Court Opinion

ID: 7896905
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:53:03.216657+00
Date Added: 2024-06-11T16:32:07.200239
License: Public Domain

Judge Bryan
delivered the following dissenting opinion, in which Judge Ritchie concurred:
The deed of trust in this case was made by an insolvent merchant. The trustee is directed in the first instance, “to pay and disburse all the lawful expenses, costs and charges of executing, and carrying into effect this trust, including a reasonable fee for the. preparation of this deed, and for such legal advice and services as may be necessary for said trustee to procure and use in the trust and the management thereof;” and secondly, to “pay and satisfy the said debts due to the individual and firm creditors of the party of the first part, in manner and form as law and equity may determine their respective rights, pari passu, and without any preference or priority save what the law allows, and save that the wages of the clerks and employes of said party of the first part, shall be paid in full to the extent not forbidden by the insolvent laws of the State of Maryland.” It was held by the Court of Common Pleas that the deed created an illegal preference in securing the fee of the attorney who drew it, and that, consequently, it was void under the thirteenth section of the Act of 1884, ch. 295., The object of this section was to compel a ratable distribution of the property of insolvent merchants among their creditors, subject only to the trifling exceptions therein mentioned. Equality was the rule to be enforced in the settlement of these estates ; and every deed which violated this rule was declared to be void. But deeds were not affected which made a fair and impartial distribution of the property among the creditors, without preference or priority. It is perfectly lawful for a merchant in insolvent circumstances to make this distribution by means of a deed of trust. The deed is a part of the legitimate and necessary machinéry by which the distribution is made. If the trust is for the general benefit of the creditors, the expenses incurred in the preparation and recording of the deed are equally for their general *237benefit. After the execution of the deed, the costs of all the proceedings necessary for the distribution of the funds would, of necessity, be borne by the trust property. Now the deed is the initial point from which all these' proceedings are inaugurated. Without it, they could not take place. Charging the cost of the deed to the trust fund can never be injurious to the creditors; because, if the debtor should pay the expense himself previously to its execution, the sum so paid would diminish to that extent the assets which would otherwise have gone into the trust fund. And if the expense were not paid in cash, or charged to the trust fund, in most cases it would be impracticable to provide for the preparation of the deed, as no one would draw it on the understanding that he was to be paid only a dividend on his fee out of an insolvent estate. Persons in the situation of the grantor in this case are prohibited by the statute from giving a priority to a favored creditor. • But surely this prohibition does not include the case of a debt incurred for the benefit of the creditors, and as a necessary means of dedicating the property to their use. This deed makes the very disposition of the property, which the statute requires. Paying the expense of it out of the trust fund, is in effect payment by the creditors. It is no hardship that they should pay for an instrument made for their benefit; and it is not forbidden by the spirit and policy of the statute that they should do so.
It has been said that the fee. for drawing the deed was. a debt due by the maker of the deed to the draughtsman. The deed does not so state. It simply provides for the payment of it out of the trust funds. It is perfectly consistent with this provision of the deed that the maker may have made an agreement with the draughtsman that he was to seek his compensation out of the trust property, and not hold the maker personally liable for it. And considering his insolvent condition, this was most probably *238the understanding. In this event it would be a question for the Insolvent Court to decide whether the fee was a proper charge on the funds; and if it decided adversely to the draughtsman’s claim, he would lose it, and the invalidity of the trust for its payment would leave the deed unimpaired in other respects. We place our opinion, however, on the ground that the deed was for the general benefit of the creditors, and that the expense - of it ought to be paid out of the fund which it appropriates to their use.