County Com'rs of Frederick County v. Page, 75.

CourtCourt of Appeals of Maryland
Writing for the CourtOFFUTT, J.
Citation164 A. 182
PartiesCOUNTY COM'RS OF FREDERICK COUNTY v. PAGE.
Docket NumberNo. 75.,75.
Decision Date18 January 1933
164 A. 182

COUNTY COM'RS OF FREDERICK COUNTY
v.
PAGE.

No. 75.

Court of Appeals of Maryland.

Jan. 18, 1933.


164 A. 183

[Copyrighted material omitted.]

164 A. 184

Appeal from Circuit Court, Frederick County; Hammond Urner and Arthur D. Willard, Judges.

George W. Page, Bank Commissioner of Maryland, filed a bill of complaint praying that he be appointed a receiver to take charge of and administer the affairs of the Central Trust Company, and he was appointed as prayed. The County Commissioners of Frederick County filed a petition to have the claim allowed as a preferred claim, and, from an order dismissing the petition and two subsequent orders, they appeal.

Affirmed.

Argued before BOND, C. J., and ADKINS, OFFUTT, DIGGES, PARKE, and SLOAN, JJ.

W. Clinton McSherry, of Frederick, for appellants.

John S. Newman, of Frederick, for appellee.

OFFUTT, J.

The Central Trust Company of Maryland, herein for convenience called the trust company, a banking and trust company, having its main office in Frederick City, and operating extensively throughout Central and Western Maryland, on September 2, 1931, adopted a resolution placing its affairs in the hands of George W. Page, bank commissioner of Maryland, and he, on that day, pursuant to that action, posted on the front doors of its main office and of each of its branches a notice that "This institution is in the hands of the Bank Commissioner." On the following day he filed in the circuit court for Frederick county, in equity, a bill of complaint reciting these facts and praying that he be appointed a receiver to take charge of and administer the affairs of the Central Trust Company, the defendant. That company on the same day in its answer, admitted the allegations of the bill and consented to the relief prayed, and upon that record the court on September 3, 1931, appointed the complainant receiver as prayed.

On October 10, 1931, the county commissioners of Frederick county, herein for convenience spoken of in the plural as commissioners, filed in that proceeding a petition in which they alleged that they had on August 22, 1931. entered into a trust agreement with the Central Trust Company of Maryland, under which $186,000, being the proceeds of bonds sold to redeem other bonds, "was paid," to the trust company, "as trustee," for the purpose of being "held in trust" to apply (a) to deposit $150,000 on October 30, 1931, in the Citizens' National Bank of Frederick, Md., to redeem certain coupon bonds which had been called for redemption payable at that bank, and (b) to deposit on the same date $36,000 in the Frederiektown Savings Institution, of Frederick, Md., to redeem certain other bonds which had been called for redemption, payable at that institution. They further alleged that the "said trust fund" was a preferred claim under Code, art. 11, § 48; that the assets of the trust company exceeded all "trust department liabilities," and they prayed the court to direct the receiver to pay on October 30, 1932, to the Citizens' National Bank of Frederick $150,000 and to the Frederiektown Savings Institution, $36,000. There was filed with that petition a copy of the trust agreement which, after reciting that "the County Commissioners of Frederick County have deposited in said Bank, the proceeds of sale of the Refunding Bonds of 1931, in the amount of $186,000" and the origin and purpose of said fund, provided:

That "the Central Trust Company of Maryland, does by these presents agree to hold the said sum of one hundred eighty-six thousand ($186,000.00) dollars, in trust and apply the same as follows:

"(1) To deposit the sum of one hundred fifty thousand ($150,000.00) dollars, on October 30th, 1931, in the Citizens National Bank of Frederick, Maryland, for the purpose of redeeming the coupon bonds of Frederick County issued in pursuance of Chapter 125 of the Acts of 1910, in the amount of seventy-five thousand ($75,000.00) dollars, and the coupon bonds of Frederick County issued in pursuance of Chapter 404 of the Acts of 1912, in the total amount of seventy-flve thousand ($75,000.00) dollars, and

"2. To deposit on October 30, 1931, the sum of thirty six thousand ($36,000.00) dollars, in the Frederiektown Savings Institution, of Frederick, Maryland, for the purpose of redeeming the coupon bonds of Frederick County, issued in pursuance of Chapter 359 of the Acts of 1914, in the amount of thirty-six thousand ($36,000.00) dollars.

