Donnelly v. Baltimore Trust & Guarantee Co.
| Decision Date | 23 June 1905 |
| Citation | 61 A. 301,102 Md. 1 |
| Parties | DONNELLY v. BALTIMORE TRUST & GUARANTEE CO. |
| Court | Maryland Court of Appeals |
Appeal from Superior Court, Baltimore City; Henry Stockbridge Judge.
Action by Daniel Donnelly against the Baltimore Trust & Guarantee Company. From a judgment in favor of defendant, plaintiff appeals. Affirmed.
Argued before McSHERRY, C.J., and FOWLER, BRISCOE, BOYD, PAGE, and PEARCE, JJ.
John V.L. Findlay, for appellant.
John N Steele and Edgar H. Gans, for appellee.
This is an action of deceit brought by the appellant against the appellee for alleged fraudulent misrepresentations in a circular issued by the appellee, offering for sale certain bonds of the Nashville Railway. There are 16 bills of exception in the record, 15 of which are concerning the admissibility of evidence; but as the first prayer offered by the defendant, which was granted by the court, presents the most important questions in the case, we will at once consider that. It instructed the jury that there was "no evidence legally sufficient to show that any of the representations alleged in the pleadings were made by the defendant to the plaintiff fraudulently, and therefore the verdict must be for the defendant."
In the early part of 1899 the attention of the appellee was directed to the street railway system in Nashville by Kountze Bros of New York, and Hambleton & Co., of Baltimore, bankers of high standing in those cities. There were then in Nashville three street railway companies--the Nashville Street Railway, the Citizens' Rapid Transit, and the Nashville & Suburban Railway. There was also a company known as the Cumberland Electric Light & Power Company, which, in addition to furnishing electric light to the city and other customers, furnished power to the railway companies. After negotiations a syndicate was formed in the early part of 1899 which purchased all the shares of stock of the light and power company and all those of the railway companies, excepting the Nashville Street Railway Company, of which they purchased three-fourths or more. In the syndicate the appellee and Hambleton & Co. each had one-third interest, Kountze Bros. one-sixth, and Messrs. McGee and Baxter each one-twelfth. In May, 1899, a company called the Nashville Railway was formed for the purpose of purchasing the three existing railways. Under the laws of Tennessee, street railway companies could consolidate or be sold to each other with the assent of the city and at least three-fourths of the stock of the companies interested. The assent of the city was not obtained at the time expected, and the proposed sale to the Nashville Railway was abandoned. On August 31, 1899, an ordinance was passed giving the assent of the city to the proposed sale or consolidation, but on September 14, 1899, the mayor vetoed it. On September 19th, before the veto was acted on by the council, W. T. Cooper and another, citizens and taxpayers of Nashville, filed a bill to enjoin the city council, the railway companies, and the city register. On the same day the court refused to restrain the city council, but granted a preliminary injunction against the railway companies and the city register. On that evening the city council passed the ordinance over the mayor's veto. On the 23d of January, 1900, Chancellor Cook, of the chancery court of Nashville, dissolved the preliminary injunction, sustaining the contentions of the railway companies. Embodied in the decree is a statement that the complainants except, and pray an appeal to the Supreme Court of Tennessee, "which appeal the court is of opinion does not lie, and refuses to grant same, to which action of the court in refusing to grant said appeal complainants except." On the day that decree was entered the railway companies were consolidated by an "agreement of consolidation" entered into by them, "into one corporation by the corporate name of 'Nashville Railway.' " In that agreement it was provided that the capital stock of the Nashville Railway be fixed at $6,500,000, "to be issued as full paid, nonassessable stock to the owners of the said four constituent corporations as agreed upon." It further provided that the Nashville Railway issue $6,500,000 bonds, of $1,000 each, to be secured by a mortgage or deed of trust, to the owners of the four constituent corporations, as agreed upon, for retiring the underlying bonds, for payment of expenses attendant upon the consolidation, and for its general corporate purposes, but at least $1,651,000 of said bonds should be retained by the trustee under the mortgage "for the construction or acquisition of branch or additional lines, extensions, power houses, betterments, property, equipment and other additional property, including construction and alterations." It also mentioned the bonds which would remain outstanding against two of the constituent corporations, there