Conkling v. Washington University

2 Md. Ch. 497

• Court: High Court of Chancery of Maryland
• Decided: March 15, 1849
• Status: Published

Opinion

The Chancellor:

This case which has been argued by counsel on both sides, has been considered by the court. Its decision must depend upon the construction of the deed of the 24th of July, 1835, between the Washington Medical College of Baltimore of the one part, and Charles F. Mayer and others of the other part.

By that deed, the Washington Medical College, which had been incorporated by an act passed in the year 1832, ch. 189, conveyed to the grantees, a leasehold interest in a lot or parcel of ground in the city of Baltimore, held under a deed, to the grantor from one George Williamson, subject to a ground rent of one hundred and fifty dollars per annum. It recites that “towards the erecting a building to be called the Washington Medical College of Baltimore on said ground the sum of fifty thousand dollars in various amounts, has been engaged, and agreed by sundry persons to be contributed, which persons shall be identified by being the owners of the certificates hereinafter mentioned. And that the Washington Medical College of Baltimore have agreed with said persons, that they shall severally and respectively, be secured as hereinafter stated, the payment and receipt of dividends arising on the amounts of their respective contributions, in semi-annual payments, on the first of January and July respectively, in every year, &c., and that the reimbursement of the principal of said contributed amounts, has also, by the party of the first part, been agreed with the said persons to be secured in the manner and in the event hereinafter stated.” Here follows the form of the certificate to be issued to the contributors, and by which they were to be identified. Each certificate being for the sum of $60, “part of the sum of fifty thousand dollars mentioned in and secured by means of the deed of trust executed by the Washington Medical College of Baltimore on the 24th of July 1835.” “The said sum of $60 to be entitled to a dividend proportioned to its amount when the same shall arise payable semi-annually, &c., by the treasurer for the time-being of the college.” “The said sum of $60 to be accepted by the party to whom the certificate is issued, or his assigns, in discharge, and extinguishment, to the extent of said sum, of said deed of trust, and his claim to, or interest in said deed of trust, and the benefit thereof, and of said piece of ground, and premises, thereby conveyed, when tendered at any time after the 4th day of July, 1845, by the grantor aforesaid, of said trust, or their assigns,” &c.

The trusts of this deed are, first, that the grantor shall be allowed to hold, occupy and use the property, and receive the rents, issues and profits thereof, until sold and disposed of, as in said deed is afterwards mentioned. Second, “that if the dividends stipulated in the certificates to be paid, shall be in arrear and unpaid, for the space of one whole year, from the dates thereof respectively, that then it shall be lawful for the grantees to sell the property, &c., and out of the money arising from said sale, after satisfying and paying all arrearages of rent due on said premises, pay and reimburse to said owners of said certificates, the full amount of the principal moneys mentioned in said certificates, and all dividends that shall then have accrued thereon, and the residue, if any, shall and will pay over to the grantor in the deed, or its successors or assigns.” The bill in this case, which was filed in the year 1843, avers, and it is admitted, by an agreement in writing, that the plaintiffs (except Mr. Mayer) are the holders of certificates, under the deed of trust, and that they contributed moneys as mentioned in said deed, so as to entitle themselves to such certificates, which moneys were expended in the erection of buildings on the lot, conveyed by the deed, and that the buildings so erected have been occupied and used by the college for medical instruction, and as a hospital and lunatic asylum, from the year 1836, and although, as appears by the answer of the college, moneys have been received by it, for the use of the buildings, it is denied, (and there is no evidence establishing the contrary,) that any dividends have accrued or have been declared or become payable, upon the moneys advanced by the contributors, according to the true construction of the deed ; which, as their anwer insists, are payable only out of the net profits.

It appears by the pleadings, proofs and admissions, that on the 9th of February, 1841, Samuel K. Jennings, one of the original founders of the college, and a member of the corporation, at the date of the deed of trust, recovered a judgment against the college, in Baltimore County Court, for the sum of $10,894 08, which judgment, on the 23d of the same month and year, was entered for the use of Edward Green, to the extent of $6000, and for the use of John W. Richardson, for the balance. That on the same day, a writ of fieri facias, issued upon the judgment which was levied upon the property in question, and that on the 27th of February, 1843, Edward Green became the purchaser thereof, at the sale of the sheriff for the sum of $6500, and that a conveyance has been duly executed to him by that officer, dated on the 8th day of the then succeeding month of March.

