Boston & A.R. Co. v. Mercantile Trust & Deposit Co. of Baltimore

• Decision Date: 24 March 1896
• Citation: 34 A. 778,82 Md. 535
• Parties: BOSTON & A. R. CO. et al. v. MERCANTILE TRUST & DEPOSIT CO. OF BALTIMORE et al. [*]
• Court: Maryland Court of Appeals

34 A. 778

82 Md. 535

BOSTON & A. R. CO. et al. v. MERCANTILE TRUST & DEPOSIT CO. OF BALTIMORE et al.^[*]

Court of Appeals of Maryland

March 24, 1896

Appeal from circuit court of Baltimore city.

On the petition of Isaac R. Trimble and others the Mercantile Trust & Deposit Company of Baltimore and D. K. Este Fisher were appointed receivers of the American Casualty Insurance & Security Company of Baltimore City.From an order fixing the manner in which the assets of the insolvent corporation should be distributed the Boston & Albany Railroad Company and 19 other creditors appealed.Order affirmed in part and reversed in part.

Argued before McSHERRY, C.J., and ROBINSON, BRISCOE, BRYAN, ROBERTSPAGE, BOYD, and FOWLER, JJ.

Bernard Carter and C.J. Bonaparte, for appellants.

Wm. A Fisher, for appellees.

McSHERRY C.J.

There are 20 appeals in the record now before us.The cases were elaborately and ably argued during the last October term of this court, and the preparation of the opinion was then assigned to the late Chief Judge ROBINSON.His lamented death occurring shortly afterwards without his having done more than hurriedly sketch an incomplete outline of some of the many questions involved, delayed a decision till now.We have had the benefit of Judge ROBINSON'S notes, and will avail of them in this opinion.

The American Casualty Insurance & Security Company of Baltimore City was incorporated under the laws of Maryland in January 1890, and began operations with a paidup capital stock of $1,000,000.Its business embraced many and divers lines of insurance and indemnity.It was authorized to write and did write policies of insurance against accidents, against losses by railroads and street railways arising from injuries to property and persons, whether passengers, employers, or strangers; and it engaged in various other kinds of indemnities.In a little less than four years its whole paid-up capital, with the large sums which it had received in premiums,--except, however, the funds in court for distribution,--has been swept away by losses, and there are now outstanding liabilities due by it in a very large aggregate amount and to many thousand creditors.Becoming hopelessly insolvent, a bill was filed against it by some of its creditors, and an order was passed thereon on November 23, 1893, appointing receivers to take charge of its assets.The receivers now have in hand certain funds of the insolvent company, and the questions before us relate to the method of distributing the same.A portion of these funds is invested in certain securities which had been deposited by the company with the treasurer of Maryland, and the residue consists of moneys derived from other sources; and the question which is presented at the threshold is whether the proceeds of these securities, when sold, and the accrued and accruing interest thereon, constitute a special or trust fund applicable to a particular purpose,--to the payment of a particular class of creditors,--or are general assets, available for the settlement of all claims due by the insolvent company.All of the questions involved were passed upon by the court below in its order of August 8, 1895, from which order the pending appeals were taken.

