Case Name: Robert H. Carter and wife, and Mary M. Smith, vs. Marcus Dennison
Court: Court of Appeals of Maryland
Jurisdiction: Maryland
Decision Date: 1848-12
Citations: 7 Gill 157
Docket Number: 
Parties: Robert H. Carter and wife, and Mary M. Smith, vs. Marcus Dennison.
Judges: The cause was argued before"Spence,.Martin, Magruder and Frick, J. On motion to dismiss the appeal and on the merits.
Reporter: Reports of cases argued and determined in the Court of Appeals of Maryland
Volume: 7
Pages: 157–177

Head Matter:
Robert H. Carter and wife, and Mary M. Smith, vs. Marcus Dennison.
December 1848.
On the 20th of October 1846, J S applied for relief under the insolvent laws, to the commissioners of insolvent debtors for the city and county of Baltimore, who granted him a final discharge, appointed his permanent trustee, and transmitted the proceedings to Baltimore county court. His real estate was then sold by order of said court, and the proceeds brought in for distribution. The cause was then referred to the auditor in insolvency, with directions to give notice to the mortgage and lien creditors to file their claims before a certain day, and to state accounts appropriating the funds to their payment. The auditor, in account B, applied a large sum to D’s mortgage, filed in pursuance of said notice, being first in priority, dated in 1840, and purporting to secure the sum of $16,000, loaned for the term of ten years; but, by an adjustment made between D and the trustee, on the ground of alleged usury, the sum actually loaned was computed at $11,495, with interest from 1840. By this application, the fund was exhausted before reaching the mortgage of the appellants who thereupon filed the plea of usury against D’s claim, which in account C was excluded. These two accounts being submitted, Baltimore county court ratified the first, allowing the claim of D, as adjusted, and rejected the second. Upon the motion to dismiss the appeal from this order, it was Held :
That the order from which this appeal was taken, being- one from the county court, in the exercise of its special jurisdiction over the estates of insolvent debtors, from which no appeal will lie, the motion must prevail.
By the act of 1805, ch. 110, and its supplements, the whole administration of the property of the insolvent, beginning with the sale and ending in distribution, is devolved upon the county court through their trustee, and their judgment in all matters appertaining to it is conclusive; because these are the exclusive subjects of the special jurisdiction conferred by that act.
The institution of a court of commissioners of insolvent debtors, by the act of 1816, ch. 221, and its supplements, was only designed to relieve the county court from the pressure of its increasing business, imposed by this extensive class of cases. It was but an ancillary tribunal, bound to report and return all its proceedings, and still subject, to Baltimore county court.
The object of the act of 1835, ch. 235, was to authorise Baltimore county court, ex officio, to require from the trustees of insolvents, who should “thereafter apply for the benefit of the insolvent laws,” an annual report of the funds belonging to their trust, with a view “to cause distribution to be made among the creditors.”
The 1st sec. of the act of 1836, ch. 133, extended this power to cases “pending in said court,” in which the trustees had not distributed the fund, giving to such trustees; in “cases then pending,” and limited to such, the right to apply “to said court, or some court of equity,” for an audit, and directions to distribute or invest the funds.
The true construction of the provision in the 2nd sec. of this latter act, “that the power of the court to appoint an auditor “in insolvent cases, “shall be concurrent with that of the court of equity,” is, that Baltimore county court shall have the power to appoint an auditor, in the investigation of insolvent cases, to the same intent that courts of equity appoint an auditor in the course of their equity jurisdiction.
But when the same section further confers, powers “concurrent with the courts of equity in the distribution of the funds of insolvent debtors,” it assumes a power to exist which is not within the scope of chancery jurisdiction, and confers nothing, therefore, the provision is a nullity.
From a special limited jurisdiction, no appeal lies to any other tribunal, and this rule applies to the insolvent courts of this State, as courts of limited jurisdiction.
Upon the merits, it was Held, that under the statute of this State against usury, there can be no recovery upon an usurious contract, in any proceeding instituted by the usurious creditor, either at law or in equity. If he becomes the actor and originator of the proceedings, he must fail as plaintiff; because there is no forum wherein he may enforce an agreement, declared by the law to be tainted and forbidden.