164 A. 185

"Said fund of one hundred eighty-six thousand ($186,000.00) dollars, shall be held by the Central Trust Company of Maryland, in trust and applied at the time and places hereinabove mentioned, and for no other purpose."

On March 17, 1932, the receiver filed an answer to that petition in which he admitted the allegations of the petition as to the origin and nature of the fund, the execution of the trust agreement, and the deposit of the fund with the trust company. He further alleged:

"That on the 25th day of May, 1931, there was deposited in the Central Trust Company of Maryland (in an interest account, under a contract providing that the deposits shall be subject to withdrawal upon thirty days notice), to the credit of 'County Commissioners of Frederick County, Maryland, 4% refunding bond issue of 1931,' a check in the sum of.............

$ 4,092.00

And that on June 1st, 1931, there was deposited to the credit of said account a draft in the sum of.............

189,259.97

Making a total deposit of.............

$193,351.97

And that on June 10th, 1931, there was withdrawn from said de-post the sum of.....

$400.00

And on June 12th, 1931, there was withdrawn the sum of..........

332.40

And that on the same day there was also withdrawn the sum of

195.00

And that on June 23rd, 1931, there was withdrawn the sum of....

50.00

Making a total of withdrawals of.............

977.40

Leaving a balance of...........

$192,374.57

And that on July 1st, 1931, said account was credited with interest to the amount of.........

643.52

Making a total deposit at that time.............

$193,018.09

And that on August 31st, 1931, there was charged against said account .............

$186,000.00

being a check for said amount dated August 22, 1931, payable to 'Central Trust Company of Maryland, Trustee,' presented to said Trust Company after the close of its books on Saturday, August 29th, 1931, and charged against said account on August 31st, 1931, as aforesaid."

He denied that the petitioner's claim was entitled to a preference under Code, art. 11, § 48, and asked leave to reargue the question, which appears to have been considered by the court in some other branch of the proceedings, as to whether that provision affected any other than judicial trusts. Testimony was taken upon the issues presented by those pleadings, and, after a hearing, the court on March 29, 1932, dismissed the petition. The first appeal is from that order.

On April 4, 1932, the county commissioners filed a second petition in which they asked for a further hearing and leave to introduce additional evidence in connection with the following propositions:

"(a) That deposit of public funds in violation of the statute, in a trust company knowing them to be public funds, creates a trust.

"(b) That a trust relation being established the claim of the public officers becomes a preferred claim by virtue of Section 48 of Article 11 of the Annotated Code of Maryland.

"(c) That the trust relation being established the claim of the public officers, independently of Section 48 of Article 11 of the Annotated Code of Maryland, are entitled to priority in the distribution of the assets of the trust company, if the deposits can be traced."

On April 11, 1932, the commissioners filed in the case a third petition in which they alleged that there were deposited in the trust company in the name of the county commissioners of Frederick county "In trust for Self and Joint Owners, subject to the order of either, the balance at the death of either to belong to the survivor," funds dedicated to the accumulation of sinking funds and the payment of interest on past issues of authorized bonds issued by Frederick county, aggregating, $144,837.07. They further alleged that by virtue of article 11, § 807, P. L. L. of Md. (1930) "all monies due said county from any source whatever, shall be paid to the County Treasurer," but that the county commissioners, under a "custom" followed for many years, instead of paying funds such as those described which came into their

164 A. 186

bands to the county treasurer, had deposited them in the name of the board.

Additional evidence was taken, a further hearing was had, and on April 25, 1932, the court ordered that "the claims of the County Commissioners of Frederick County are hereby allowed preference to the extent indicated in the aforegoing opinion with respect to the distribution of the funds, amounting to $133,912.70, of the Central Trust Company, which came into the hands of the Receiver as of the time of his appointment." The preference "indicated in the aforegoing opinion" is that "Subject to revision as to details, our conclusion is that the County Commissioners, in regard to the $186,000 and $82,531.32 accounts, are entitled to preference as to $1,000 of the receivership funds, and in regard to the accounts having balances to the total amount of $55,287.63 they have the right to be preferred, ratably with claims for uninvested balances of ordinary trust funds, in the distribution of $132,912.70 of the funds belonging to the Trust Company at the beginning of the receivership. There is no proof identifying the deposits of the County Commissioners with any assets of the Trust Company other than its cash balances." The second appeal is from that order.

Without further proceedings, on June 18, 1932, that order was modified by a further order which provided that "in...

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