Engle v. U.S. Fid. & Guar. Co., s. 49-52.

• Citation: 200 A. 827
• Decision Date: 29 June 1938
• Docket Number: Nos. 49-52.,s. 49-52.
• Parties: ENGLE et al. v. UNITED STATES FIDELITY & GUARANTY CO. (four cases).
• Court: Court of Appeals of Maryland

200 A. 827

ENGLE et al.
v.
UNITED STATES FIDELITY & GUARANTY CO. (four cases).

Nos. 49-52.

Court of Appeals of Maryland.

June 29, 1938.

Appeals from Circuit Court No. 2 of Baltimore City; Edwin T. Dickerson, Judge.

Suit by Charles B. Engle and others, constituting a Plan Management Committee, and others, against the United States Fidelity & Guaranty Company and another to declare a trust in favor of plaintiffs and others similarly situated. From an order sustaining named defendant's demurrer to the bill, orders denying plaintiffs' petitions for leave to amend, and a decree dismissing the bill, plaintiffs appeal.

Order sustaining demurrer and decree of dismissal affirmed, and appeals from orders denying leave to amend dismissed.

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

200 A. 828

George M. Brady and Arthur W. Machen, both of Baltimore (H. Vernon Eney and John Marshall Jones, Jr., both of Baltimore, on the brief), for appellants in all four cases. Charles McH. Howard and J. Kemp Bartlett, Jr., both of Baltimore, for appellees in all four cases.

SLOAN, Judge.

&gt

The bill in this case was filed by Charles B. Engle, J. W. Jakes, A. E. Kusterer, W. F. Enright, R. A. Packard, Alan H. Andrew and Lee R. Daly, called Plan Management Committee, and G. Walter Holden, Edith L. Charlton, Cyrus S. Mitchell, Laura M. Culver and The Florence Crittendon Home of Denver, a corporation, against the United States Fidelity and Guaranty Company, a Maryland corporation, the appellee, and the Federal Mortgage Company, a foreign corporation, on which there was no service, to declare a trust in favor of the Plaintiffs and others similarly situated. The defendant, appellee, demurred, and its demurrer having been sustained, the Plaintiffs appeal. The plaintiffs filed two petitions for leave to amend, with drafts of the proposed amended bills, both of which were refused, and appeals taken from these orders. The Chancellor then passed a decree dismissing the bill of complaint, so that while we have four appeals in one record there are two questions for decision, the sufficiency of the allegations to show a trust and its breach, and the right to amend.

According to the bill of complaint, the Federal Mortgage Company, a North Carolina corporation, with its office at Asheville, North Carolina—which we shall designate as the Mortgage Company—from October 1, 1924, to December 1, 1926, issued three series of real estate mortgage bonds, designated as Series A, B, C, D, E, F, G and H, secured by three indentures to the Central Bank and Trust Company of Asheville, North Carolina, as trustee, hereinafter called the Trust Company. On October 1, 1928, the Mortgage Company executed a fourth indenture to the Trust Company to secure two issues of bonds, designated as Series "I" and "J", which are those involved in this appeal. Under the indentures the Mortgage Company deposited with the Trust Company as collateral first mortgages on real estate, Government bonds and cash equal in face value to the full amount of the bonds issued. The obligation of the defendant, U. S. Fidelity and Guaranty Company, hereinafter called the Guaranty Company, was, under the indenture, to guarantee the mortgage notes, accepted and approved by it, deposited by the Mortgage Company with the Trust Company, and interest thereon, and such other first mortgage notes as may be, from time to time, approved and accepted by the Guaranty Company, and this is the only obligation assumed by it under its bond to the Mortgage Company; it did not guarantee the payment of the mortgage bonds issued under any of the indentures.

The indenture, with respect to cash of the Mortgage Company which it might have on hand provided that when such cash deposits should exceed twenty-five per cent. of the aggregate capital and surplus of the Trust Company, it should furnish to the Mortgage Company "* * * for the benefit of the holders of the bonds of the respective issues for the security of which said cash shall have been deposited a good and sufficient deposit bond of a surety company covering the full amount of the excess deposits, indemnifying the (Mortgage) Company for the benefit of the holders of the bonds for which said cash is deposited as security and of the United States Fidelity and Guaranty Company as guarantor of the obligations securing said bonds as their respective interests may appear against any loss in connection with such cash deposited". This provision, at the instance of the Baltimore Trust Company, the holder and seller of a number of the bonds, and fiscal agent and banker as to all of the bonds, in conjunction with the Guaranty Company and the Mortgage Company, was amended, in the indentures securing Series "I" and Series "J", so as to provide that in the event that the cash at any time should exceed five percent of the aggregate capital and surplus of the Trust Company, it shall furnish to the Mortgage Company a good and sufficient depositary bond of a surety company covering such excess deposits for the benefit of the bond holders, the U. S. F. & G. Co., and any other surety company guaranteeing the obligations securing the Mortgage Company's bonds. Thereupon a depositary bond was given to the Mortgage Company as obligee by the Standard Accident Insurance Company of Detroit, Michigan, in the penalty of $350,000, in which there was this provision: "In the event of loss...