But where the debtor himself seeks relief, and brings his usurious creditor, with his contract, into a court of conscience, relief will only be extended to Mm, on his paying, or offering to pay, the principal and legal interest of the sum due; upon the principle, that he who seeks equity, to obtain relief, must do equity.
In this case, where the creditor was compelled by the court, to file his mortgage before it was due, and was placed in his present position by the act of the law, he cannot be regarded as the actor; but the subsequent mortgagees, who interpose the plea of usury and demand relief against him on this ground, are the actors, and their case is fully within the spirit, if not the letter, of the rule, that requires equity first from them.
It is the duty of a court of equity, in a case like this, to look at all the circumstances, and if the status of the party before them is involuntary, to assign him an equitable position in court, in relation to all the other parties, and not to make him the actor, to his own prejudice, where his standing in court will hear any other more favorable construction.
Appeal from Baltimore county court.
On the 20th of October 1846, John Spear Smith applied to the commissioners of insolvent debtors of the city and county of Baltimore, for the benefit of the insolvent laws. He was granted a final discharge in March 1847, having reported among his creditors. “Marcus Dennison for $15,000, secured by mortgage, part, if not all, in dispute,” and Margaret and Mary Smith, $20,000. John Glenn was appointed his permanent trustee, and gave an approved bond on tho 20th of October 1846. On the 3rd of November, the trustee was directed by Baltimore county court, to which the proceedings in insolvency had been transmitted, by the commissioners aforesaid, to sell the real estate of the insolvent. The sales made in pursuance of this order, and which were duly ratified by the court, amounted to $33,874.95. The trustee, in his report of the 7th of May 1847, states, that “the whole of the real estate is incumbered by mortgages and judgments, to more than its value,” and prays that “special notice may be given to the several mortgagees to file their claims.” With this report the several liens are filed as exhibits, among which, the first in date, and designated by the auditor in his account B, as claim No. 1, is a mortgage from Margaret Smith and her trustee, of the first and second part, to Marcus Dennison of the third part,-dated the 15th of December 1840. This mortgage recites,'that- “whoreas at the instance and request of the party hereto of the first part, the party of the third part has this day lent to her the sum of $16,000; for the term of ten years, at an interest of six per cent, per annum, payable quarterly, for which said sum of $16,000, there has been passed and delivered to the party of the third part a promissory note, of even date, herewith drawn by John Spear Smith, (son of said Margaret,) to, and in favor of, the said Marcus Dennison, or order, payable at ten years after date, and for legal interest on said sum, there have been passed and delivered to the said Marcus forty prbmissbry notes, dated and drawn as aforesaid,- for $240 each, payable quarterly in succession.” For securing these notes, the mortgage conveys certain property situated in Baltimore city to said Dennison, which, by the will of said Margaret, was' devised to the said John Spear Smith, and upon her death, in'1843, come into his possession. Upon the back of this mortgage is the affidavit of Dennison, that the amount due on the 5th of December 1846, was $15,614.25, and also the following agreement':
“It is agreed, that in settlement of Marcus Dennison's mortgage, on the estate of John Spear Smith, that the amount due to him is adjusted at $11,495, with interest from 15th day of December 1840, till the day of sale.
John Glenn, Permanent Trustee.
David Stewart,
Solicitor for M. Dennison.
Baltimore, Nov. 12th, 1846.”
After several intervening incumbrances, there'is a mortgage, (designated as claim No. 6,) from John Spear Smith to Margaret Carter, wife of Robert Hill Carter, and Mary M. Smith, dated the 19th of January 1846. This mortgage recites, that “whereas the said John Spear Smith is, and stands justly indebted to the parties of the second part in the sum of $20,000, being a portion of the proceeds arising from the disposition of certain ware-houses on Spear's wharf, belonging to the parties of the second part, and appropriated to the use of the said John Spear Smith," and, to secure the payment of this sum, conveys to them the property previously mortgaged to Dennison.