being no bonded indebtedness of the Nashville & Suburban Railway Company or of the Nashville Railway. This agreement of consolidation was approved by the stockholders of the respective companies, was filed with the Secretary of State, and seems to have followed the method authorized by the laws of Tennessee, provided the assent of the city is obtained. At a meeting of the stockholders of the four companies held on January 23, 1900, the stock was directed to be issued--64,989 shares to T.E. Hambleton and John N. Steele, trustees, and 1 each to 11 persons named--and a motion was passed for the issue of the bonds to the appellee, and that $2,789,000 of them be delivered to it, as agent for the owners of the stock, bonds, and properties of the four constituent corporations, in part payment therefor, and for the payment of taxes and expenses of the consolidation and other corporate purposes; that $489,000 of them be held by the trustee to redeem the bonds of the light and power company, and that the remaining bonds ($2,060,000) be held by the trustee to take up the bonds of the constituent companies, and the $1,651,000 be reserved for construction, etc. On May 4, 1899, a subsyndicate was formed, which agreed to take from the appellee, as agent of the original syndicate, $2,300,000 of the whole issue. When the stock of the several companies was purchased by the syndicate the appellee advanced the money, and in December, 1899, the other members of the syndicate paid it their portions; thus leaving a one-third interest in the appellee at that time. It was agreed that the original syndicate was to have the $2,300,000 of bonds at 87 1/2, and the subsyndicate at 94. The appellee had paid for the shares of the railway companies and of the light and power company, which sum, together with interest, amounted to $1,863,822.34, and also various items which are set forth in an account filed, amounting to $148,962.77; being a total of $2,012,785.11. It charged itself with the proceeds of the bonds at 87 1/2, and sundry interest allowed on the balance, $285.11. It retained an interest in the bonds in the sub-syndicate of $75,000, and the evidence shows that all the members subsequently paid for their bonds, excepting one subscriber for 10 or 15 of them. On the 29th of January, 1900, a mortgage was executed by the Nashville Railway to the appellee to secure the issue of the bonds. On the same day all the stock of the light and power company was deposited, duly indorsed in blank, under a declaration of trust, as additional security for the bonds, to be held by the trust company. On February 1, 1900, the bonds ($2,300,000) were charged to the subsyndicate, and, in accordance with the agreement with the members of that, the appellee proceeded to sell them as its agent. All of the stock was issued, but $1,100,000 of it was put back in the treasury. Twenty per cent. of the stock to the amount of the subscriptions by the subsyndicate was given to its members as a bonus, and the balance was divided between the members of the original syndicate and some others. The appellee gave part of its stock to three trust companies, and had left about $466,000. On February 5, 1900, the appellee issued a circular for the sale of the $2,300,000 of bonds, and on February 12, 1900, the appellant purchased seven of them, paying par and accrued interest, less a commission of one-half per cent. allowed him. The first coupon, due August 1st, was paid, but there was default in the payment of the one due February 1, 1901, and none were paid afterwards. The company was placed in the hands of receivers in June of that year, a bondholders' committee was appointed, and the appellant sold his bonds at 78 1/2 cents on the dollar. He now seeks to recover the difference, with interest. The bondholders' committee sold the bonds controlled by them to another syndicate for 80 cents on the dollar, deducting 1 1/2 per cent. for expenses. As the alleged false representations were made in the circular spoken of, we will consider them in the order they there appear:
1. The first is: "We own and offer part of an issue of the first consolidated mortgage 50-year 5 per cent. gold bonds of the Nashville Railway of Nashville, Tennessee." We find nothing in the evidence of Mr. Donnelly suggesting that he thought that the appellee was the actual owner, in its own right, of all the bonds to be sold, or that this statement in any way influenced him to make the purchase. He was a member of the finance committee of the Metropolitan Savings Bank of Baltimore, and could not have supposed from that circular that the trust company was the owner of all the bonds. He was allowed a commission of one-half per cent., and would not likely have thought that the appellee was paying him a commission for buying its own bonds. He must have known that the circular meant that the appellee's ownership was as t...
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