Abell v. Safe Deposit & Trust Co. of Baltimore

• Decision Date: 09 March 1949
• Docket Number: 95.
• Parties: ABELL et al. v. SAFE DEPOSIT & TRUST CO. OF BALTIMORE, et al.
• Court: Maryland Court of Appeals

64 A.2d 722

192 Md. 438

ABELL et al. v. SAFE DEPOSIT & TRUST CO. OF BALTIMORE, et al.

No. 95.

Court of Appeals of Maryland

March 9, 1949

Appeal from Circuit Court of Baltimore City; W. Conwell Smith, Chief Judge.

Suit by Margaret Anna Abell and others against the Safe Deposit & Trust Company of Baltimore, trustee, and the A. S. Abell Company to have release given by the Safe Deposit & Trust Company of Baltimore, trustee, to the A. S. Abell Company declared void, for construction of provisions for redemption of certain bonds issued under an indenture of mortgage, to have the lien of the plaintiffs on property embraced by the mortgage applied to property acquired by the A. S. Abell Company subsequent to release of mortgage, to compel trustee to bring into court original election of the A. S. Abell Company whereby it exercised its election to use proceeds of a fire loss for redemption of bonds, and for general relief. From a decree dismissing the bill, the plaintiffs appeal.

Decree affirmed.

Joseph T. Molz, of Baltimore, for appellants.

Harry N. Baetjer, of Baltimore (John Henry Lewin and Venable Baetjer & Howard, all of Baltimore, on the brief), for appellees.

Before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON, HENDERSON and MARKELL, JJ.

GRASON Judge.

This case was instituted in the Circuit Court of Baltimore City by Margaret Anna Abell et al. (called the Abells) against The A S. Abell Company, a body corporate (called the Company), and the Safe Deposit and Trust Company of Baltimore, a corporation, Trustee (called the Trustee), wherein the Abells prayed: (1) that a release dated April 24, 1947, from the Trustee to the Company, and duly recorded, be declared null and void; (2) to construe the provisions of redemption of certain bonds issued under a certain indenture of mortgage hereafter referred to; (3) that the lien of the Abells on the property embraced by the mortgage be applied to property acquired by the Company subsequent to the release of said mortgage; (4) to compel the Trustee to bring into court the original election of the Company made by the Company to the Trustee whereby it exercised its election to use the proceeds of a fire loss for redemption of bonds; and (5) for general relief.

After answers were filed, the case was tried on an agreed statement of facts, and the chancellor refused relief and dismissed the bill, and the case comes here on appeal.

The facts of the case are substantially as follows: The Company issued one thousand bonds of the par value of $1000 each, and to secure the payment thereof when redeemed or matured, together with interest thereon at 5% per annum, it executed an indenture of mortgage to the Trustee, dated as of January 1, 1910, for one million dollars, on all of its property. The last of these bonds were to mature on January 1, 1965.

The third clause of the mortgage is as follows:

'Third: The said Abell Company further covenants and agrees to and with the said Trustee that commencing with the first day of January, nineteen hundred and fifteen, it, the said Abell Company, will annually on the first day of January in each year until the maturity of said bonds, retire and redeem twenty of said bonds, in the order of their serial numbers, at par and accrued interest, and will to this end pay to the Trustee within five days before said dates the sum of Twenty thousand dollars with interest due on said twenty bonds to be applied to such payment; and on such payment interest on the bonds to be paid shall cease; the Company shall have no right to pay any other bonds prior to maturity, except those hereafter provided to be redeemed out of the unused proceeds of insurance.'

The fourth clause of said indenture requires the Company 'to insure and until the full payment of said bonds to keep insured against loss by fire such portion of the mortgaged premises as may be subject to injury or destruction by fire and to the extent of its insurable value, and to cause the policies to be so framed or endorsed as to be payable in case of loss to the Trustee'. The Company is given the option, under this clause, to apply the proceeds of insurance policies that might be collected for loss by fire to repair or restoration of the property damaged, or to 'elect to have the same applied to the redemption of said bonds * * * and the Trustee shall thereupon apply such proceeds to the payment and redemption of said bonds in the order of their serial numbers * * *.' Italics supplied.

