Hambleton & Co., Inc. v. Union Nat. Bank of Pittsburgh

• Decision Date: 04 December 1931
• Docket Number: 42.
• Citation: 157 A. 404,161 Md. 318
• Parties: HAMBLETON & CO., INC., v. UNION NAT. BANK OF PITTSBURGH.
• Court: Maryland Court of Appeals

157 A. 404

161 Md. 318

HAMBLETON & CO., INC., v. UNION NAT. BANK OF PITTSBURGH.

No. 42.

Court of Appeals of Maryland

December 4, 1931

Appeal from Superior Court of Baltimore City; H. Arthur Stump Judge.

Action by the Union National Bank of Pittsburgh, a body corporate against Hambleton & Co., Incorporated. Judgment for plaintiff, and defendant appeals.

Reversed and remanded.

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

Hunter H. Moss, of Baltimore (Harry N. Baetjer, of Baltimore, on the brief), for appellant.

William D. Macmillan, of Baltimore (Semmes, Bowen & Semmes, of Baltimore, on the brief), for appellee.

OFFUTT J.

On December 6, 1928, Hambleton & Co., Incorporated, the appellant, hereinafter called Hambleton, the Union National Bank of Pittsburgh, the appellee hereinafter called Union or the bank, and the Baltimore Trust Company, hereinafter called the trust company, executed a written agreement, which, after reciting that: "Whereas, agreements for the purchase of Seven Per Cent Cumulative Prior Preference stock of the Pittsburgh Hotels Corporation and Common stock of said Corporation, in units of one share of Prior Preference stock and one-half share of Common stock, are about to be entered into between employees of Pittsburgh Hotels Corporation and Union, a true copy of the form of said purchase agreement being attached hereto and made part hereof," provided: (1) That the trust company would deliver to the bank 1,500 shares of the preferred stock of the Pittsburgh Hotels Corporation, hereinafter called the hotels company, which it held as collateral on a loan to Hambleton; (2) that Hambleton would deliver to the bank 750 shares of the common stock of that company; (3) that the bank would receive payments on such stock from employees of the hotels company purchasing the same under the form of the purchase agreement referred to in the preamble, and would remit such collections together with all dividends on the preferred stock received by it to the trust company; (4) that the bank would deliver to employees purchasing stock under such installment purchase agreements the stock purchased by them whenever the payments made by or for such purchasers on that account to the bank plus dividends on the preferred stock paid to it were sufficient to pay for the stock purchased; (5) that "In case Union is called upon to make any payment to or to credit the account of any purchaser, or his personal representative, under the provisions of the seventh paragraph of the purchase agreement, Hambleton agrees to re-imburse Union for the amount so paid or credited upon demand by Union. When so reimbursed, Union shall deliver to Baltimore, upon demand by it, certificates for the Prior Preference stock and to Hambleton, upon demand by it, certificates for the Common stock covered by the agreement with the purchaser to whom, or to whose personal representative, payment has been so made. It is understood that Union shall have a lien upon any such stock immediately enforcible by public or private sale thereof, in case Hambleton should fail to reimburse it, upon demand, as above provided"; (6) that the bank was under no obligation "to terminate the right of any Subscriber to continue payments or receive stock under the terms of his purchase agreement, except after written notice from Pittsburgh Hotels Corporation of the termination of his employment"; and (7) that "Hambleton agrees to indemnify Union against any liability incurred by it on account of entering into said purchase agreements except to the event of such liability arising on account of the gross negligence or wilful default of Union."

