry, C.J., writing for the court, stated that the provision of the insolvent law against the creation of an unlawful preference (now article 23, section 94 of the Code) "is engrafted on the jurisdiction of a court of equity precisely as though the same provision had been independently enacted in identically the same words without any allusion whatever to the insolvent laws."

The effect of this decision is that each of the two mortgages at bar might have been avoided by the receivers on the ground of its being an unlawful preference, or a fraudulent conveyance within the meaning of the Statute of 13 Elizabeth, ch. 5, as now codified in article 39B of Code; or an actual fraud, as denounced upon equitable principles. If the mortgages are to be attacked as unlawful preferences of an insolvent corporate debtor, the prescribed statutory proceedings for a dissolution must have been instituted within four months after the preferences had been made and have resulted in a decree dissolving the corporation and naming a receiver. Supra. Since the bill of complaint for the dissolution of the mortgagor was not filed within four months after the execution of the mortgages, they cannot be set aside as unlawful preferences, and must be given effect according to their tenor, unless the mortgages are void either as fraudulent conveyances within the meaning of the Statute of 13 Elizabeth, ch. 5 (codified in Code, art. 39B), or as actually or constructively fraudulent, independently of the Statute of Elizabeth, within the meaning and denunciation of equitable principles. Colton v. Mayer,90 Md. 712, 713, 45 A. 874; Clark Co. v. Colton, 91 Md. 195,46 A. 386; Folsom v. Detrick Fertilizer Co., 85 Md. 52, 36 A. 446;Stockbridge v. Franklin Bank, 86 Md. 189, 200, 37 A. 645. SeeDiggs v. McCullough, 69 Md. 592, 609, see page 613, 16 A. 453;Mundy v. Jacques, 116 Md. 11, 16, 17, 81 A. 289; Merchants'Bank v. Page, 147 Md. 609, 128 A. 272.

Aside from the provisions of the statute law with respect to unlawful preferences, the mere fact that a corporation debtor is insolvent will not prevent it from securing a pre-existing creditor by giving the latter a priority over other creditors, if the transaction be made in good faith, upon a valid consideration and without a fraudulent intent to hinder and delay creditors, knowingly participated in by the debtor and creditor. Mowen etal., Receivers, v. Nitsch, 103 Md. 687, 688, 62 A. 582; Crooksv. Brydon, 93 Md. 640, 642-644, 49 A. 921; Totten v. Brady,54 Md. 170, 173; Castleberg v. Wheeler, 68 Md. 266, 275, 12 A. 3;Smith v. Pattison, 84 Md. 341, 35 A. 963; Commonwealth Bank v.Kearns, 100 Md. 202, 207, 208, 59 A. 1010; Thompson v.Williams, 100 Md. 195-199, 60 A. 26; Busey v. Reese,38 Md. 264, 268, 269; McCauley v. Shockey, 105 Md. 641, 646, 66 A. 625. So, an insolvent corporation, unless restricted by statute or by its charter, may prefer one creditor over others or one class of creditors over other classes. Cook on Corporations (8th Ed.), sec. 691; State v. Bank of Maryland, 6 G. J. 205, 219.

Hence, if the directors of a corporation pay or secure a pre-existing debt due one of its directors or a creditor corporation which has all or a majority of directors in common with the debtor corporation, in preference to debts due others, either by transferring property or cash to the creditor or by giving the creditor a mortgage on corporate assets, the transaction is not void, but is voidable unless sustained by a full and valuable consideration and shown to have been free of actual fraud. By reason of the relation of the corporation and the creditor, the transaction is presumptively fraudulent, and this presumption becomes stronger, but not necessarily conclusive, should the corporation be insolvent or in contemplation of insolvency at the time of the transaction.Clark Co. v. Colton, 91 Md. 195, 46 A. 386; Mowen et al.,Receivers, v. Nitsch, 103 Md. 687, 62 A. 582; Macgill v.Macgill, 135 Md. 384, 109 A. 72; Cumberland Coal Iron Co. v.Parish, 42 Md. 598; Booth v. Robinson, 55 Md. 419; Welbournv. Kleinle, 92 Md. 114, 48 A. 81; Pennsylvania Ry. Co. v.Minis, 120 Md. 461, 484-486, 87 A. 1062; Davis v. U.S. Elec.Lt. Pow. Co., 77 Md. 35, 41, 25 A. 982; Hagerstown Mfg. Co.v. Keedy, 91 Md. 430, 46 A. 965; Shaw v. Davis, 78 Md. 318, 28 A. 619.