By January 1, 1928, 280 of these bonds were redeemed in accordance with said 'Third' paragraph of the mortgage, and on October 13, 1928, the Company had purchased 481 bonds from its general funds. At that time title to 239 bonds stood in the name of Walter W. Abell, Trustee of the estate of Edwin F. Abell. On December 31, 1928, Mr. Spamer, Second Vice President of the Trustee, wrote Mr. Abell as follows:

'Under the terms of the A. S. Abell Company Mortgage that Company is to place with us $20,000 each January 1st to redeem outstanding bonds, and as the A. S. Abell Company has acquired all outstanding bonds except those conrolled by you, we beg to advise that we will be prepared to take up on January 2, 1929, 20 of those held by you.'

Mr. Abell declined to deposit 20 bonds for redemption in accordance with Mr. Spamer's letter, but contended that the bonds held by him at that time could only be redeemed serially in accordance with the 'Third' paragraph of the mortgage. This was acceded to by the Trustee and from December 1, 1929, to January 1, 1941, 86 bonds held under this trust were redeemed serially. The Abell trust terminated in 1941.

At the time this case was instituted twenty-nine (29) bonds were held by the plaintiffs and nine hundred and seventy-one (971) bonds had been purchased by the Company, or redeemed in accordance with the provisions of the 'Third' clause of the mortgage.

On October 4, 1946, a fire occurred, severely damaging the property of the Company, and on April 10, 1947, the Trustee received from the insurance companies, in payment of claim for loss, $108,449.65. On April 18, 1947, the Trustee notified the appellants that in accordance with the 'Fourth' paragraph of the mortgage the redemption of the bonds was accelerated by the fire loss, and called the bonds of the appellants to be redeemed at the price of $1000, plus accrued interest to July 1, 1947. The plaintiffs denied that the bonds they held were callable on July 1, 1947. The Company bought sixty-four (64) outstanding bonds from the proceeds of the insurance, leaving a balance of thirty-five (35) bonds outstanding. At the argument before this court it was admitted that at this time of the total of 1000 bonds issued in 1910, there are only thirteen of the Abells' bonds and six others outstanding, not including bonds which in any view have become serially redeemable preceding this suit. On April 22, 1947, the Trustee executed a release of the mortgage to the Company.

The questions presented for our decision are purely questions of law.

The mortgage of January 1, 1910, by the Company to the Trustee was a contract under seal, entered into by the Company with the bondholders, and the Trustee was the fiduciary to administer the contract on behalf of the bondholders. It was without power to relinquish any rights of the bondholders, for to do so would be a violatior of its trust, and a court of equity will not countenance a breach of trust by a fiduciary. Under the 'Third' and 'Fourth' paragraphs of this mortgage the method of redeeming the bonds is clearly and specifically set out, and no construction of these paragraphs is necessary. They are clear, certain, unambiguous, and speak for themselves. These bonds were to be redeemed serially, and in no other way. From January 1, 1915, until the entire issue was redeemed, twenty bonds were to be redeemed serially each year, and no more. This was a valuable right in the bondholders. The bonds provided a good investment at high interest rate and some of them would run for a long term. To redeem these bonds in any other way than provided by the mortgage was a violation of the contract by the Company, and a breach of trust by the Trustee.

During the period prior to October 13, 1928, the Company acquired 481 bonds. They did not acquire them by redemption, because during that period 280 bonds were redeemed under the 'Third' paragraph of the mortgage. The Company therefore, purchased 481 bonds during that period. This the Company had a right to do. American Brake Shoe & Foundry Co. v. New York Rys. Co., D.C., 277 F. 261, at pages 281-282. It was stated...