Union Trust Co. of Md. v. Thomas
| Decision Date | 02 April 1907 |
| Citation | 66 A. 450,105 Md. 507 |
| Parties | UNION TRUST CO. OF MARYLAND et al. v. THOMAS et al. |
| Court | Maryland Court of Appeals |
On Rehearing, May 1, 1907.
Appeal from Circuit Court of Baltimore City; Alfred S. Niles, Judge.
Suit by the Union Trust Company of Maryland, trustee, and another against Douglas H. Thomas and others. Plaintiffs appeal from the decree. Reversed and remanded. Motion for reargument overruled.
Argued before BRISCOE, BOYD, PEARCE, SCHMUCKER, BURKE, and ROGERS JJ.
Fielder C. Slingluff, T. Wallis Blakistone, and Joseph C. France, for appellants.
George Dobbin Penniman, for Perin estate.
Arthur George Brown, for Wells Bros. Co.
Bernard Carter, for committee of second mortgage bondholders.
John P Poe, for unsecured creditors.
It will be necessary to a proper understanding of this case that the facts be stated in somewhat full detail before considering the law applicable to the facts. The Belvidere Building Company of Baltimore City is a corporation formed under the general incorporation law of the state of Maryland April 10 1901. The certificate of incorporation states that it was formed "or the purpose of buying, selling, mortgaging, leasing, improving, disposing of, or otherwise dealing in lands in this state, and also for the purpose of carrying on in the city of Baltimore the industrial business of conducting a hotel in all its branches, the aforesaid purpose being, in the judgment of those forming said corporation, of advantage to the general interests of said corporation," and the aggregate capital stock of the corporation was fixed at $500,000, divided into 5,000 shares of the par value of $100 each. Under its corporate powers, and in pursuance of proper authority from its directors and stockholders, it was determined to issue its first mortgage bonds to the amount of $850,000 in order to pay for the erection, equipment, and furnishing of a hotel building upon a lot of land at the southeast corner of Charles and Chase streets, in Baltimore City, owned by it, and also its second mortgage bonds to the amount of $500,000, for the erection, equipment, and furnishing of said hotel building; and, accordingly, on June 20, 1902, said corporation executed to the appellant the Union Trust Company of Maryland, trustee, its mortgage upon the parcel of ground at the corner of Charles and Chase streets on which the Belvidere Hotel was then in the course of erection, together with all the improvements and machinery thereon when and as erected, and all the rights, privileges, and franchises connected with said hotel in any manner, to secure the said first mortgage bonds mentioned to the amount of $850,000, said bonds being for $1,000 each, payable on January 1, 1923, with interest in the meantime semiannually at the rate of 5 per cent., payable on the 1st days of January and July in each year. And on June 16, 1903, said corporation executed to the said Union Trust Company, trustee, its mortgage upon the same property described in the said prior mortgage, and also upon all the furniture, equipment, machinery, and supplies that should be placed in said hotel, to secure said second mortgage bonds to the amount of $500,000; said bonds for $1,000 each payable October 1, 1918, with interest in the meantime payable semiannually at the rate of 5 per cent. on the 1st days of April and October in each year. It also executed a third mortgage on May 27, 1904, to the Fidelity & Deposit Company of Maryland, as trustee, to secure its bonds for $150,000, held by Wells Bros. Company, for work done by them on said hotel building. The whole amount of bonds secured by these three mortgages were issued concurrently with the execution of said mortgages. It does not appear in the record by whom all of these bonds are now held, nor is it material that this should appear; but the record does disclose the fact that the Union Trust Company of Maryland holds in its own right $620,000 of the first-mortgage bonds, and that Ella K. Perin, as life tenant under the will of Nelson Perin, now deceased, holds $134,000 of the first-mortgage bonds. It also appears that, of the second-mortgage bonds, Ella K. Perin holds $120,000; the Merchants National Bank of Baltimore, $30,000; Hambleton & Co. $10,000; Citizens' National Bank of Baltimore, $10,000; United States Fidelity & Guaranty Co., $20,000; W. P. Harvey, $30,000; Parker & Thomas, $14,000; and the Sherwood Distilling Company, $8,000. And that, of the third-mortgage bonds, $68,000 are yet held by Wells Bros. Company, and that there are unsecured creditors whose claims amount to a large sum of money. The bondholders above named have all been made parties to the proceedings at some stage, and McDowell & Co., holding an unsecured claim of $3,133.34, have also come in by petition, acting in their own behalf and in behalf of other unsecured creditors.