The bill prays for a sale of the property upon these grounds, 1st. Upon the ground that the accrued dividends have not been paid within the period prescribed by the deed, and 2nd. Because of the sale and transfer of the title to Green, the corporate body have become incapacitated for fulfilling the requirements of the trust, and performing the agreement and conditions under which the advances and contributions were made. .

The claim to relief under the first head is not pressed, and need not, therefore, be considered. The answer of the college,, which admits the possession and use by it, of the buildings from the year 1836, as a medical college hospital and lunatic asyIum, states that it is still using them for those purposes : and upon this statement, it has been argued that the corporation is not shown to be disabled from performing the requirements and stipulations of the deed. In the answer of Green, however, a different ground appears to be taken, it being there stated, that the buildings were used for these purposes from theh completion, and up to the time of the sale to and purchase by him. The inference from this answer is, that subsequently to the purchase by Green, the buildings had not been used by the college, for the purposes contemplated by the deed. It is not deemed necessary, however, to examine this question, because it is very clear, that since the sale of this title of the corporation to Green, if it has retained the possession at all, it must be under and in subordination to him as his tenants, and by his sufferance, and that so far as the corporation is concerned, Green must be entitled to the rents, and may use the buildings for any purpose he may please. The college, therefore, I think, are not now in a condition to perform the requirements of the deed. This being the case, the complainants say, that as the leading objects of its execution, was the securing the reimbursement of the principal sums advanced by them, they are now entitled to the interposition of this court, in such form as will accomplish that object. The trustees cannot sell, because the event upon which they might exercise the power given them by the deed has not happened, and now since the sale to Green cannot happen, no dividends can accrue, and of course none can be in arrear, and the question therefore is, (assuming for the present the deed to be valid,) whether this court, in view of the manifest intent and meaning of the instrument, will not supply those remedies without which that intent and meaning must be frustrated.

It seems now to be settled, that if the purposes of a trust cannot be accomplished, without the most serious delays and inconveniences, the court will direct a sale or mortgage, though a power is only given to raise money for this purpose in a different way. Or if a will contain a direction or power to raise money out of the rents and profits of an estate, to pay debts or portions, if necessary to raise the money, the courts have held such a power to include in it, for the purposes of the trust, a power to sell and mortgage, upon the ground that otherwise it might be impracticable to raise the money. Mr. Justice Story says, that this is the doctrine established by the more recent cases in opposition to older decisions, which restricted the power to the mere annual rents and profits. 2 Story Eq., section 1064.

And even in cases in which the parties are not wholly without remedy, but the interposition of this court is called for, simply for the purpose of accelerating the payment of the debt, the authorities show, that the courts will grant relief, by decreeing a sale to accelerate the payment, and, a fortiori, will they do so, when the only remedy by the creditor is to be found in the power of this court of decreeing a sale. In such a case, in the language of the Supreme Court of the United States, in Barton vs. Smith et al., 13 Peters, 464, they will “not leave the creditor to look on in hopeless despondency, except through the interposition of a court of equity in decreeing a sale.” It is said, however, that the deed is void, because of the uncertainty of those provisions which have reference to the making of dividends. The argument is, that it does not appear from what source the dividends are to accrue, or by whom they are to be ascertained and declared. Now I think that though the terms employed are not so explicit as they might be, that it does sufficiently appear that the dividends were to arise from the profits to be derived from the use of the buildings, and this was the manifest understanding of the college, as appears by its answer, which says, that the deed contemplated the payment of dividends out of the net receipts to arise from the use and employment of the buildings. The same ground is virtually taken by Green in his answer, which relies upon the defences set up in the answer of the college. As to the objection that no persons were designated to ascertain and declare the dividends, this, from the nature of the trusts, was a duty to be performed by those having charge of the finances of the institution. But the great object of this bill is to procure a decree for the sale of this property, for the satisfaction, not of the interest upon these sums of money, or dividends in the place of interest, but the principal sums themselves, and with regard to the mode in which the principal sums were to be paid, and the source from which the money for their payment was to arise, there is clearly no uncertainty.

The important question, therefore, as it seems to me, is, whether these plaintiffs who contributed this money, in the manner, and for the purpose stated in the deed, are to be regarded as creditors having a lien • on this property, by virtue thereof, or as partners with the corporation, and, consequently, in a contestation with regard to the partnership effects, to be postponed to the claims of creditors.

