Bank of Westminster v. Whyte , 1 Md. Ch. 536 ( 1850 )

The Chancellor:

These cases have been argued together, and are so connected, as in the view of the counsel and the court, to constitute but one suit.

The pecuniary interest involved is inconsiderable, but the questions which the case present are not unimportant.

The general rule is too firmly established to be questioned, that no matter how absolute a conveyance may be on its face, if the intention is to take a security for a subsisting debt, or for money lent, the transaction will be regarded as a mortgage, and will be treated as such. Hicks vs. Hicks, 5 Gill & Johns., 75; Dougherty vs. McColgan, 6 G. & J., 275.

And though the defeasance was by an agreement resting in parol, still, as between the parties, the deed, though absolute on its face, will be considered a mortgage, for parol evidence is admissible to show that an absolute conveyance was intended as a mortgage, and that the defeasance was omitted or destroyed by fraud or mistake. 2 Kent’s Com., 142, 143 ; Henderson vs. Mayhew et al., 2 Gill, 393.

But it is likewise undeniably true, that unless accident, fraud, or mistake, can be shown, or in cases of trusts, parol evidence cannot either at law or in equity, ccbe admitted to contradict, add too, or vary the terms of a will, deed or other instrument.” Bend vs. The Susquehanna, &c. Co., 6 H. & J., 128; Watkins vs. Stockett, ib., 435.

In this case, the transfer of the three stalls is absolute and unconditional, and if there was nothing in the answer of Mr. Fisher, to whom the transfers were made, and who acted as the agent of the bank in the' negotiation with Suter, from which it could be fairly inferred that the object was to take security for money loaned, or to be loaned, it would fall within the general rule ; and the transfer could not be qualified by the introduction of parol evidence, neither fraud nor mistake being alleged.

But, looking to the pleadings in the cause, and especially to the answer of Fisher, to the bill filed by Whyte, as the permanent trustee of Suter, to set aside the transfer as fraudulent in view of the insolvent laws, which answer is invoked in these causes, and has been read without objection, and there can, I think, be no doubt that the transfer of the stalls was taken as security for the repayment of the money due to the bank, and not absolutely by way of purchase.

The language of the answer is, “that the said sum of three thousand dollars was not lent specifically upon the security of the three stalls in different markets in the city of Baltimore, but on the joint security of said stalls and other property of said Suter, which, at the time was believed by this respondent, to be bound by said judgment, the object of the Bank and Suter being, as understood by the respondent, to secure not only the money then advanced, but the debt previously due the bank.”

It, therefore, clearly appears, that the transfer of the stalls was taken as security for a debt, and whether to secure the specific sum of three thousand dollars loaned Suter at that time, or the entire debt of nine thousand dollars, for which judgment was confessed, still the intention of the parties was merely to give and to take, a security for a debt, and, consequently, the transaction must be treated accordingly — that is, the transfer must be regarded as a mortgage or pledge, to secure the payment of a debt, and not as passing the absolute title to the creditor.

The position that this was the intention of the parties, derives powerful support from the fact, that the sum of three thousand dollars, advanced at the time of the transfer, was included in the judgment confessed by Suter. Indeed, I do not understand it to be contended by the counsel o.f the bank, that these three stalls were purchased by it, for the sum of three thousand dollars, because, if so, no conceivable reason could be assigned, for including that sum in the judgment. His argument is, that the transfer was absolute, and that the bank was to be at liberty to sell and apply the proceeds of the sales to the ex-tinguishment, as far as they would go, of the entire debt of nine thousand dollars, for which the judgment was rendered. If that was the character of the transaction, that is, if the stalls in the hands of the bank, or its agent, were affected with a trust, to sell and apply the proceeds to the payment of the debt, still, I should think, that in the eye of a court of equity, the transfer would be regarded as a mortgage, being a mere security for the debt, and not an indefeasible transfer of the title.

My opinion then, is, that this transfer of these stalls, though absolute in terms, must be treated as a security merely, and be subject to the considerations governing such transactions.

And this conclusion is arrived at without trenching upon the principle, that parol evidence in the absence of fraud, or mistake, is inadmissible to vary or .contradict the clear import of a written instrument, but upon the confessions and statements of the answers themselves, which, in my opinion, prove clearly that a security merely was intended to be taken, and if so, it follows, that however absolute the form of the instrument, it will be dealt with as a mortgage.

The remaining question has reference to the right of the insolvent trustee of Suter to sell this property, and administer the proceeds of the sales under the control of the court, by which he was appointed, and this question depends upon the true construction of the 5th and 7th sections of the act of 1805, chap. 110.

It is conceded, and indeed could not be disputed, since the decision of the case of Alexander vs. Ghiselin et al., 5 Gill, 138, that if the transfer of this property is to be regarded as a mortgage or pledge for the security of a debt, that it would be the right and the duty of the insolvent trustee to sell it and pay off the liens and incumbrances thereon, the opinion of the Court of Appeals in that case being explicit to that effect. But it is urged, that the transfer here, though made to secure a debt, is in the nature of a trust, and that the insolvent trustee has no authority to interfere with the trustee selected by the convention of the parties, whose right it is to proceed in the discharge of his duty, undisturbed by any such interference.

It appears to me, however, that, assuming the transaction to be such as the counsel of the bank has characterized it — that is, that the property in question, though transferred to Mr. Fisher absolutely, was nevertheless affected with, and to be regarded as subject to,'a trust for the payment of the money due from Suter to the bank ; and that parol evidence is admissible for the purpose of showing the trust, still it seems clearly to come within the scope of the principles settled by the appellate court in the case referred to.

Looking to the design of the insolvent laws, as expounded in that case, which was to secure a prompt, single and harmonious administration of the estate of the insolvent, which' could only be effected by bringing all the parties interested before one and the same tribunal; it would seem to be essential that no one should be permitted to participate with the insolv-1’ ent trustee in the execution of the trust, by which, as observed by the court in that case, “adverse interests might be created, delays engendered, if not ensured, and probably different, and possibly conflicting, tribunals consulted.”

Considering that this question is, in effect, settled by the case in which these remarks were made, I shall pass orders, dissolving the injunction issued upon the bill of the Bank of Westminster, and continuing that which issued upon the bill of the insolvent trustee.

[No appeal was taken from this order.]