Court Opinion

ID: 7900211
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:54:58.040235+00
Date Added: 2024-06-11T16:32:14.034989
License: Public Domain

Bryan, J.,
dissented and delivered the following opinion:
The charter of the Baltimore and Ohio Employees’ Relief Association was repealed by the Act of 1888, chapter 527. It was provided by this Act that it should go into effect on the first day of April, eighteen hundred and eighty-nine. We have already had before us on three several occasions controversies which have ensued in consequence of the repeal of this enactment. The cases are reported in 72 Maryland, 493; 77 Maryland, 566; and in 79 Maryland, 442. The greater portion of the facts which bear on the questions now before us are stated in the opinions which were filed in the cases mentioned. Nevertheless some repetition is unavoidable for the purpose of explaining the present case, and of showing the grounds of the opinion which we have formed,
A couple of days before the day appointed for the ex*111piration of the charter of the Relief Association, it made a contract with the Baltimore and Ohio Railroad Company for a conveyance to it of all its property upon certain conditions, and for certain purposes specially and distinctly set forth in the contract. It was recited in the contract that the Railroad Company had established the relief department under regulations issued by its president, which relief department was intended and was adapted to carry out the purposes and continue the business of the relief savings fund, and the building and pension features respectively of the Relief Association ; and that it was desired to wind up the business of the several features of the Relief Association, and to afford opportunity to the members of the relief feature, the depositor's in the savings fund, and the pensioners of the association to retain and continue the privileges and advantages afforded them respectively in the association by becoming members of the relief feature, depositors in the savings feature, and pensioners respectively in the relief department. And the contract was made to carry into effect the purposes mentioned in these recitals. The railroad covenanted and agreed that the property of the relief feature to be conveyed should be held and applied to the payment of the liabilities of the association in connection with the business of its relief feature, and thereafter for the benefit and advantage of the members of the relief feature of the relief department; and that the property of the pension feature and of the savings fund and. building feature to be conveyed should in like manner be held, and applied to the payment of their proper liabilities, and thereafter for the benefit of the members of said features respectively. And it further covenanted and agreed that if any member of the relief feature of the association should refuse to become a member of the relief department, the value of his membership and interest in the association should be paid to said member in money. And it further covenanted and agreed that all the property, assets, credits and securities, the conveyance and transfer of which is provided for in this agree*112ment, should be kept and remain distinct and separate from the property of the company held for its railroad purposes. After the making of this contract the Relief Association transferred to the Railroad Company a large amount of assets. This amount will be a subject of consideration in another part of this opinion. More than nineteen thousand of the members of the Relief Association became members of the relief department, and executed assignments to the Railroad Company of their interest in the assets of the association. By these assignments they became members of the relief department; and these instruments each contained a clause by which they agreed to be bound by all the regulations of the relief department then in force, and which might thereafter be adopted. There was also in each assignment a clause declaring assent to, and confirmation of, the transfer of the assets made by the Relief Association to the Railroad Company “for the purposes of the like features of the relief department respectively.” Eleven hundred and sixty-five members of the Relief Association declined to join the relief department, and, of course, made no assignment of their interests. In March, eighteen hundred and eighty-nine, Conley filed a bill in equity against the Baltimore and Ohio Railroad Company and the Relief Association ; and soon afterwards another bill in equity was filed by Cannon against the same defendants. Both of these complainants, were non-assigning members of the Relief Association, and the scope and purpose of each suit were the same. Both bills were filed by the complainants in their own behalf, and also in behalf of all the members and creditors of the Relief Association who might choose to become parties. They both alleged that the assignment made to the Baltimore and Ohio Railroad Company by the Relief Association was ultra vires and void, and they prayed for the appointment of receivers to take charge of the assets of the dissolved corporation and make distribution of them. Shortly afterwards, the Railroad Company filed a bill in equity in the same Court against the Relief Association, and each and every of *113the eleven hundred and sixty-five non-assigning members of the said association. The bill set forth the trust created by the contract with the Relief Association, and prayed the Court to take jurisdiction of the matter and direct the complainant in the administration of the trust. These three cases were consolidated by the order of the Court. After a long litigation the Court passed a decree requiring the .Railroad Company to account with all the members of the Relief Association who were in good standing at the time of its dissolution on March 31st, 1889; and after prescribing the terms of accounting gave the following direction (among others) to the auditors, to-wit: “ They shall audit the amount due all the members when ascertained as above directed, who have assigned their interest in said association to the Baltimore and Ohio Railroad Company, upon proof of said assignment to said Railroad Company in one sum to be held by it for the benefit of the members of the relief feature of the relief department of said company.” An appeal was prayed by the Railroad Company, and this Court in 77 Maryland, 566, reversed the decree in a particular not connected with the matter now in hand. In due course the auditors made their report, and after having distributed their share of the assets to the non-assigning members, distributed to the Baltimore and Ohio Railroad Company in trust for the benefit of the relief feature of the relief department of said company the sum of $548,399.04, in which sum were included certain securities. This account was duly ratified and confirmed on the fourteenth day of December, 1895. On the twenty-sixth day of February, 1896, John Flaherty, a member of the relief department, filed a petition praying that the Railroad Company should be required to pay into Court the trust fund distributed to it by order of the Court in trust for the relief department. After hearing in the regular order (answer having been filed, testimony having been taken and argument of counsel having been heard) the Court passed an order requiring the Railroad Company to pay into Court the amount of money embraced in the dis*114tribution made to it by the auditor’s report. The Railroad •Company has appealed.