The numerical weight of precedent supports the contrary view, that the transaction is voidable by the stockholders and by those authorized to act in behalf of the corporation, without regard to the good faith of the participants, the fullest disclosure, the adequacy of the consideration, and whether or not the terms of the transaction are executory or executed. France onCorporations (2nd Ed.), sec. 65, p. 106; Cook on Corporations (8th Ed.), sec. 692; Machen on Corporations, sec. 1563. The decisions of this court do not accept this statement as the general principle governing the subject, but apply the first stated principle, which permits the transaction to stand, provided the fiduciary meets the burden of proof and shows the utmost fairness and the fullest disclosure. This is illustrated by the appeal of Clark Co. v. Colton, 91 Md. 195,46 A. 386. In that case the receivers of an insolvent bank had repudiated certain transactions of their corporation with its president and directors, whereby these officers of the corporation had caused the corporation to pay in full a check on the bank of a corporation of which the president of the bank was the substantial owner and a note on which the president and directors were bound as sureties. The court did not here hold that the two payments were voidable on these facts, upon the principle that no trustee, agent or other fiduciary is permitted to contract with himself or to represent his principal or cestuique trust in any transaction in which he has a private conflicting interest, but recognized and applied the first stated general principle and examined the record for the purpose of seeing if the transactions might stand because the proof would show them "as fair and equitable payments." Page 209 of 91 Md.,46 A. 386, 389. There was much written, arguendo, in the opinion, but the decision ultimately depended upon the failure of the fiduciaries to establish the good faith of the transactions. The facts were that "the payments were made when the corporation was actually insolvent, and under circumstances which convince us that the directors know or were bound to know the bank was hopelessly insolvent, and would, as it did, the very next business day after the payments were made, close its doors, and deny admittance to its depositors who wished to withdraw their deposits." Page 215 of 91 Md., 46 A. 386, 392. In short, the transactions were declared properly avoided, because they were not in the utmost good faith but for the purpose of defrauding other creditors. Machen on Corporations, secs. 1563, 1594. Again, in Hughes v. Hall, 118 Md. 673, 85 A. 946, where the director and president of an insolvent corporation secured, with knowledge of the insolvency, a preference for himself by causing payments to be made to him from time to time on account of the corporate indebtedness to him, it was determined that relief would not be afforded upon general equitable principles but must be sought under the statutory provision against an unlawful preference. Page 680 of 118 Md., 85 A. 946.

In reference to the same subject-matter, in Cumberland CoalCo. v. Parish, 42 Md. 598, 606, 607, Judge Alvey wrote:

"The design of the rule, therefore, is to secure a faithful discharge of duty, and, at the same time, to close the door, as far as possible, against all temptation to do wrong, by subjecting the transaction between parties standing in such confidential relations, to the most exact and rigid scrutiny, whenever such transactions are brought in question before the courts.

"The transaction may not be ipso facto void, but it is not necessary to establish that there has been actual fraud or imposition practiced by the party holding the confidential fiduciary relation; — the onus of proof being upon him to establish the perfect fairness, adequacy, and equity of the transaction; and that too by proof entirely independent of the instrument under which he may claim. This is required, upon the general principle, ``that he who bargains in a matter of advantage with a person placing confidence in him, is bound to show that a reasonable use has been made of that confidence; a rule applying equally to all persons standing in confidential relations with each other. If no such proof is established, courts of equity treat the case as one of constructive fraud.' 1 Story Eq.Juris., sec. 311, and also secs. 321, 322; Pairo v. Vickery,37 Md. 467."

See Booth v. Robinson, 55 Md. 419, 441, 442, in whichHoffman Steam Coal Co. v. Cumberland Coal Co., 16 Md. 456, 506, 507, is cited and interpreted; Welbourn v. Kleinle, 92 Md. 114, 123, 124, 48 A. 81; Hagerstown Mfg. Co. v. Keedy, 91 Md. 430, 436, 46 A. 965. The principle adopted by our predecessors has merits which should prevent any departure, since it serves, not only to check the cupidity of corporate fiduciaries and to remove the difficulty of obtaining evidence of wrongful conduct by declaring presumptively fraudulent the questioned transactions, but also to assure protection and permanency to just corporate transactions by making this presumption rebuttable, upon the production by the fiduciaries of proof which clearly establishes that the transactions are fair, honest, and equitable.