Upon a careful consideration of the terms of the deed, I can find nothing in it, which places these contributors, and the corporation in the relation of partners with each other, or among themselves. It appears to me to have provided simply for a loan of certain sums of money for a specified purpose, for the payment of the interest upon which the lenders were willing to look to the dividends which might be derived from the profits, to arise from the use of the property, so Jong as it should be used for the purpose of medical instruction, with a right to sell for the repayment of principal and interest, upon the contingency mentioned in that behalf. It is immaterial in what form the evidence of the loan was to exist, whether in the shape of certificates or notes or bonds.

The deed makes no provision for the apportionment of dividends among the contributors and the college; but each sum of $60 is to receive a dividend in the proportion which it has to the whole sum advanced. There is no stipulation, then, that the corporation and the persons who might advance the money to erect the buildings, should participate in the profits, which might make them partners; but the profits in the shape of dividends are to be divided among the contributors exclusively, with an agreement, that after the 4th of July, 1845, the corporation might get clear of the incumbrance upon their property, by paying off the principal sums. If a partnership had been designed, or had been at all within the contemplation of the parties, it is scarcely to be doubted, that some estimate would have been put upon the lot, as that, and this money advanced, would have constituted the capital of the firm. But still, as has been said, that though these parties may not have intended to become partners, and may not bear that relation to each other inter sese, yet the contract between them, may be such as to make them partners inter alios, and it is insisted that the agreement as to dividends, is of that character. But as we have seen, the agreement, with regard to the dividends, does not extend to the corporation, and there is, therefore, no stipulation between it and the contributors for participation in the profits. My construction of this deed is, that it provides for a simple loan of money by the contributors to the corporation, to receive the payment of which the latter gave them a lien upon that lot and premises in question, and that, consequently, that they have superior rights to any creditor of the corporation, becoming such after the execution of the deed.

But assuming that these contributors and the corporation are partners, is it quite clear that Green, the judgment creditor of one of the partners, is entitled to be preferred over a partner who is, himself, a creditor of the firm ? Partnership effects must be first applied in liquidation of the claims of the joint creditors before any partner can claim anything for his share, or debt; and when an account is taken between partners, after a determination of the partnership, each partner is entitled to be allowed against the other, everything he has had advanced, or brought into the concern, and nothing will be considered as the share of any one of them, but that proportion of the residue to which each, on a balance of the accounts, will be entitled. Gow on Part., 258, 259. In the settlements of the' accounts between these contributors and the corporation, supposing them to be partners, the joint debts are first to be paid, then the claims of either partner against the partnership, and the surplus only would be divided between the partners in just proportions. To the share of the corporation of this surplus, and to nothing more, would Green be entitled, as his claim is not against the firm, but against one of the partners, to wit, the corporation, against whom alone, the judgment under which he purchased was rendered.

Charles F. Mayer and John Nelson for Complainants. J. Mason Campbell, John Glenn and Thomas G. Pratt for Defendants.

As decided by the Court of Appeals in the case of Richardson vs. Stillinger, 12 Gill and Johns., 477, 483, the seizure and sale could only transfer the interest of the defendant, the corporation, at the date of the judgment, and would be subject to all judgments, liens, and outstanding equities existing against him anterior to that time. The claim of Dr. Jennings, upon which this judgment was rendered, and under which Green purchased, was a claim against the corporation alone, and it would therefore seem to follow, that even if the contributors and the corporation can be regarded as partners, that still, as against them, they being creditors of the partnership for advances made to it, Green would not be entitled to be preferred, and especially so as Jennings, under whom he claims, had actual, as well as constructive, notice of the deed of trust. The excess of one partner’s advances over those of the other, constitutes a preferred claim upon the partnership property or its proceeds, as against the individual creditors of the bankrupt partner, and as in this case, the corporation is conceded to be bankrupt, its individual creditors must give way to the partner who made the advances. Pierce vs. Tiernan et al., 10 Gill & Johns., 253.

Upon the whole, I am of opinion that these plaintiffs are entitled to a decree for a sale, and will so decree, the money to be distributed among the parties according to the views herein expressed. If any portion of the claim of Dr. Jennings is for advances, which will put him, or his assignee, Green, on a footing of equality in the contribution with the plaintiffs, he will be allowed to come in with them, and his rights, in that respect, will be reserved.