The purchase agreements, the form of which was made a part of the contract described supra, recited that: "Whereas, Hambleton & Company has offered to sell to the Purchaser, on the terms herein mentioned, the shares of stock below set forth and in order to make more certain the carrying out of the plan for the sale of said stock, and to enable the Bank to enter into and carry out the terms of this agreement, has caused delivery to be made to the Bank of certificates for said stock in for for transfer," and then provided for the purchase of the stock by employees of the hotels company, the payment of the purchase price by dividends on preferred stock and installments to be deducted by the hotels company from the wages of the employee and paid to the bank, for the delivery of the stock when fully paid up, that "In case the Purchaser dies, or his employment by the Pittsburgh Hotels Corporation is terminated for any other reason, before he had fully paid for his stock, the Bank agrees to pay to the Purchaser, or to his personal representative, or other person authorized to receive payment under any present or future law of the State of Pennsylvania, on identification satisfactory to the Bank, the amount of all payments on the purchase price of said stock received by it (not, however, including any dividends credited on said purchase price), with interest on each of said payments at the rate of six per cent. per annum from the date of the receipt thereof to the date of the termination of Purchaser's employment by The Pittsburgh Hotels Corporation. After such payment has been made by the Bank, or the amount due the Purchaser has been credited to him by the Bank, all right, title and interest of the Purchaser, or of his heirs, executors, administrators or assigns, in said stock, or under this agreement, shall terminate, except the right to receive the amount so credited."

The purpose and effect of those instruments may be thus summarized: Hambleton owned a number of shares of the common and preferred stock of the Hotels Corporation and it had pledged 1,500 shares of the preferred stock as security for a loan which the trust company had made to it. It had devised a plan to sell that stock to employees of the hotels company under an agreement by which the purchase price would be paid in installments deducted from the wages of the purchasers by their employer, and by dividends on the preferred stock. To carry out that plan, the trust company agreed to deliver to the bank 1,500 shares of the preferred stock which it held as collateral, and Hambleton was to deliver to it 750 shares of common stock which it held. The bank was then to execute purchase contracts with employees of the hotels company purchasing the stock thus delivered to it, in which it would appear as principal and vendor, and to which neither Hambleton nor the trust company would be a party.

In those stock purchase contracts, the bank agreed with employees purchasing stock under them that in the event of the death of the purchaser, or in the event that "his employment by the Pittsburgh Hotels Corporation is terminated for any other reason," it would refund to such purchaser or his legal representative all payments made on account of the purchase price, exclusive of dividends received by it, together with interest thereon at 6 per cent. per annum.

After the execution of the original contract, the bank executed with a number of the employees of the hotels company agreements in the form described above for the sale of shares of the common and preferred stock of the hotels corporation to them, and the trust company and Hambleton delivered to it certificates of stock sufficient in number to permit it to perform those contracts. For a time payments were made under the purchase contracts and remitted by the bank to the trust company, and occasionally, as some purchaser died or his employment by the hotels company was terminated, a certificate to that effect from the hotels company would be presented to the bank, it would notify Hambleton, and Hambleton would furnish the money to refund the purchaser what he had paid on the purchase together with interest as provided in the stock purchase contracts. But when in September, 1930, Hambleton was notified by the bank that the employment of about seventy-five of the employees of the hotels company who were bound by those stock purchase contracts had been terminated, and that those employees demanded of the bank a refund of payments made on account of the stock respectively purchased by them with interest thereon, it wrote the bank as follows: "We have made an investigation of the books of the Pittsburgh Hotels Corporation and find that with the exception of only a few employees, all of those who have demanded a refund of the amounts paid by them on the ground that their employment by the Hotels Corporation had terminated, were out of such employment in most cases for not more than two days and in no case for more than a week. The agreement certainly never contemplated the return of the fund on account of temporary suspension of employment, particularly when as in this case the claim for the refund must be based upon collusive discharge of the employee. We are unwilling, therefore, to honor the claims for the refund unless we are furnished with satisfactory evidence over the signature of the President or Vice-President of the Hotel that the Man who is making the claim has been discharged permanently and will not be re-employed by the Hotels Corporation at least for a period of one year." On September 10th the Bank in answer to that letter wrote: "Until advised by counsel to the contrary we will exercise all reasonable care in complying with your stipulation but inasmuch as the Stock Purchase Agreements between this Bank and the various employees specify the conditions under which refunds are to be made, we are apprehensive that some employees may seek to hold this Bank liable for breach of contract. Therefore, we should like to have an official communication from your company undertaking to indemnify and...