The more drastic doctrine enforced in other jurisdictions has, apparently, not been more effective than that of this tribunal in the prevention of breaches of duty by the fiduciaries of corporations; and is furthermore open to the practical objection that its tendency is to deprive the corporation of the aid, in its financial affairs, of those best advised of the necessity for the aid and most interested in giving it, with judgment, according to the exigencies of the situation.

Before proceeding with the application of the general principle in force in this jurisdiction, the actual relation of the parties to the questioned mortgages must be known; and, in the ascertainment of that fact, recourse must be had to that other equitable rule, that the form of a corporate entity may be disregarded when the ownership of all of its corporate stock is in one person, and, because of the circumstances, it becomes necessary to disregard the formal corporate existence to prevent fraud or imposition or to enforce a paramount and superior equity. Carozza v. Federal Finance Co., 149 Md. 223, 228,131 A. 332, and cases and authorities there cited. Dollar DryCleaners Dyers v. MacGregor, 163 Md. 105, 161 A. 159, 161.

At the time of the execution of the several documents mentioned on this record, the corporate stock of fifty shares of the Milburn Realty Company, the mortgagor, was all owned by three stockholders, who were its board of directors and its executive officers. Isaac Rosenberg was the president and owned seventeen shares of stock, Harry M. Berman was the secretary and treasurer, and his father, Joseph Berman, was the third director, and each of the two last-named stockholders owned sixteen and one-half shares of the stock. The corporation was engaged in the purchase and development of real estate and in construction work. For this purpose it required large sums of money, which it generally obtained, from time to time, from the Lyon Realty Company, which owned and operated an apartment house. The stock of the last-named corporation was, with the exception of two shares, owned by Joseph Berman. Harry M. Berman, a son, and Isaac Rosenberg, a son-in-law, held these two shares for the purpose of qualifying them as directors, and their certificates carried an assignment to Joseph Berman, who was, substantially, the sole stockholder. While the two corporations had the same three thus related persons as stockholders and directors, the corporations were engaged in different corporate enterprises, which were separately controlled and operated.

In order to make provision for the funds which might become necessary to carry on its business, the Milburn Realty Company, on January 6th, 1923, entered into a contract with Joseph Berman, the Lyon Realty Company, and the Druid Realty Company, whereby these parties agreed to furnish the Milburn Realty Company such sums of money and at such times as Joseph Berman would deem necessary for the carrying on of its business. In consideration of these loans, the borrower agreed to secure any such lender by mortgage lien, when demanded, on such of the borrower's property as Joseph Berman should believe adequate. As a result of this contract, money was borrowed and the balances due on the current accounts would vary according to circumstances, but, finally, the borrower became indebted to both the Lyon Realty Company and the Druid Realty Company, which was, likewise, for all practical purposes, owned by Joseph Berman, with the same officers and directors as the Lyon Realty Company. The indebtedness to the Druid Realty Company was comparatively small, but that to the Lyon Realty Company was large, and the latter company acquired the smaller demand and consolidated both loans. Pursuant to the terms of the contract under which these loans had been made, a mortgage deed of all its property was demanded and given to the Lyon Realty Company on July 29th, 1930, for $124,564.38. This mortgage was, without delay, duly recorded, and the Lyon Realty Company continued in the usual and active course of its business. About the first of the following year, the Milburn Realty Company desired to erect a row of houses on a part of the mortgaged premises, and had the Lyon Realty Company release a portion of the mortgaged land in order to obtain a mortgage loan on it from a third party, and, after having successfully concluded this transaction, gave, on February 20th, 1931, to the Lyon Realty Company a second mortgage on the land so released for $35,000. The houses were built and the corporation continued to function until July 18th, 1931, paying out large sums of money in discharge of its ordinary and current obligations.

