Fox et al. vs. Davidson et al.
In Equity.
No. 6946.
Decided March 21, 1881.
The Chief Justice and Justices Wylie and Hagnek sitting.
1. A deed of trust given upon a stock of goods which authorises the grantor to use and dispose of the goods at his own discretion, is void as against creditors.
2. Where the goods and chattels of the tenant have been sold by virtue of an assignment, the landlord’s claim upon the fund, to the extent of three months’ rent, has priority over the claims of simple contract creditors. This priority being given him by the statute. R. S., E. O., §678.
STATEMENT OE THE CASE.
On the 26th of February, 1878, one Hoff made his note for $500, payable to the order of Elias J. Hill in one year, with interest semi-annually. To secure the note Hoff and his wife executed, on the same day, to complainant, Fox, as trustee, a deed of trust covering a stock of merchandise and goods in a store on Pennsylvania avenue, "Washington, D. 0. The schedule attached to the deed after enumerating and describing a number of stoves, ranges," &c., described the other mortgaged goods as follows : “ Together with a large assortment of general tin ware and house furnishing goods * * * and, every article that may be purchased, by way of replenishing said stock after this date and prior to the payment of the matter secured by said trust.” Ploff, by the terms of the deed, was to be permitted to retain possession of and use the mortgaged property until default made in payment of the note. The deed was recorded on the day of its execution. A short time afterward the complainant'Perreard became purchaser, for value, of the note.
’ About four months after the execution of this trust, Hoff executed to the defendant Davidson an assignment of all the goods, fixtures, &c., contained in the same store, except those exempt from execution at law, in trust to sell the same, and from the proceeds “ to pay pro rata or according to their legal priorities,” all the debts which Hoff then owed. These debts were enumerated in a schedule attached to the assignment and aggregated $3,472.50, the first two being described as follows: E. J. Hill, chattel mortgage, $500; rent, E. Carusi, $600.
*103After the execution of this assignment Hoff continued in possession of the store and its contents, and settled all the debts mentioned in the schedule at 35 cents on the dollar, except the two above given.
On the 30th of August, 1879, Davidson, the assignee, without notice to plaintiff, took possession of all the goods in the store and sold the same at auction for $396.30. Some of the articles sold were among those specifically described in the trust deed to Fox, and the assignment to Davidson ; the remainder had been bought by Hoff subsequently to the date of the trust deed for the purpose of replenishing his stock.
At the date of the execution of the. assignment (June 12, 1878), the landlord of the premises had a claim for six months rent at one hundred dollars per mouth, which had not been paid.
Fox, trustee, and Perreard filed their bill claiming the fund by virtue of their deed of trust, alleging that Davidson intended to divert the money from them, and praying that their right might be established. Perreard also claimed that by the terms of the assignment to Davidson, he, as holder of the $500 note, was made a preferred creditor, and in that •character, if not as mortgagee, he should receive the fund.
After the bill was filed Mrs. Lowe intervened by petition alleging that she was landlord of the premises at the time of the assignment; that she had a lien upon the goods, &c., for ,$300, being three months rent then unpaid, and claiming the whole fund by virtue of the assignment.
The case was referred to the auditor to state the distribution of the fund (which had been paid into court) and the assignee’s account.
The auditor in his report, after allowing commissions to the assignee and the expenses of the assignment, awarded the residue to Mrs. Lowe, the petitioning creditor.
To these allowances and award complainants excepted, and upon the overruling of their exceptions and confirmation of the report they appealed to this court.
Messrs. Berney & Birney for complainant:
1. The trust deed to Fox is valid as against Hoff the *104maker, and all persons claiming under him. The landlord’s-lien and trust deed lien may attach to after-acquired goods. 15 Wall., 828; 1 Hare, 557; 20 Maine, 408; 20 Iowa, 399; 3 Fairfax, 282; Jones on Mort., 138, 672, 683; 12 Wall., 514;, 7 Mich., 108, 520; 2 Story, 630; 18 Md., 433.
2. Equity will enforce the trust deed. Mitchell v. Win-slow, 2 Story, 630. For elaborate opinion and numerous cases quoted from English and other reports, see also 1 Ves.,. 409, 411; 1 Hare, 549; 2 P. W., 182,192; 1 J. & Walk., 532; 4 Sim., 524; 6 lb., 224, 414; 14 N. J. Eq., 408; 8 Price, 269;. 4 Myl. & K, 129, 580.
