County Corp. of Md. v. Semmes, 60.

Decision Date15 January 1936
Docket NumberNo. 60.,60.
PartiesCOUNTY CORPORATION OF MARYLAND v. SEMMES et al.
CourtMaryland Court of Appeals
182 A. 273

COUNTY CORPORATION OF MARYLAND
v.
SEMMES et al.*

No. 60.

Court of Appeals of Maryland.

Jan. 15, 1936.


182 A. 274

[Copyrighted material omitted.]

182 A. 275

Appeal from Circuit Court of Baltimore City; Joseph N. Ulman, Judge.

Proceeding against the Tidewater Lines, Inc., wherein Raphael Semmes and Ralph E. Monson were appointed receivers of the Tidewater Lines, Inc. The County Corporation of Maryland filed exceptions to an account stated by the receivers, and from an order overruling the exceptions, the County Corporation of Maryland appeals.

Order affirmed in part and reversed in part and cause remanded, with directions.

Argued before BOND, C. J., and URNER, OFFUTT, PARKE, SLOAN, and SHEHAN, JJ.

Clarence W. Miles and Seymour O'Brien, both of Baltimore, for appellant.

Thomas J. Tingley and George Farber, both of Baltimore, for appellees.

PARKE, Judge.

The problems on this appeal are of fact and of law. They arise on an appeal from an order overruling exceptions to an account stated by the receivers of a carrier of freight for hire in motor vehicles on specified routes between terminals on highways. The operation of the utility by the receivers was at a loss, and all the property, except some real estate and choses in action, were sold by the receivers, and the holder of a mortgage on all the tangible personal property and franchises was distributed, after an allowance of costs, expenses, and charges, the sum of $1,493.21 in part payment of the principal and interest of a mortgage debt which amounted to $10,480.85. The chief question of fact was what were the terms of an agreement between the receivers and the owner of the mortgage indebtedness under which the owner agreed that the receivers might operate the lines of the utility and sell the mortgage property free of the mortgage lien. After the determination of this issue of fact, the main questions of law are: (1) What effect shall be given in this cause to the agreement as so found; (2) whether the exceptions are too indefinite in respect of one objection to be considered with reference to that objection; (3) whether the receivers are to be surcharged with the loss in operation, and, if so, for what period of control; (4) whether the commissions allowed to the receivers were excessive; and (5) whether the fee of counsel was not too large.

The Tidewater Lines, Inc., an incorporation of the state of Delaware, had been engaged for some years in carrying on in

182 A. 276

the state of Maryland, in the District of Columbia, and in certain adjoining sections of other states, the business of operating for hire motortrucks for the transportation of goods on the highways between terminals which had been specified in the franchises which had been obtained from the several sovereignties. On May 2, 1933, a bill of complaint was filed, which alleged that although the assets of the corporation exceeded its liabilities, it was unable to meet its debts as they became due in the usual course of its business. It was further averred that it was necessary for the protection of creditors that a receiver be appointed to take charge of the assets and administer and dispose of them under the jurisdiction of a court of equity. The defendant answered, admitted the allegations, and receivers were at once appointed to administer the corporate affairs under the supervision and direction of the court. The receivers qualified and filed a petition which stated that it would be in the interests of the public and creditors to continue the operation of the corporation. The court thereupon authorized and directed the receivers to continue the operation of the business, subject to the further direction of the court. All these proceedings were had on the day that the suit was begun.

On the date of these proceedings, the corporation was indebted unto the County Corporation of Maryland, a banking corporation, in the principal sum of $9,550, which was secured by a mortgage deed of the debtor that was executed on the 1st day of June, 1928, and later duly assigned to the County Corporation of Maryland, which, for convenience, will hereafter be called "mortgagee." By this mortgage deed, the corporation granted and transferred as security (a) all of its real estate; (b) its good will, and its franchises, licenses, routes, and privileges which it had acquired or might subsequently acquire during the life of the mortgage deed; (c) its rolling stock of busses, trucks, and automobiles, together with all the accessories, tools, machinery, supplies, and equipment; and (d) its office furniture and fixtures, together with all personal property which the corporation might acquire during the subsistence of the mortgage and appropriated to the uses and purposes of its business, whether in addition to the mortgaged personalty or in substitution therefor; and with the privilege to the corporation to sell any article of such personalty that may become worn or useless, and. to apply the proceeds of the sale to the purchase of other equipment for its use. In the event of a default in the payment of the debt, or in the performance of any agreement, covenant, or condition, the deed of mortgage authorized a public sale or a private sale, if the latter be at a price at least sufficient to pay the mortgage obligation and the costs; and provided that out of the proceeds of sale there should be first paid the expenses of sale, which included a fee of $100 for the solicitor and commissions to the party who might make the sale in an amount equal to the commissions allowed trustees for the sale of property under a decree of the circuit court for Charles county, where the principal office of the corporation was located.