The term insolvency is defined by the decisions of this tribunal, but the difficulty is, generally, in determining if the facts of the instant case fulfill the applicable definition, as is illustrated in the different conclusions drawn from the record at bar. When all the testimony is considered as a whole, and its divergent portions weighed in connection with the character and credibility of witnesses and the import of persuasive circumstances, the writer is of the opinion that the explanation given by the witnesses of some testimony of an inability to meet liabilities when due in the ordinary course of business and of the content of a letter of November 7th, 1930, which admitted a present inability to pay two obligations of the corporation in the ordinary course of its business, is correct; and that, while the Milburn Realty Company did not pay taxes for two years on one of its properties, and did not meet the interest payment accruing due, with the principal of the mortgage debt of $37,079, on October 8th, 1930, the reasons for these two solitary defaults were that the receipts of money by the corporation had been affected by the failure to maintain its sales, and that it was unable to obtain either an extension or a renewal of this mortgage because of a general decline in the demand for building lots, which constituted the chief assets of the corporation but which had not, in November, 1930, then approximated their later ultimate and disastrous shrinkage in market value; and that, although the corporation was unquestionably embarrassed in the conduct of its business by general market conditions, the testimony does not establish that the directors of the corporation knew or had reasonable cause to believe that the borrower had insufficient assets to discharge in full all of its existing liabilities on the dates of the execution, in the course of its business, of the two mortgages in controversy. A different conclusion has been stated, and is firmly held, by other members of the court, but this circumstance does not afford any justification for an effort to vindicate the writer's position by a review of the testimony, and no more than his findings on the facts will be given.

The corporation was, on July 29th, 1930, a going concern and expected to continue. It did not contemplate insolvency. Moreover, its financial condition then imposed upon it no duty to cease doing business. Subsequent developments which reduced the corporation to insolvency cannot be given decisive weight in determining whether or not a state of known insolvency existed at a prior date. The two mortgages were unquestionably made with the intent to prefer the mortgagee, but an intent to prefer is not the same as an intent to defraud. As has been recently said, "preferences are not fraudulent, and, aside from a statute of insolvency or bankruptcy, an innocent creditor who can secure enough to satisfy his claim is entitled to hold it against other creditors, although the debtor is insolvent." Drury v. StateCapital Bank, 163 Md. 84, 161 A. 176, 178, 179, decided June 20th, 1932; Code, art. 39B, secs. 3(a) and 4; Van Iderstone v.National Discount Co., 227 U.S. 575, 582, 33 S. Ct. 343, 57 L. Ed. 652, 654; Coder v. Arts, 213 U.S. 223, 29 S. Ct. 436, 53 L. Ed. 772. So, the question of insolvency vel non becomes merely an evidential fact in the determination of whether or not the giving of the mortgages was a fraud.

There is not any denial of the necessity and good faith of the contract in writing of January 26th, 1923, whereby the Milburn Realty Company provided for its future financial requirements by agreeing to secure the Lyon Realty Company and the other named lenders, for the loans to be so made, by the execution of a mortgage lien on all or such of its corporate property as might be requested by Joseph Berman. Nor is there any controversy that the mortgages in question were executed in the performance of this contract, and that the mortgage indebtedness was honestly incurred and used for corporate purposes, and, although a prior obligation, constituted a valuable and a full consideration in the amount specified, and is due and unpaid. In all these transactions there was no concealment, no unfairness, no improvidence, and no fraud. It is true that the borrower and the lender had the same directors, and that Joseph Berman was, in reality, the sole owner of the stock of the corporate lender, and the one-third owner of the stock of the borrower, but these common directors of the lender and the borrower were the executive officers and the owners of all the respective corporate stock of both corporations, and, therefore, the contract and mortgages had the approval of all the officers and stockholders of both corporations, and, so, the corporations are bound. Leavenworth County v. Chicago, etc., Railway Co.,134 U.S. 688, 10 S. Ct. 708, 33 L. Ed. 1064; Nye v. Storer,168 Mass. 53, 46 N.E. 402; U.S. Steel Corp. v. Hodge, 64 N.J. Eq. 807, 54 A. 1. Nor can any class of creditors complain.

The law is well settled that a promise in writing to execute a mortgage of particular property, or a defectively executed or unrecorded mortgage, creates an equitable lien upon the property, which is enforceable by a court of equity not only against the promisor, but also against parties who claim under him as volunteers or without an equity superior to that of the creditor, so that the claim of the equitable lienor is entitled to priority over unsecured creditors existing at the time of the making of the promise, but not to priority over general creditors whose debts were contracted after the date of said agreement and without notice. Textor v. Orr, 86 Md. 392, 399, 38 A. 939;Applegarth v. Wagner, 86 Md. 468, 473, 38 A. 940; Pannell v.Farmers' Bank, 7 H. J. 202; Sixth Ward Building Assn. v.Willson, 41 Md. 506; Stanhope v. Dodge, 52 Md. 483; Hoffman Flack v. Gosnell, 75 Md. 590, 24 A. 28; Brown v. Deford Co.,