On February 10, 1906, the Union Trust Company of Maryland, trustee, filed its bill in the circuit court of Baltimore, reciting the first mortgage above mentioned, so far as necessary to the case, and especially alleging that, in the second article of said first mortgage, the said mortgagor covenanted that on January 1, 1906, and annually thereafter, and so long as any of said bonds remained outstanding and unpaid, it would pay to the plaintiff the sum of $12,500 for the purpose of constituting a sinking fund for the payment of said bonds at maturity. That, by article 13 of said mortgage, the said mortgagor further covenanted to pay promptly all taxes and assessments lawfully assessed against the property mentioned in said mortgage, so long as any of said bonds should be outstanding. That, by article fourth of said mortgage, it was provided that if the mortgagor, its successors or assigns, should at any time, after demand made, neglect or omit, for any period exceeding nine months, to pay semiannual interest on said bonds, or to pay the principal sum of each bond for any period after the maturity thereof, "or shall suffer or allow any lawful tax or charges to fall in arrear, or any lien to be obtained on the said property, whereby the security of this mortgage may be impaired, or shall refuse or fail to keep or perform any of the covenants or stipulations contained herein," then, in either of such events, in case the same continue for nine months, the plaintiff might, upon the written request of one-fourth the amount of bonds thereby secured, enter upon and take possession of the mortgaged premises, and apply the net revenue and income therefrom as stipulated in said mortgage; or after, or without entering as aforesaid, upon the written request as aforesaid, might proceed to sell and dispose of said mortgaged real estate, corporate rights, and franchises. That it was further provided by said article 4 that in case of any default in any matter or thing to be done or performed by the mortgagor, according to the requirements of said bonds or of said mortgage, the plaintiff should be authorized to apply to any court of competent jurisdiction in the state of Maryland for the appointment of a receiver or receivers of the mortgaged property and franchises, and that the court should forthwith appoint such receiver or receivers, and, if named or designated as such by the plaintiff, that such appointment should be made by the court as a matter of strict right to the trustee and to the bondholders, and without reference to the solvency or insolvency of the mortgagor. The bill then alleged that the defendant had made default: (1) in failing to pay on January 1, 1906, to the trustee, the sum of $12,500, or any part thereof, for said sinking fund; (2) in failing and omitting to pay "the properly levied and assessed state and city taxes upon the property, real and personal, conveyed by said mortgage deed of trust for the years 1905 and 1906, as covenanted in article 13, which taxes are in arrears under section 40 of the City Charter, and are liens upon said property prior to the aforesaid deed of mortgage, and the security conveyed thereby is impaired by the failure to pay said taxes." The bill then further averred that the failure to pay promptly the taxes for the year 1905 had continued for a period of more than nine months, and the contingency had arisen under which the plaintiff was authorized to enter upon and take possession of said mortgaged property, or to exercise the power of sale before mentioned, or to apply for and have appointed a receiver or receivers as aforesaid; that the plaintiff deemed it necessary and expedient to exercise its rights and obligations under said mortgage, and to take possession of the mortgaged property for the purpose of sale; that it was the plaintiff's intention to sell the same as soon as it could be advantageously done; and that it deemed it necessary that a receiver or receivers should be appointed to continue the business of the defendant until the further order of the court. The prayer of the bill was: First, that the court would assume control of all the trusts reposed in the plaintiff, and direct the proceedings as to the sale of said property; second, that a receiver or receivers should be appointed; third, that an injunction should issue restraining the defendant's officers or servants from interfering with the receivers; and, fourth, for general relief.
On the same day the defendant answered, admitting all the matters and facts stated in the bill, consenting to the appointment of receivers, and recommending Edgar G. Miller, Jr., as a receiver on behalf of the defendant and its stockholders representing the $508,300 of capital stock of the corporation. On the same day an order or decree was passed (1) Assuming jurisdiction of all the trusts confided to, and the powers to be exercised by, the trustee...
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