Hambleton v. Rhind
| Decision Date | 05 January 1897 |
| Parties | HAMBLETON ET AL. v. RHIND. |
| Court | Maryland Court of Appeals |
Appeals from circuit court of Baltimore city.
Bill of interpleader by J. Edward Hambleton and others against Colden Rhind to determine conflicting claims to a certain fund. From a decree for defendant, the plaintiffs appeal. Reversed.
Argued before McSHERRY, C.J., and BRYAN, BRISCOE, FOWLER, and ROBERTS, JJ.
William A. Fisher, W. Cabell Bruce, D. K. Este Fisher, Charles Marshall, William L. Marbury, and Henry J. Bowdoin, for appellants.
R. M Venable and Edwin G. Baetjer, for appellee.
There are ten appeals now before us in a single record, but only one opinion will be required to cover them all, because while there are some slight variations in minor details, the material facts in all the cases are identical, and precisely the same legal principles are applicable to them.
Some time in the early fall of 1892, the appellee, Colden Rhind, a resident of the state of Georgia, obtained authority from the governor and treasurer of South Carolina to float for that state, upon certain stipulated terms, an issue of about $6,000,000 of her 4 per cent. bonds, the proceeds of which were to be used in retiring an outstanding and shortly maturing prior series, known as "Brown Consols." He proceeded to New York, and after endeavoring, without success, to organize a syndicate to purchase the bonds suggested a change in the character of the bonds, and then resumed his efforts. By the new scheme, the bonds, instead of being 4 per cent. 40 year bonds, were, subject to the approval of the legislature, to be 4 1/2 per cent. 20-40 year bonds, and were, when negotiated, to net the state par. Rhind approached a banker by the name of Lancaster, who carried on business in both New York and Richmond, and agreed to give him, as compensation for his aid in forming a syndicate one-third of the commissions which Rhind himself might realize out of the transaction. Failing to secure a sufficient number of subscribers in New York, Lancaster, acting for and as the agent of Rhind, proceeded to Richmond, in the month of December, and there enlisted the cooperation of the banking firm of Williams & Son, one of whose members suggested that he could probably fill up the syndicate from among his acquaintances in Baltimore. Accordingly, with the sanction and approval of Lancaster, I. Skelton Williams went to Baltimore, in the latter part of December, approached and interviewed the appellants and others, and solicited them to join the syndicate; and, if this was not done with the knowledge of Rhind, certainly it was subsequently ratified by him. Williams represented to the appellants that all the subscribers to the bond purchase were to be placed on the same footing of perfect equality, and that each was to share alike in the profits of the venture. He further represented that there were expenses connected with the syndicate that would have to be provided for out of the profits. After considerable negotiation, a sufficient amount was conditionally subscribed in Baltimore to make up with what had been taken elsewhere, the sum of $2,000,000; and the Baltimore Trust & Guarantee Company was selected as the agent of the syndicate to carry out and consummate the transaction. Each of the appellants became a subscriber, and each signed a memorandum setting forth the terms, and specifying the amount of his subscription; and, while these papers were executed at different times, they all bear date on the 30th of December, 1892, and they were all executed in anticipation of the purchase of the bonds from the state. The material parts of these subscription contracts are in these words: "(2) The said trust company shall pay to R. A. Lancaster & Co., of New York City, for syndicate expenses, two-thirds of the interest on said bonds, from January 1, 1893, to July 1, 1893, that may be received by it; that is to say, a commission of 1 1/2% out of the interest or profit received on said bonds.
