Carson v. Phelps , 40 Md. 73 ( 1874 )

Bautol, C. J.,

delivered the opinion of the Court.

This is a contest among the creditors of Thomas J. Carson, deceased, as to the proper distributions of the money arising from the sale of his real estate, made by Randolph Barton, Esq., Trustee. The property sold consists of two of the lots of ground described in the deed of the 27th day of April 1868, executed and acknowledged by Thomas J. Carson, and purporting to convey to himself as Trustee seven lots of ground, in trust for the uses and purposes therein mentioned. The appellee Phelps is the Trustee under the will of the late Samuel C. Edes, appointed in the place of Thomas J. Carson deceased, and the other appellees are the eestuis que trust under the same will, and claim under the deed of the 27th day of April, 1868, a lien and priority in the fund, as against the general creditors of Carson, who were such prior to the execution of the deed.

This lien and priority was allowed by the Circuit Court in ratifying the auditor’s accounts C and D and is resisted by the appellants upon several grounds which will be noticed hereafter.

The main question to be considered is the operation and effect of the deed of April 27th, 1868.

The deed remained in the possession of Thomas J. Carson, and some months after his death, was found among his papers relating to the estate of Edes, and was by his administrators delivered to Mrs. Long the administratrix de bonis non of Edes.

The appellants contend that the deed having been retained in Carson’s possession during his life-time, never was delivered by him, and never became operative as a conveyance, or a contract for a conveyance. They further contend that even if the deed had been delivered, it is not valid at law and will not be held good in equity as a contract ; because being in the nature of a mortgage an affidavit “that the consideration was true and bona fide” as prescribed by the Code, Art. 24, section 29, was necessary to render it valid against creditors. It is also objected that the deed is invalid for want of the stamp required by the Acts of Congress then in force. With respect to the last objection, the want of a stamp, this defect appears to have been supplied by the affixing of a stamp and the payment to the collector of the penalty prescribed by Act of Congress, which was held in Cook vs. England, 27 Md., 28, and Dowler vs. Cushwa, ibid, 354, to be a substantial compliance with the stamp law. But if this be not so, the want of the stamp would not make the instrument invalid, or render it inadmissible in evidence, in the absence of proof that the stamp was omitted with intent to defraiid the revenue, as was decided in Black vs. Woodrow & Richardson, 39 Md., 194, following and adopting the construction of the Acts of Congress, which was established by the Supreme Court in Campbell vs. Wilcox, 10 Wal., 422. As to the want of an affidavit. The Code, Art. 24, section 29 declares that “no mortgage shall be valid, except as between the parties thereto, unless there be endorsed thereon an oath or affirmation of the mortgagee, that the consideration in said mortgage is true and bona fide, as therein set forth.”

This provision has been construed as applying to “ deeds of mortgage technically such and not to deeds of trust.” Stocked vs. Holliday, 9 Md., 492, 499. This instrument is by its terms and operation a deed of trust, not a mortgage, tbe grantee took the property not as mortgagee but as trustee, not only in name but in reality, both from the nature of the estate conveyed to him, and from his rights and duties thereunder; the property was intended to be held by the grantee, as trustee for the benefit of the parties therein named as cestuis que trust; no equity of redemption in the property remained in the grantor ; but there was a resulting trust in his favor, under which, after the exercise of the power of sale by the trustee, he would be entitled to receive in money, any balance that might remain after the purposes of the trust were accomplished by paying to the cestuis que trust in remainder under Edes’s will their respective shares of the trust fund. It is very clear to us that to such an instrument, the provision of the Code has no application, and that no affidavit was necessary. The deed was regularly executed by Carson, attested and formally acknowledged according to law. To make it operative as a conveyance delivery was necessary ; was it delivered ? this is the next question to be considered.

The law on this subject is correctly stated by the Judge of the Circuit Court “that no particular form of procedure is necessary to effect a delivery; it may be by words or acts, or by both combined; but in all cases the intention that it shall be a delivery must exist, and acceptance may be presumed from the grantee’s possession.” But the learned Judge adds that “in this case the possession is equivocal, the grantor and grantee being the same person,” and he came to the conclusion that “there are no circumstances from which an intention to deliver can be inferred.” In this conclusion we do not concur. An examination of the instrument with the facts and circumstances attending the transaction, has satisfied us that there was a valid and effectual delivery of the deed, and that such was the intention of Carson. It was not a mere voluntary deed, but founded upon a valuable consideration : Carson as trustee under the will of Edes had, by the order of the Orphans’ Court, obtained possession of the fund remaining in his hands as executor; he was under the strongest legal and moral obligation to secure it to the parties entitled, the beneficiaries under the will. In addition to this, as shown by the recitals in the deed, he had upon their request, made an express contract to secure the same. For that purpose the deed was prepared by his attorney at his instance, and was formally executed, attested and acknowledged, and was by him carefully preserved among the papers relating to the trust estate. It is difficult to explain these facts upon any other theory, than an intention on his part that the deed should operate as a creation or declaration of trust for the benefit and security of the parties in whose favor it was made. The fact that the paper remained in his possession can have little force or significance in disj>roving a delivery. Being a conveyance to himself as trustee ; after its acknowledgment, it was in his possession in that character; and no longer under his moral or lawful control as an individual. There could be nothing equivocal in such possession; as it was his legal duty to hold the deed as trustee, the law presumes the possession was held by him in that character. “If a trustee act ambiguously, he cannot afterwards take advantage of the doubt and say he acted not as trustee, but in some other character.” Lewin on Trusts, 168.