The cause was then referred by the court to the auditor in insolvency, who was directed to give notice to the creditors of the insolvent to file their claims, and to state accounts between the trustee and the creditors of the insolvent. The auditor reported by account J3, as due the appellee, $15,614.05, and Margaret Carter and Mary M. Smith each $31.33; and by account C, stated at the instance of the counsel for the appellants, and rejecting the claim of the appellee entirely, the sum of $15,676.71 was allotted to said Margaret Carter and Mary Smith. On the 27th of May 1847, the court, by agreement of parties, ratified account 13, except as to claim No. 1, and directed the appellee to file further proof in support thereof. After the filing of this additional proof, the appellants, on the 21st of June, filed separate pleas, in which they allege, that the claim of the appellee is on the note for the principal sum of $16,000, filed with his said claim, and the notes for the interest on said principal sum; and that said notes, and the mortgage given to secure the same, were made and delivered to the appellee, upon an usurious and unlawful contract, entered into after the 3rd day of October 1704, and they severally plead the act of 1704, ch. 69, in bar of said claim and every part thereof. They also set forth in their said pleas, that while said notes and mortgage, to secure the sum of $16,000 and the interest thereof, were given to the appellee, only the sum of $11,495.05 was in fact loaned by him to the insolvent, in consideration of said notes and mortgage, and that but for the usury of said transaction, only the last named sum, with interest from the 15th of December 1846, would be due to the appellee. And the appellants, at the same time, severally excepted to the appellee’s claim, No 1, in account 13 of the auditor, as being void on the ground of usury, and in their exceptions, again specially plead the usury thereof, in opposition thereto.
To these pleas the general replication was filed. And, by agreement, the testimony taken before the auditor in reference to the claim of the appellee, No. 1, was agreed to be read at the hearing of the auditor’s report by either party, as if taken after, and in reference to the pleas and exceptions of the appellants. This testimony clearly establishes the fact, that the claim of the appellee was founded upon an usurious and unlawful'loan, made by him to the insolvent.
Upon this agreement and testimony, the claim of the appellee, with the pleas and exceptions of the appellants thereto, and the replications of the appellee, were submitted by the solicitors of the respective parties, and, on the 24th of June 1847, the court adjudged and ordered, that the exceptions and pleas of the appellants should be overruled, and the claim of the appellee,-as-stated in account B, should be finally ratified and confirmed, and that account 0 should be rejected. From which decree the appellants appealed.
The cause was argued before"Spence,.Martin, Magruder and Frick, J. On motion to dismiss the appeal and on the merits.
Brown and Bruñe for the appellants,
contended :
1st. That an appeal lies from the decree of Baltimore county court, of the 24th of June 1847.
2nd. That said decree should be reversed3 because the appellee’s claim being founded on' - an usurious and unlawful contract of loan, made between' him and the insolvent, was, by such usury, rendered null and void, and the appellee was thereby debarred from setting up said claim against the insolvent, and also from recovering his said claim, or any part thereof, out of the proceeds of the property mortgaged to secure-the said loan.
Under the second point, they argued:
1st. That the note and mortgage, filed by the appellee as the evidence of his claim, were given upon-an usurious and illegal contract, by reason of which he would be prevented from recovering on said note and mortgage,-independently of • the provisions of the act of 1845, ch. 352.
2nd. That the objection and defence of usury to the appel- ■ lee’s claim have been properly taken and pleaded, according to the requisitions of the law previous to the act of 1845, as well as under that act, even if its provisions should be held teextend to this case.
3rd. The appellants being subsequent mortgagees of the property affected by the usurious mortgage, may plead the usury affecting the mortgage of the appellee, so as to bar him from asserting his claim to, or lien upon the proceeds of the mortgaged property.
4th. The principle of courts of equity requiring a party, who seeks in them to be relieved from an usurious contract, to pay or tender the amount actually loaned by the usurious lender, does not apply to this case, so as to make valid the claim of the appellee in whole or in part.
5th. That the provisions of the act of 1845, do not apply and were not intended to extend to a case like this.