After determining by this order what was the special and what the general fund, and after directing how the commissions, costs and auditor's fees were to be paid, the circuit court ordered that the taxes claimed to be due to the mayor and city council of Baltimore were not properly chargeable upon the assets in the hands of the receivers, and, further, that there were three classes of creditors.The order then proceeded to define each of these classes, and prescribed rules for ascertaining the different values of the several policies held by them.Following, with a single exception, the paragraphs of the order appealed from we come first to the question relating to the division of the funds into a special and a general fund.At the time of the appointment of the receivers there was standing in the name of the Honorable Spencer C. Jones, treasurer of Maryland, Baltimore City stock of the par value of $200,000, which had been deposited with him by the company as a guaranty for the payment of the policies issued by it.On December 2, 1893, the receivers filed their petition in the circuit court, setting forth the facts in reference to the deposit of these securities, and praying the court to require Mr. Jones to transfer and deliver them to the petitioners, in order that the same might be administered under the order and direction of the court.To this petition an answer was filed by Mr. Jones, asserting that these securities were held by him as a trust fund for the benefit of the policy holders of the company, and that they could not be applied to any other or different purpose.Presenting this view, he submitted to such decree as the court might deem proper to pass in the premises.Upon the petition and answer a decree or order was passed whereby Mr. Jones, the treasurer of Maryland, was directed to assign and deliver this Baltimore City stock to the receivers, to be held by them for the benefit of the policy holders, subject to the further orders of the court.Whether this fund is a special or trust fund, or, on the other hand, belongs to the general assets of the company, depends entirely upon the facts and circumstances under which it was deposited with Mr. Jones.If these are such as to create a trust in behalf of the policy holders, then the fund must be applied as the terms of the trust direct.In determining whether or not a trust has been created courts will take into consideration the situation and relations of the parties, the character of the property, and the purpose which the settlor had in view in making the declaration.No technical terms or expressions are needed.It is sufficient if the language used shows that the settlor intended to create a trust, and clearly points out the property, the beneficiary, and the disposition to be made of the property.27 Am. & Eng. Enc.Law, 26, and the citations in notes 1, 2, 3.In this case the trust is alleged to have been created by an accident insurance and security company doing business in all parts of the country, and having its home office in this state.In many states of the Union insurance companies of every kind doing business in such states are required to deposit with some one of the state's officers a certain named sum of money or approved securities of a designated value, as a guaranty for the payment of losses sustained by the policy holders.And in this state every life insurance company is required to deposit with the treasurer of the state public securities of the value of $100,000 as a guaranty for the payment of the policies issued by the company.The American Casualty Company, it is insisted, however, is not a life insurance company, within the meaning of the Code of Public General Laws, and was not, therefore, obliged to make a deposit of any kind with the treasurer; and, further, that the treasurer, as such, had no lawful authority to accept such deposit.We need not stop to consider whether the deposit in this case was made by the company under the impression that it was a statutory requirement, or whether it was made voluntarily, with a view to strengthen its credit, and to give confidence to its policy holders of its ability to meet its obligations.The fact is, the company did make the deposit with Mr. Jones, and did take from him at the time the following certificate: "I, Spencer C. Jones, do hereby certify that I am treasurer of the state of Maryland, and that the American Casualty Insurance and Security Company of Baltimore City, a corporation chartered by said state, and located in the city of Baltimore, has deposited in this office securities of the denominations and descriptions particularly set forth and described in the schedule signed by me and hereto annexed, amounting in par value to the sum of two hundred thousand dollars; and I further certify that said securities are now held by me, as such treasurer aforesaid, in my official capacity, on deposit as a guaranty for the payment of the policies of insurance issued by said company.In witness whereof I have hereunto set my hand at the city of Annapolis this twenty-eighth day of July, A.D. 1892.Spencer C. Jones, Treasurer of Maryland."The schedule annexed to this certificate is entitled, "Schedule setting forth the several denominations and a particular description of the stocks and other securities * * * held by me in trust for the policy holders of the American Casualty Insurance and Security Company of Baltimore City, as stated in the foregoing certificate."Here, then, is an express declaration by the trustee that this City stock was deposited with him by the company, and that it was held by him in trust as a guaranty for the payment of its policy holders; and this certificate was delivered by Mr. Jones to the company, and was in its possession at the time the receivers were appointed.An intention to create a trust of this kind may be inferred from conduct and circumstances without any express declaration.Allen v. Withrow,110 U.S. 119, 3 S.Ct. 517.In the case at barwe have the most explicit proof of the creation of the trust, for there is the unequivocal declaration of the trustee that he held the funds in trust; and by the acceptance of the certificate there is the direct admission on the part of the company itself as to the existence of the trust, and there is a clear designation of the cestuis que trustent who are entitled under it.This is sufficient.Smith v. Darby,39 Md. 268,--a case directly in point.The evidence of the trust, then, is conclusive, not only as to its creation, but...