“ Where a man has several capacities, and is found in possession of property, the law will attach the possession to the capacity in which of right it ought tobe held.” Flickinger vs. Hull, 5 Gill, 60.

The omission of Carson to place the deed upon record, is relied on by the appellants as a significant fact to show that he did not intend it as a complete and binding act; but we think this is explained by the fact that he considered himself perfectly solvent as late as 1869, as proved by the witness Vickery.

Being of opinion that the deed was perfected hy delivery, and that Carson’s possession of it was in the character of trustee; it operated to create a perfect and valid trust in favor of the appellees.

“If a settlor purpose to convert himself into a trustee, then the trust is perfectly created, and will be enforced so soon as the settlor has executed an express declaration of trust, intended to he final and binding upon him, and in this case it is immaterial whether the nature of the property he legal or equitable—whether it he capable or incapable of transfer.” Lewin on Trusts, 56, (5th Eng. Ed.)

The same doctrine is stated in Hill on Trustees, 51 to, and on page 63 the author says, “A trustee of real or personal property may be created hy any formal instrument, whether deed or will, which passes the legal title to the trust estate, and contains a proper declaration of trust; or without any transmutation of possession, the owner of property many convert himself into a trustee of it hy a proper'declaration of the trust.” We refer also to Maccubbin vs. Cromwell, 7 G. & J., 157, 163, 164, and to Aldridge & Higdon vs. Weems & Hall, 2 G. & J., 37, 47, 48.

This trust thus validly created is binding against Carson and his representatives, and notwithstanding the failure to record the deed, it is valid and will he enforced in equity against 1ns general creditors. This doctrine is well settled and has been recognized in Maryland in a great number of cases, and is alike applicable, whether the trust he expressly created by deed unrecorded, or whether it arises from a valid contract in writing- for specific security. McMechen vs. Maggs, 4 H. & J., 132; Tiernan vs. Poor, 1 G. & J., 216 ; Moale vs. Buchanan, 11 G. & J., 315 ; Repp vs. Repp, 12 G. & J., 341; Alexander vs. Ghiselin, 5 Gill, 139, 185; Price vs. McDonald, 1 Md., 403, 414, 415; Johnston vs. Canby, 29 Md., 216.

In this case the effect of the decision of the Circuit Court in ratifying accounts C and D, was to give to the appellees a lien and priority over the general creditors of Carson, who were such at the time the deed was executed; as to the subsequent creditors, that is to say, those who became creditors after the date of the deed, they were allowed to share pro rata in the distribution, in the same manner as if the deed had not been made. This mode of distribution was adopted in conformity with the ruling in Panned vs. Farmers’ Bank, 7 H. & J., 202; which was a case of an unrecorded mortgage. Whether that rule was applicable to the present case, it is not necessary to decide. The appellees have made no objection to the account, or claimed any priority over the subsequent creditors. So far as the appellants are concerned there can he no doubt or question of the equitable rights of the appellees to their lien upon the fund, and to the priority allowed them in account C.

The provisions of the Code, Art. 24, secs. 19 and 21, allowing deeds relating to land duly acknowledged to be recorded at any time, saving the rights of creditors and purchasers without notice, cannot he construed as impairing the rights of parties claiming under a trust; or as affecting in any manner the equitable rights and liens of parties as recognized by the established doctrines of Courts of Equity.

It apireara from the record that at the time the deed of trust was executed, the property therein described was encumbered by a previous mortgage executed by Carson, which contained a covenant providing for its payment by voluntary sales of the property mortgaged. Eive of the seven lots were afterwards sold and the mortgage released. The effect of that was simply to remove the prior incumbrance, and leave the two remaining lots unincumbered, subject to the equitable rights of the cestuis que trust under the deed, and gives no right to the appellants to claim a marshalling of the fund, so as to subject the two remaining lots to the payment of a proportional part of the original mortgage debt. There is no evidence in the case to lay the foundation for any such claim ; and it is very clear that the rights of the appellees to their lien and priority under the deed, could not be impaired either by the payment of the mortgage by Carson, or by the breach of trust committed by him in selling a portion of the property.

(Decided 6th March, 1874.)

We agree with the Judge of the Circuit Court, that there is no just ground for charging the appellees with laches in asserting their rights, and being of opinion for the reasons stated that the accounts C and D were properly ratified, the order of the Circuit Court will be affirmed and the cause remanded.

Order affirmed, and cause remanded.

The appeal by the representatives of the estate of Edes, was taken from the order of the Circuit Court passed on the petition of Messrs. Steele and Snowden, solicitors, by which they were allowed out of the personal estate of Carson a fee of $500, as compensation for their services in arguing the case of “Pairo vs. The Administrators of Carson, 37 Md., 467.”

We have considered the several objections to this order urged by the appellants, and are of opinion that the fee was properly allowed.

The case was one of considerable importance to the estate of Carson ; it had been decided below in favor of the administrators; it was their duty to employ counsel to try the cause upon the appeal; and it is equitable that the estate should be charged with the counsel fees. The proof shows that the amount allowed is a reasonable compensation for the services rendered.

Order affirmed.

(Decided 6th March, 1874.)