Clark v. Clark

• Decision Date: 28 June 1921
• Docket Number: 42.
• Citation: 114 A. 722,139 Md. 38
• Parties: CLARK v. CLARK et al.
• Court: Maryland Court of Appeals

114 A. 722

139 Md. 38

CLARK v. CLARK et al.

No. 42.

Court of Appeals of Maryland

June 28, 1921

Appeal from Circuit Court, Howard County, in Equity; Wm. Henry Forsythe, Jr., Judge.

"To be officially reported."

Suit by Garnett Y. Clark against James Booker Clark and another. Bill dismissed, and plaintiff appeals. Affirmed.

George M. Brady, of Baltimore (Maloy, Brady, Howell & Yost, of Baltimore, on the brief), for appellant.

James Clark, of Ellicott City, and James U. Dennis, of Baltimore for appellees.

OFFUTT J.

The appellant and the appellee in this case are brothers. They were at one time interested in the Pennwood Coal Company which operated a coal mine at Rockwood, Pa. That company failed, and Garnett Y. Clark, J. Booker Clark, William J O'Brien, Lemuel R. Brandenburg, and George Dobbin Penniman, under an arrangement with its bondholders, bought in the property at the receiver's sale. They organized a new company under the name of the Brandenburg Coal Mining Company, and issued to the bondholders of the Pennwood Coal Company bonds of the new company for the bonds of the old company, which they held. Then, in order to take care of the receivership and other expenses incident to the reorganization and to the operation of the new company, they borrowed on a promissory note payable on demand, executed by Brandenburg, and indorsed by Messrs. O'Brien and Penniman and the two Clarks, and secured by the stock held by Brandenburg and $40,000 par value of the bonds of the new company as collateral, $25,000 from the Baltimore Trust Company. Some time after that the trust company called the loan, and was told to sell the collateral. It did that, and at the sale the collateral was bought in by the Messrs. Clark, Mr. O'Brien, and Mr. Penniman, for $5,000, each of whom then held a one-fourth equal share of the collateral so bought in. They then executed a new note to the trust company, signed by the four men last named, secured by the same collateral, and for the sum of $20,000. This note was dated May 2, 1912. Later Mr. O'Brien paid $5,000 on account of this loan, and was released from further liability thereon, and later still Mr. Penniman paid $5,000, and was also released from further liability. Each of them, however, left his share of the Brandenburg Coal Mining Company's bonds as collateral to secure the payment of the balance of $10,000 and interest due on account of the loan, which was evidenced by renewals of the original note; the renewal notes being in each case demand notes. This note remaining unpaid, the trust company notified Mr. O'Brien, who was the secretary of the coal company, that they were about to sell the collateral, and they did advertise and offer it for sale at the auction rooms of Messrs. Pattison and Gahan in December, 1916. Garnett Y. Clark was not in Baltimore at that time, but the sale was attended by J. Booker Clark and Mr. O'Brien. Mr. O'Brien went to look after the interests of Garnett Y. Clark. Just what took place on that occasion between Mr. O'Brien and Mr. J. Booker Clark is the subject of directly conflicting testimony. Mr. O'Brien said he was told by J. Booker Clark that he (Clark) proposed to buy the bonds for Garnett Clark and himself, "half and half," and that therefore there was no reason for Mr. O'Brien, who was interested in protecting Garnett's interests, to bid on them, and that he then told Clark that as a result of that assurance he would not bid, and that the bonds were sold to J. Booker Clark for $500. J. Booker Clark, on the other hand, said that he had no such conversation; that he went to the sale to protect his own interests, and so informed Mr. O'Brien who did bid on the bonds. J. Booker Clark, however, failed to turn over any part of the bonds to Garnett Clark, and the latter, on May 25, 1920, filed the bill in this case for the purpose of obtaining what he claimed to be his half of the bonds so bought by his brother, on the theory that his brother acquired and held them in trust for him. J. Booker Clark in due course answered the bill, testimony was taken, and, the case having been submitted for final decree, the bill was dismissed, and this appeal taken from that decree.

The appeal presents two questions, one of law and one of fact; the first being whether, if the facts asserted by Garnett Y. Clark, to which we have referred, are true, the appellee held the bonds he acquired in trust for himself and the appellant, and the second, whether the allegations of the bill of complaint are supported by the proof in the case.

The first question before us then is whether if the facts asserted by the appellant are true the appellee holds the bonds he acquired at the sale in trust for himself and his brother.

"Trusts are divided *** into direct or express trusts, implied, resulting, and constructive trusts. Direct or express trusts are created by the direct or express words of a grantor or settlor. Implied, resulting, and constructive trusts arise by operation of law upon the transactions of the parties." 1 Perry on Trusts (6th Ed.) § 73.

Manifestly this was not an express trust, which is created by the express words of the vendor or settlor, nor an implied trust, where it is inferred from all the circumstances of the transaction that the parties intended to create a trust. Id. §§ 73, 112. Nor can a resulting or presumptive trust arise from these facts. Such a trust is presumed where one party pays the purchase money for property, the title to which is taken in the name of another. Bouvier L. Dict. (6th Ed.); Perry on Trusts, § 124. And the payment of the purchase money by the person for whose benefit it is sought to establish the trust is an indispensable condition precedent to the existence of such a trust. Since the purchase money for the bonds under consideration was paid and the title to them taken by the same person, there could be no resulting trust in respect to them. The only class of trusts remaining is that of constructive trusts, which are also described as trusts ex maleficio, and are said to arise under the following circumstances:

"If a person obtains the legal title to property by such arts or acts or circumstances of circumvention, imposition, or fraud, or if he obtains it by virtue of a confidential relation and influence under such circumstances that he ought not, according to the rules of equity and good conscience as administered in chancery, to hold and enjoy the beneficial interest of the property, courts of equity, in order to administer

...