(3) The said * * * shall have no right, by virtue of his said subscription, to actual delivery of said bonds from said trust company, but shall, in addition to the interest provided for by section 2 hereof, be entitled to receive from said trust company a share of the whole profits, if any, that may be realized by the sale of said bonds by syndicate, at a greater price than that paid for the same, the share of the said * * * in the said profits to be in the proportion that the number of said bonds subscribed for by him may bear to the whole number of bonds subscribed for by the syndicate. (4) The said Baltimore Trust & Guarantee Company is also authorized to pay R. M. Marshall & Bro. $2,500; the Bank of Charleston, N. B., A., $1,000; the Baltimore Trust & Guarantee Company, $500; and such other expenses as may be authorized by the syndicate. (5) It is understood that the syndicate shall have the same rights and privileges in the balance of about $3,800,000 of bonds as hereinbefore provided with reference to the said $2,000,000 of said bonds." The subscriptions first made related only to the sum of $2,000,000 of the issue, but under the fifth clause an option was given to the subscribers to take the residue of the bonds, amounting to $3,250,000, on precisely the same terms. This option was availed of on March 7, 1893. It was understood that the subscriptions for the first $2,000,000 were only to be binding in the event that the syndicate should succeed in disposing of that amount of the bonds to parties in South Carolina or elsewhere outside of the syndicate. This condition having been ultimately complied with, a meeting of the members of the syndicate was held in Baltimore, on January 11 or 12, 1893, and this meeting was attended by Lancaster. It is proved beyond the possibility of doubt that Lancaster then and there and repeatedly afterwards unequivocally declared that he had no interest, beyond about $500 for traveling expenses, in the fund payable under the second clause of the subscription agreements to R. A. Lancaster & Co., "for syndicate expenses." He urged the members of the syndicate not to press him with inquiries as to what disposition was to be made of this fund for syndicate expenses, and strongly intimated that it was to be used in some way among parties who exercised political influence in South Carolina, though he declared emphatically that he knew not to whom the money was to go, and persistently protested that he did not wish to know. This fund, as to the clause already quoted from the subscription agreement shows, was to be raised by deducting two-thirds from the amount of the interest due July 1, 1893, on the new 4 1/2 bonds. The syndicate agreeing to take the $2,000,000 of bonds at par flat as of July 1st, and also agreeing, under the option, to take the remaining $3,250,000, the interest coupons to mature that day for the preceding six months, and amounting to 2 1/4 per cent., were to be the property of the syndicate, and out of their proceeds, when paid by the state treasurer, a portion of the profits of the members was to be derived after the syndicate expenses, and the other items, named in the fourth paragraph of the subscription papers, were first subtracted. It is obvious, therefore, that one of the things which the members of the syndicate contracted to get, and one of the things that was to be their common property, under both the original subscription and the option, was this six months' interest, amounting, at 2 1/4 per cent. on the $2,000,000, to the sum of $45,000, and, on the remaining $3,250,000, to the further sum of $73,125, and aggregating the gross sum of $118,125. The trust company was authorized to disburse in discharge of syndicate expenses, from this common or partnership fund, for the benefit of the whole syndicate, two-thirds, or $78,750, if the entire $5,250,000 of bonds were included under the second clause of the subscription agreements, or $30,000 if only the $2,000,000 purchase was embraced and covered by that clause.
It was perfectly natural that the members of the syndicate should inquire of Lancaster (himself also a member) as to what these expenses were for; and, both as a promoter of and a participant in the enterprise, he was bound to disclose the literal truth on this subject to his associates; but as already stated, and as the sequel will further show, he not only did not content himself with a mere concealment and a suppression of the truth, but he deliberately uttered the most unblushing falsehoods, strictly in keeping with his subsequent reprehensible efforts, during his examination as a witness, to deny, avoid, and explain away his glaring duplicity. After the most unqualified declarations on the part of Lancaster (who, it must be borne in mind, was acting throughout this whole transaction as the agent and partner of Rhind, to the effect that he had no interest in these expenses, and was to get no part of the proceeds of these coupons beyond the $500 already named), the arrangement to take the $2,000,000 of bonds was concluded, and on January 19, 1893, a contract for the purchase of the bonds, with the interest coupons attached, was entered into between the Baltimore Trust & Guarantee Company, as agent for the syndicate, and the governor and the treasurer of South Carolina, in behalf of the state. By that agreement it was provided: ...
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