3. The assignment by Hoff to Davidson was fraudulent- and void. Hoff was incompetent to make an assignment inconsistent with his prior trust deed duly recorded. Jones-on Mort., 138, 683, 672; 21 Conn., 379; 1 Hare, 567; 18. Md., 433.
4. Davidson and all claiming under him could take nothing-but what Hoff could lawfully give. 2 Story, 620.
5. The assignment being void all claims under it fail. These are Mrs. Lowe’s claim for rent; commission; expenses of assignment.
6. Even if the assignment were good, Mrs. Lowe has no standing in the case, for her lease had expired, the goods sold and those assigned were not the same, and she has no constituted lien, (Case vs. Beauregard, 9- Otto, 129), either by act of Hoff, by landlord’s lien or judgment at law. 2. Johns Ch., 283; 24 How., 352; 4 Johns Ch., 691.
7. We do not claim under the assignment; we do claim that Davidson, getting possession under the assignment,, held the proceeds as trustee for Fox. Prior equity should prevail.
Eugene Carusi, Esq., for defendants:
1. The deed of trust from Hoff to Fox was fraudulent and void as to creditors, and a court of equity will not lend its aid to enforce it. Edgall vs. Hart,"13 Barb., 380; Selling vs. Kimmel, S. C. D. C., May, 1868; Robinson vs. Elliott, 22. Wall., 513.
2. The deed of trust being void, complainant is driven to. *105claim, as a creditor, under the assignment to Davidson. The assignment directs the creditors to be paid according to their legal priorities, i. e.rat the time the assignment was executed. At the time the assignment was executed the landlord had a lien upon the stock for three months’ rent in arrears, which commenced with Hoff’s tenancy and prior to the deed of trust to Fox. Therefore, the lien for rent was entitled to priority over the deed of trust. Eev. Stat.', D. C., sec. 678; Webb vs. Sharp, 13 Wall., 1; Fowler vs. Kap-ley, 15 Wall., 828.
3. Even if the assignment were fraudulent and void as to creditors, this could not help complainant for the deed of trust being void, as already shown, equity will not enforce it, therefore complainant stands in the position of a simple contract creditor who has not obtained judgment and issued execution thereon. Such a creditor cannot come into equity to set aside a fraudulent assignment. Berely vs. Staley, 5 G. & J., 451, 452; Day vs. Washburn, 24 How., 356; Case vs. Beauregard, 99 H. S., 129.
Mr. Justice Wylie
delivered the opinion of the court:
Under the circumstances of this case and the language of this deed of trust, we are bound to interpret it as authorizing the maker of the deed to carry on his business, and to sell and use the proceeds of the property as he thought proper, and then at the time that the note fell due that the holder of the note secured should be preferred to everybody else in case of a sale of the property by the trustees.
Now, we have decided on former occasions that any deed of trust given upon a stock of goods which authorized the party who makes it to use and dispose of the goods at his own discretion is void as against creditors. We are of opinion, therefore, that as against the creditors of Hoff this deed is. invalid.
The next question then in this case is upon the effect as between the holder of the Hill note for $500 and the landlord of the premises, of the words in the assignment “ according to their legal priority,” for this Hill debt is recognized by the assignment, although the deed of trust which secured it is void.
*106Now, at the date of the, assignment there were three months and more rent due by Hoff to the landlord, and that instrument professes to secure this rent to the amount of $600. If the original deed of trust which secured this $500 note had been valid, that would give it legal priority over the landlord’s claim, but as the deed is void, the question recurs, has it any legal priority by virtue of the general assignment as between it and the claim for rent? The language of that paper does not give it any legal priority or preference of any sort, it is merely provided that it shall be paid “according to its legal priority.” Well, what is that priority? It derives none from the deed of trust, as that is void, and if it derives none from the deed it is nothing more than an ordinary debt having no priority over any other. But the landlord has a legal priority given him by the statute to the extent of three months’ rent.
We have concluded, therefore, that the landlord in this case is entitled to his three months’ rent according to the priority given him by law, and that, together with the expenses of the assignment, exhausts the fund.