6th. That if it should be held that the act of 1845, was intended to extend to a case like this, yet as the appellants, for a valuable and legal consideration, acquired their lien on the mortgaged property of the insolvent before the passage of that act, and when, by reason of the usury in the appellee’s contract with the insolvent, the mortgage previously given to the appellee had no validity in law to give the appellee a lien on the property mentioned in said mortgage, or its proceeds, but, on the contrary, was declared by the law to be utterly null and void, the said act, under these circumstances, should be held to have no operation to make valid the security of the appellee, and invalidate the security of the appellants; because, in so operating, it would not only divest or impair legal and vested rights, but, at the same time, destroy the security and violate the obligation of the contract between the appellants and the insolvent, and would therefore be repugnant to the fundamental principles of right and justice, unconstitutional and void.
C. J. M. Gwinn and David Stewart for the appellee,
contended :
1st. That under the circumstances of this case, the appellee is entitled to be reimbursed and paid out of the fund, the actual amount of his advances to the insolvent.
2nd. That the decision of Baltimore county court, acting upon the distribution of the estates of insolvent debtors, is final and conclusive, and that no appeal lies therefr.om to any other tribunal.

Opinion:
Magrtjdeir, J.,
dissented in part, and delivered the following opinion :
Until the passage of the act of 1804, for the relief of insolvent debtors, all applications were required to be made, by persons of that description, to the chancellor, and he alone was authorised to act upon such applications, and to grant the relief which was sought. The proceedings, preparatory to to the discharge, were very much as now, except that the chancellor only could order or sanction them.
These annual insolvent acts, created an insolvent's court, of which the chancellor was the judge, as he was of the land office, received compensation for his services therein, distinct from the salary paid to him as chancellor and judge of the land office, and had power to do some acts ex officio, and to frame issues for the trial of facts, when he thought them necessary. These were powers conferred upon him by act of Assembly, and a grant of them would have been unnecessary, if, in acting upon the application of an insolvent, he was acting as chancellor, and exercising any branch of chancery jurisdiction.
The necessary consequence of any application to him and discharge of the insolvent, was, that the estate given up by the insolvent, created a trust fund in the hands of his trustee, who possessed the same powers, had to perform the same duties, and was responsible in the same way, that any other trustee for the benefit of creditors is. To the creditors the trustee was responsible, and, in the chancery court, might be made to render an account and complete his trust, and this without any additional powers conferred, by the insolvent or other laws, upon that court. To compel trustees, (no matter whether appointed by the chancellor, in consequence of an application by a debtor for his discharge under the insolvent law, or by the debtor himself, by deed, conveying property in trust for the benefit of his creditors,) to discharge their trust, was, and always had been, an acknowledged branch of chancery jurisdiction.
'Hie regular course of proceeding when a cestui que trust, or any person interested in the trust fund, wished the trust to be completed, was, to file a bill, and this would be the commencement of a regular chancery suit, to be conducted as such, and, in the course of time, to be ended in a decree, by the chancellor distributing the trust fund. Prom this decree, any party who thought himself aggrieved, no doubt had a right to appeal, as well as from any other decree.
If, then, the chancellor was still the person to receive insolvent's applications, and grant discharges, and the application in this case had been made to him, and he had passed the order now appealed from, there can, it is believed, be no doubt that an appeal would lie from that order.
The insolvent jurisdiction has been take a from the chancellor, though without taking from him any portion of his jurisdiction iu cases of trusts, and to that court the parties interested in this trust fund, must have applied lor relief, if no such power to grant them relief had been conferred upon any other tribunal. It would not, of necessity, belong to the tribunal which granted relief to the insolvent.
The county courts might have been invested with the power to appoint a trustee, take his bond, and grant a final discharge, without any power to call that trustee to account, and had certainly no such power in 1S04. A law conferring upon them that power, would be an enlargement of their equity jurisdiction. This power, no doubt, has been conferred by a later act of Assembly, (1814, ch. 94,) giving to the county court, very extensive equity powers indeed.
