Irving Trust Co. v. Williams, Inc.

• Court: Maryland Supreme Court
• Writing for the Court: URNER, Judge.
• Citation: Irving Trust Co. v. Williams, Inc., 168 Md. 588, 178 A. 848 (Md. 1935)
• Decision Date: 03 May 1935
• Docket Number: 14.
• Parties: IRVING TRUST CO. v. WILLIAMS, INC.

178 A. 848

168 Md. 588

IRVING TRUST CO. v. WILLIAMS, INC.

No. 14.

Court of Appeals of Maryland

May 3, 1935

Appeal from Circuit Court of Baltimore City; Rowland K. Adams Judge.

Petition by Williams, Incorporated, against the Irving Trust Company trustee of the estate of the United Cigar Stores Company of America, bankrupt. From an adverse decree, defendant appeals.

Reversed.

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

Solomon Hirschhorn, of Baltimore (Louis J. Sagner, of Baltimore, on the brief), for appellant.

H Harry Rosenberg, of Baltimore (Irving C. Goldstein, of Baltimore, on the brief), for appellee.

URNER Judge.

The decree under review on this appeal declared a chattel mortgage to have been discharged, and restrained its enforcement by the trustee in bankruptcy of the corporate mortgagee. That relief was invoked in a petition of Williams, Inc., the mortgagor, which alleged that it is a Maryland corporation conducting a barbershop business in Baltimore City on the first floor of the premises known as 209 East Baltimore street; that on February 1, 1929, the United Cigar Stores Company, lessee of the property, entered into a written agreement with Anthony Williams, which he subsequently assigned to the petitioner, creating a sublease of the premises for a term beginning March 1, 1929, and ending April 29, 1935; that the sublease included a provision for the deposit of $2,000 to be applied as a credit for the last months' rent so far as applicable; that during the petitioner's occupancy under the sublease, the United Cigar Stores Company distrained the chattels on the premises for rent in arrears for the months of February and March, 1932, amounting to $916.68, which action resulted in a settlement upon terms stated in a memorandum exhibited with the petition; that pursuant to the settlement a new agreement was executed for the sublease of the store floor and basement of 209 East Baltimore street to the petitioner and others for a term beginning on April 1, 1932, and ending on April 29, 1935, at the annual rental of $3,600; that a "Rider" attached to the new agreement provided for a chattel mortgage of the petitioner's furniture, fixtures, and equipment securing the payment of $1,800, at the rate of $50 per month, as a special consideration for the sublease, in addition to the stipulated rent, and conditioned for the performance of the sublessees' covenants pending the payment in full of the mortgage debt; that the petitioner and others accordingly, on April 25, 1932, executed the chattel mortgage to the discharge of which the petition is directed; that the petitioner paid to the United Cigar Stores Company the sum of $350 per month, from April 1, 1932, until notice was received, on or about September 1, 1932, from the Mercantile Trust Company of Baltimore; that all of the rent accruing after August 29, 1932, should be paid to it, the ownership of the property being in the Trust Company and Harry Lee Zeigler as trustees, and the United Cigar Stores Company having been adjudicated a bankrupt in the United States District Court for the Southern District of New York on August 29, 1932, and under the provisions of the lease from the trustee owners to the United Cigar Stores Company the bankruptcy adjudication having terminated the lease and any authority which that company previously had to collect the rent for the building; that the termination of the main lease similarly affected the sublease, and the petitioner was therefore compelled to enter into a new lease with the owners of the property and to discontinue rental payments under the pre-existing sublease agreement; that the petitioner has demanded, but has been refused, a release of the chattel mortgage, which is claimed to be no longer effective in view of the termination of the sublease with reference to which it was executed.

The memorandum of settlement and the "Rider" to the new sublease, exhibited with the petition, have such an important relation to the question presented for decision that it seems necessary to quote their provisions in full. The first of those agreements was in the following form:

"This memorandum of settlement made this 31st day of March, 1932, by and between United Cigar Stores Company of America, a body corporate, Williams, Incorporated, a body corporate, Anthony Williams and John M. J. Sweeney and Linda M. Sweeney, his wife.

Whereas the said United Cigar Stores Company of America, a body corporate, is the lessor of the premises known as No. 209 East Baltimore Street, Baltimore, Maryland; and

Whereas the said United Cigar Stores Company, on or about February 1, 1929, entered into a written agreement of lease of said premises with the said Anthony Williams; and

Whereas the said Anthony Williams is in arrears in the monthly installments of rent called for by said lease for the months of February and March, 1932, at $458.34 per month, or $916.68, and in addition thereto the said Anthony Williams owes to the United Cigar Stores Company an amount payable under said lease for 1931 city and state taxes on said property and water rent, amounting to $850.28; and

Whereas the said United Cigar Stores Company has issued a distraint out of the People's Court for the rent for the months of February and March aforesaid, and has seized the goods and chattels found upon the said premises; and

Whereas the said Williams Incorporated, a body corporate, conducts the business at said premises and the said Sweeney is an officer of said corporation and financially interested in the said business, and the said Linda M. Sweeney holds a chattel mortgage, in the amount of $5,000, on the chattels seized by the United Cigar Stores Company under the aforesaid distraint proceeding, the effect of which distraint proceeding is to create a lien in favor of United Cigar Stores Company, which has priority over the lien of the chattel mortgage to the said Linda M. Sweeney; and

Whereas the parties hereto, in consideration of the premises and the mutual covenants, promises and agreements by, to and with each other, have agreed to a settlement of the aforementioned matter upon the following terms, agreements and conditions:

1. That the said United Cigar Stores Company, Williams, Inc., Anthony Williams, Sweeney and Linda M. Sweeney will enter into a written agreement of lease to be prepared by the said United Cigar Stores Company in which the said United Cigar Stores Company shall be the lessor and the other parties hereto shall be either lessees or guarantors, at the option of the said lessor, for the rental of the first floor and basement of the aforesaid premises, for the term from April 1, 1932 to April 29, 1935, at and for the sum of Three Hundred ($300) Dollars per month, payable on the first day of each month in advance. The said lease shall be in the same form as that now existing between the said United Cigar Stores Company and the said Anthony Williams, and subject to the same conditions, except as herein provided for. That under the terms of the said lease to be executed the taxes and water rent beginning with the year 1932 shall be paid by the lessor.

2. That the said Linda M. Sweeney shall execute either a release or a waiver of priority, at the option of said United Cigar Stores Company, of the chattel mortgage from Williams, Incorporated, to Linda M. Sweeney, dated March 18, 1931, and recorded among the Chattel Records of Baltimore City in Liber S. C. L. No. 411, folio 376.

3. That there is now due and owing to the said United Cigar Stores the aforesaid rent, taxes and water rent due under the lease with the said Anthony Williams, amounting to approximately $1,800. That there shall be paid by the said Williams Incorporated, Anthony Williams, Sweeney and Linda M. Sweeney the sum of fifty dollars ($50) per month during the continuance of the term of the lease to be executed, as mentioned in paragraph one, in liquidation of said indebtedness; that a chattel mortgage on all...