83 Md. 297, 34 A. 788; Cissell v. Henderson, 88 Md. 574, 41 A. 1068;Dyson v. Simmons, 48 Md. 218; Alexander v. Ghiselin, 5 Gill, 138; Diggs v. Fidelity Dep. Co., 112 Md. 50, 72, 75 A. 517;Brady v. Johnson, 75 Md. 445, 451, 455, 26 A. 49; Butler v.Rahm, 46 Md. 541, 548.

It follows that the original contract in writing has a dual office on this record. In the first place, it established a superior equity in the lender corporation as against the subsisting general creditors of the borrower at the date of its execution, and an equal equity as against all unsecured subsequent creditors; and, in the second place, it demonstrated that the mortgages in controversy were the performance of a subsisting contractual obligation between the borrower and the lender, and thereby convincingly proved the good faith, reasonableness, and fairness of the transaction, with reference to the existing creditors of the corporation, since the amount of the mortgage debt is not questioned, and, although all the corporate property was conveyed, the security was not disproportionate to the indebtedness of between $124,000 and $125,000, because of the value of the property and of its incumbrance of prior mortgage liens. Glenn v. Grover,3 Md. 226, 227; 15 Halsbury's Laws of England, sec. 172, pp. 83, 84. It may be observed in this connection that, when these mortgages were foreclosed on July 18th, 1931, the aggregate of the two sales was the gross sum of $5,705.

The mortgage deed of July 29th, 1930, with its affiliated and subordinate mortgage deed of February 20th, 1931, was openly made for value, without fraud, even if intended to prefer, and promptly recorded. They were executed primarily to secure a creditor in fulfillment of the terms of a valid contract, under which the corporation had obtained the full amount of the mortgage debt for its corporate uses. Johnson v. Stockham,89 Md. 367, 43 A. 920. It cannot be said that the performance of this valid antecedent contractual obligation, upon which the creditor had, from its date in 1923, relied in furnishing the money which constituted the mortgage debt, was a breach of any legal or equitable duty of the mortgagor to its subsisting creditors. See Jones on Mortgages (8th Ed.), sec. 226, p. 265; Collier on Bankruptcy (13th Ed.), p. 1253; Davis v. Billings, 254 Pa. 574, 99 A. 163; SanfordFork Tool Co. v. Howe, Brown Co., 157 U.S. 312, 319, 15 S. Ct. 621, 39 L. Ed. 713; Huntley v. Kingman Co., 152 U.S. 527, 532, 14 S. Ct. 688, 38 L. Ed. 540; Sexton v. Kessler, 225 U.S. 90, 96, 97, 99, 32 S. Ct. 657, 56 L. Ed. 995. So, the execution of these mortgages, under the circumstances of the record, was neither an actual fraud upon creditors nor acts done with the intent improperly to delay or hinder creditors within the meaning of the Statute of 13 Elizabeth, ch. 5, as codified in article 39B of Code, supra. Bump on Fraudulent Conveyances, pp. 19-26; Mowenv. Nitsch, 103 Md. 687, 688, 62 A. 582; Castleberg v. Wheeler,68 Md. 275, 276, 12 A. 3; Wilson v. Russell, 13 Md. 494, 528-536; Dyson v. Simmons, 48 Md. 214-218; Commonwealth Bankv. Kearns, 100 Md. 208, 209, 59 A. 1010; Wareheim v. Bayliss,149 Md. 107, 108, 131 A. 27; Kerr on Fraud (6th Ed.), 220, 221, 273, 274, 281-284.

The two mortgages were, therefore, both upon a valuable and adequate consideration, and are shown to have been executed in good faith and free of all fraud, and, therefore, they must prevail and have effect as against all subsequent lien creditors and all general creditors without reference to the times when their claims arose, because the period within which they could be attacked as creating an unlawful preference was suffered to pass.Supra; and see Code, art 66, sec, 11; Sullens v. Finney,123 Md. 653, 657, 658, 91 A. 700; Felgner v. Slingluff,109 Md. 474, 480, 71 A. 978; Annan v. Hays, 85 Md. 505, 508, 509, 37 A. 20.

DIGGES, J., dissents from the decision of the Court.