Diggs v. Fidelity & Deposit Co. of Md.
| Decision Date | 13 January 1910 |
| Citation | 75 A. 517,112 Md. 50 |
| Parties | DIGGS v. FIDELITY & DEPOSIT CO. OF MARYLAND. |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court No. 2 of Baltimore City; Henry D. Harlan Judge.
Proceedings by the Fidelity & Deposit Company of Maryland to procure the execution of trusts of a mortgage under the direction of the court, in which Albert Diggs intervened. There was a decree assuming jurisdiction of the trust and from an order directing the trustee to certify and deliver certain bonds under the trust mortgage, intervener appeals. Reversed and remanded.
Argued before BOYD, C.J., and BRISCOE, PEARCE, SCHMUCKER, BURKE PATTISON, THOMAS, and URNER, JJ.
Stuart S. Janney and Albert C. Ritchie, for appellant.
Harry W. Williams, Charles Markell, and Edgar H. Gans, for appellee.
The proceeding before us is an ex parte one, instituted in circuit court No. 2 of Baltimore City by the Fidelity & Deposit Company of Maryland (hereinafter called the "fidelity company") as trustee under a mortgage deed of trust made to it by the Consolidated Gas Company of Baltimore City (hereinafter called the "gas company"). The purpose of the proceeding is to procure the execution of the trusts of the mortgage under the direction and supervision of the court. There is no question that in cases of express trusts the trustee, if in doubt may, for his protection, apply to a court of equity for a construction of the instrument creating the trusts and for their execution under the court's direction and supervision. Cases of that class form an exception to the general rule that courts of equity will not declare future rights, but will leave them to be determined when they come into possession. As was said in Cross v. Del Valle, 68 U.S. 1, 17 L.Ed. 515: Even in such cases, however, where the persons whose rights are to be affected by the court's action are in esse and within the reach of its process the fundamental principles of equity jurisdiction require that they must be made parties to the suit in person or by representation in order to bind them by the decrees or orders to be passed therein. Keeping these principles in view we will proceed to the consideration of the issues presented by the present appeal, which is not from the decree assuming jurisdiction over the trust estate, but from an order subsequently passed directing the trustee to certify and deliver certain bonds in performance of its duties under the mortgage creating the trusts. The material allegations of the trustee's petition, on which the court took jurisdiction in the case, may be briefly stated as follows:
The gas company was created on May 5, 1888, by the consolidation, under the provisions of the general corporation laws of this state, of three pre-existing corporations which may be designated as having been the "Baltimore," the "Chesapeake" and the "Equitable" Gas Companies. On April 1, 1904, the corporation thus formed made the mortgage deed of trust, already mentioned, to the petitioner to secure a proposed series of bonds amounting in the aggregate to $15,000,000, to be issued for the purposes, at the times and upon the terms and conditions in the mortgage set forth. On June 20, 1906, after that mortgage had been made, but before all of the bonds to be secured by it had been issued, the gas company was, itself, consolidated under the general corporation laws of the state, with another Maryland corporation known as the Consolidated Gas, Electric Light & Power Company (hereinafter called the "power company"), thus forming the now existing corporation, the Consolidated Gas, Electric Light & Power Company of Baltimore, which we will hereinafter call the "consolidated company." One of the terms of the last-mentioned consolidation was that, immediately upon its completion, "all the property and franchises of the gas company" should pass, "subject only to such liens on such property as existed prior to this consolidation," to the Continental Trust Company as trustee under a mortgage which had theretofore, on February 14, 1905, been executed to it by the power company and also under a supplemental mortgage which had been executed to it by the power company on May 15, 1905, to secure the payment of $15,000,000 of bonds of that company referred to in said original and supplemental mortgages. The consolidated company, the now existing corporation, in pursuance of the terms of its incorporation executed on November 19, 1906, a supplemental mortgage, of all of its property of every kind and description, except certain specified parcels of land, subject to existing liens thereon, and also all property and franchises which it might thereafter acquire, to the Continental
Trust Company as trustee under the above-mentioned mortgage and supplemental mortgage, which had been made to it by the power company on February 14, and May 15, 1905, to be held subject to the terms and for the purposes of said mortgages. The mortgage of April 1, 1904, from the gas company to the petitioner, conveyed in terms not only the property of every kind then owned by the gas company, but also such as it might thereafter acquire and both that company, during its existence, and since then the consolidated company have from time to time executed conveyances of property thereafter acquired to the petitioner upon the trusts of said mortgage of April 1, 1904. Certified copies of the deeds, mortgages, and instruments of consolidation mentioned in the petition were filed with it as exhibits and appear in the record.
The petition, after making the allegations of facts aforesaid, states that "by reason of the various mortgages or deeds of trust prior to and subsequent to the mortgage or deed of trust to your petitioner as trustee, and by reason of the consolidation" by which the gas company was formed, "your petitioner has been in doubt as to its duties, rights, and obligations as trustee, and more especially your petitioner has been in doubt as to its rights and duties with reference to the certification of further bonds under said mortgage deed of trust" at the request of the consolidated company, and it is therefore desirous of executing its trusts under the direction and supervision of the court. It then prays the court to take jurisdiction of the trusts of the mortgage and their execution and of the trust property and for further relief. Upon the filing of the petition and accompanying exhibits, the court passed a decree declaring "that relief be granted as prayed in said petition, and that the court do hereby assume jurisdiction over the trust" created by the mortgage of April 1, 1904, from the gas company to the petitioner and over the property now or hereafter to be held in trust under it and over all of the acts of the petitioner as trustee under it.
As the allegations of the petition are of a general nature it is necessary to refer to the contents of some of the exhibits in order to arrive at an accurate understanding of the questions presented by it. An inspection of the mortgage of April 1 1904, from the gas company to the petitioner, for the execution of whose trusts the aid of the court is invoked, shows that it was made to secure the payment of 15,000 bonds for $1,000 each, which were to be executed by the gas company, and on each of which the trustee was to indorse a certificate that it was one of the series of bonds secured by the mortgage. Of these bonds 1,015 were to be forthwith certified by the trustee and delivered to the gas company upon its order. Of the remainder, 1,500 bonds were to be applied to the redemption of outstanding certificates of indebtedness of the company; 6,895 bonds were to be used to take up and retire, as they matured, outstanding bonds which were secured by underlying mortgages on the company's property, and 5,500 bonds were from time to time to be issued to pay 80 per cent. of the cost of the property to be thereafter acquired by the company. Before any bonds could be issued for the purchase of after-acquired property the trustee must be furnished with the certificate of an engineer appointed by the gas company, and also, at its option, of an engineer to be appointed by it, stating that the plant or property proposed to be purchased is desirable for that company to acquire in the profitable conduct of its business and also stating the actual cost of the property, and the trustee must also be furnished with a resolution of the directors of the company reciting the engineer's certificates and requesting the trustee to deliver the bonds. The mortgage also contains covenants on the part of the mortgagor to make all needed and proper betterments and improvements, to keep the mortgaged property and appliances in such thorough repair that their efficiency shall at no time become impaired, to pay off all taxes, prior lien bonds, liens, and incumbrances and to convey to the trustee upon the trusts of the mortgage all property thereafter acquired by the company whether the same be appurtenant to its business or not. Among the other provisions of the mortgage is to be found one exempting the trustee from liability or responsibility for any acts or defaults of the gas company, its servants or agents, and further providing: "Nor shall the trustee be held...
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