The mortgagor was in default, and the right of the mortgagee to foreclose subsisted, but was held in abeyance as an effect of the court having taken custody of the mortgaged property. Since this power of sale was coupled with an interest in the property conveyed and formed a part of the security afforded by the mortgage, and the mortgage purported to transfer all the corporate assets, except its cash and choses in action, it was a reasonable expectation that the court of equity in which the receivership was pending would have permitted a foreclosure under the power of sale in the mortgage. Forest Lake Cemetery v. Baker, 113 Md. 529, 538-540, 77 A. 853; Berry v. Skinner, 30 Md. 567; Dill v. Satterfield, 34 Md. 52, 54. Accordingly, the receivers promptly sought and obtained a relinquishment of the mortgagee's right to foreclose upon obtaining the sanction of the chancellor.

The parties agreed that, because of the nature of the corporate enterprise and of the promises made, it would be in the best interest of all the parties concerned that the mortgaged property should be sold by the receivers while it was in use for the corporate business of a public carrier. The surrender of the right of the mortgagee to foreclose was a valuable consideration moving from the mortgagee to the receivers, qua receivers, supra. The parties, however, do not agree in respect to the promise or condition which induced the mortgagee to forego its right. It would be supererogation to set forth the analysis of the testimony by which the facts have been ascertained from the conflict in recollection

182 A. 277

of the witnesses and the court will, therefore, state its conclusions after having given due weight to all the parol and written evidence.

At the time of the agreement, all the parties concerned knew that the corporation was insolvent, but the receivers were confident that the property mortgaged would be sufficient to pay in full the mortgage debt. The receivers accordingly promised to the mortgagee that, if they were permitted (1) to operate the corporate mortgaged property as a common carrier for an estimated period of sixty days, but never longer than the time when the expenses of operation should become greater than the current receipts; and, while so carrying on the transportation of goods, (2) to sell property of the corporation free of the mortgage debt, the receivers would pay the principal and interest of the mortgage debt to the mortgagee.

This agreement was made without the previous authorization or subsequent ratification of the chancellor, but the receivers, with the consent of the mortgagee, continued the transportation of goods; and for about sixty days their operations were profitable, but the ensuing two periods of thirty days were at so great a loss in each period that the net loss of operation for the entire period of about one hundred and twenty days was sufficient to absorb all former gains and to leave a net deficit of $6,607.91.

On May 26, 1933, the receivers sold for $750 four trucks and surrendered to the purchaser its franchise or permit to carry goods on certain highways of the state. A sale of all the remaining tangible and in-tangible property of the corporation, exclusive of the cash on hand, the bills, notes, accounts receivable, and the real estate, was made on July 28, 1933, for $18,000, and confirmed by the court on August 24, 1933. The receivers, also, sold for $400 a lot of land which was covered by the mortgage, and this money was paid direct to the mortgagee. The deposit of the corporation with the mortgagee was credited on the mortgage debt and reduced the amoupt due by $421.21.

In the latter part of August, 1933, the receivers and their attorneys filed separate petitions which respectively set forth in detail the services rendered, and the sum of $2,000 was thereupon awarded the receivers, and the sum of $3,500 was allowed to their two solicitors. At the time of these applications, the receivers and their attorneys believed that the operation of the receivers had resulted in a profit of approximately $3,500, and that there were in hand sufficient proceeds from the sales of the mortgaged property to pay the mortgage debt in full. The receivers did not know that they...

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