It is alleged, that the power to distribute the trust fund among the creditors, as well as the power to grant the discharge, is in the county courts, and it seems to be thought by some, that in these acts, they are sitting as a court of common law. This can scarcely bo true, nor is it true, as thought by some, that this is a common law court, possessing some chancery powers. It is one court, possessed of common law and chancery jurisdiction, but it would be as correct to say, that it is a court of equity, possessed of some of the powers of a court of common law, as to call it a court of law, exercising occasionally equity powers, when "sitting as a court of equity." These courts are not exercising common law jurisdiction, when settling an account between the trustee of an insolvent and the creditors, or ordering the trustees to render an account of the trust fund, and a common law court would find some difficulty in exercising such powers, even if the law directed them, in the discharge of these duties, to act as a common law .tribunal. In 1st Bland, 67, it is said: "If the legislature directs any thing to be done, it either provides the means to be pursued to effect its object, or it is partially or wholly silent as to the manner of proceeding. If the prescribed means are such, as can only be exercised at common law or in equity, then the one or the other of those tribunals must be clothed with exclusive jurisdiction accordingly, or the enactment may be such, as to allow them to have concurrent jurisdiction. But, if its nature be such, that the prescribed mode can be executed by neither, or the right given be such, that, according t.o their several limited and settled modes of proceeding, neither of them can grant proper redress, they cannot, in any way, supply the deficiency; because, even upon English authority, a court of justice cannot be permitted, in any case, to legislate; and because, by the constitution of our republic, the three departments having been directed to be kept forever separate, the judiciary has been expressly excluded from every species of legislation, and is precluded from supplying any omissions of the legislature, however obvious and necessary it may be for attaining the object in view." Lord Eldon, in 2nd Jacob & Walker, p. 371, remarks: "If the powers of both, (equity and common law,) taken together, can give the king's subjects nothing but an action for damages, it is a defect which, whether it proceeds from mistake on the part of the legislature, or, if I may presume to say so, from negligent inattention, no court can supply. The legislature has not entrusted that authority to courts of justice. It is not said, that they can legislate, but that the act is to be carried into execution by the known rules of law and equity. What the legislature has directed to be. done, or may have prohibited, the courts, as far as their known rules and principles will permit, will endeavor to enforce; but if their known rules and principles will not supply a remedy, if the legislature has mistaken its way, no court of justice can supply the deficiency."
The act of 1785, chap. 33, enables land-holders to have their lands marked and bounded. That law "provides the means to be pursued, to effect the object." If, however, this had not been done, if the law had merely authorised an application to the county courts, and had directed the courts, when such applications were made to them, to proceed to have the land marked and bounded, "the rules of the courts of common law or of equity, would have been insufficient to assure to the citizen any right which it was intended that he should derive from that law:" the law would have been a dead letter, until the General Assemblymade provision for carrying it into effect; yet such law, perhaps, would not have been more defective, than an act of Assembly to direct a court, without equity jurisdiction, to settle up insolvent estates. A court of common law, perhaps, might, by the old action of account, afford a partial, but it would have been a very inadequate remedy. The mode to be pursued, in order to a settlement of the. estate of an insolvent applicant, is precisely the same, as it would be if the debtor, instead of applying for a discharge under the insolvent laws, had made an arrangement with his creditors, and had conveyed his property, or a jrortion of it, to an individual, in trust, to sell the same, and appropriate the proceeds of sale to the payment of his debts. In such a case, any party aggrieved may appeal, and I can perceive no reason for denying to a party, who supposes himself to be aggrieved, in the settlement of an insolvent's estate, the same right of appeal.
In the case of bankruptcy in England, this right of appeal may be denied, but our ancestors were not very partial to the bankrupt system of England, and are not understood to have adopted any provision peculiar to it. The reasons which exist in England for denying in any such cases a right of appeal, do not exist here; and here, the right of appeal as given by law, cannot be abridged by provisions to be found in the bankrupt law of England, or in that which has existed in the United States.
My opinion then,-is, that the'legislature possesses the power, and may at any time exercise it, to take the right of appeal from all parties interested in cases like this; but, until denied by the legislature, the right exists, and I can discover no law which excepts- cases of this description, from the remedy by appeal given to parties aggrieved, by the decisions of the county courts, sitting in those cases, not as courts of common law, but as courts of equity. I am therefore for entertaining, the appeal.
My warrant for affirming the decree of the court below in this case, I find in Scott vs. Nesbit, 2nd Bro. Chan. Rep'ts, 640.