It has been maintained by the appellant that the Court had no jurisdiction to pass this order. We shall examine this question. Cannon’s bill was filed in behalf of all the persons interested in this fund who chose to become parties to the suit, and it prayed' the decision of the Court on the responsibilities of the Baltimore and Ohio Railroad Company to all of them. . This Court decided that the case did nbt justify the appointment of a receiver; but it was fully recognized that Cannon had a right to demand an adjustment of the interests of the members of the Relief Association. Conley’s bill does not appear in the transcript of the record, but we are given to understand that it was of similar import with Cannon’s. The bill of the Baltimore and Ohio Railroad distinctly brought before the Court the rights of all the parties concerned in the affairs of the Relief Association. As has been stated, all these cases were consoli-' dated. Consequently every question was before the Court which was validly presented in each of them, and the Court had all the jurisdiction which could be derived from all the cases combined. The Railroad Company, by virtue of the contract hereinbefore mentioned, being possessed of the funds and assets of the Relief Association for the purpose of carrying out the objects of the agreement, duly represented in the litigation all the members who had made assignments. It was its duty to hold the property for the benefit of the assigning members after the payment of the liabilities properly chargeable on it. It is a necessary consequence that it had the right and power to protect it by representing the members in any litigation which might arise, and it was its duty to do so. This consequence is also evident from the absolute impossibility of bringing the twenty thousand assigning members into Court as parties litigant to defend the fund. In Kerrison v. Stewart, 93 United States, 160, it was held that where a trustee represents his beneficiaries in all things relating to their common interest in the *115trust property, the beneficiaries are not necessary parties to a suit by him against a stranger to enforce the trust, nor to one by a stranger against him to defeat it in whole or in part, and that in such cases the trustee is in Court for them and in their behalf Many illustrations might be given of this principle. One of the most familiar is the case of an executor, whose duty is to protect the interests of the estate, and who prosecutes and defends suits which concern the augmentation or diminution of the personal assets without the joinder of residuary legatees, or any other persons interested in the estate. In Lucas v. McBlair, 12 Gill & Johnson, 1, the doctrine of representation was declared in the fullest manner, where trustees held property for a large number of persons who could not be made parties without great hardship and inconvenience. The case involved the rights granted to Lucas and others by an Act of Assembly to raise by sales or drawing of schemes of lotteries, the requisite money for the construction of an armory and town hall in the city of Baltimore. But in the determination of the questions which arose, it became necessary to consider the doctrine which we have stated. This Court gave its full assent to the opinion of the learned Story in his work on Equity Pleading, quoting at large from it as follows: ‘ ‘ It has been well remarked by an eminent author, in many cases, that the expression, that all persons interested in the subject must be parties to the suit, is not to be understood as extending to all persons who may be consequentially interested. In all cases of bills by creditors, and legatees, the persons entitled to the personal assets of a deceased debtor, or testator, after payment of the debts or legacies, are not deemed necessary parties, though interested to contest the demands of the creditors and legatees.” And also as follows: “ Courts of Equity do not require that all persons having an interest in the subject-matter, should, under all circumstances, be before the Court as parties. On the contrary, there áre cases in which certain parties before the Court are entitled to be deemed the full *116representatives of all other persons, or at least so far as to bind their interests under the decree, although they are not or .cannot be made parties. Thus, for example, where real estate has been purchased by a joint fund, raised by a subscription in shares of more than two hundred and fifty subscribers, and the property had been conveyed to certain persons as trustees for the subscribers; and afterwards a bill was brought against the trustees for the sale of the real ' estate, under a mortgage made in pursuance of the trust, it was held, not necessary for the subscribers to be made parties to the bill; for the trustees, by the veiy nature and constitution of such a trust, must be held sufficiently to represent the interest of all the subscribers, and a different doctrine would be attended with intolerable hardship and inconvenience, as it might be impossible to make all the subscribers parties.” One of the principal objects of the bill filed by the Railroad Company was to ascertain the extent of the interests of the non-assigning members of the Relief Association. Yet this manifestly could not be done without also ascertaining the correlative interests of the other members in the same funds. The fund was to be apportioned between the two sets of owners, and the shares of each were increased or diminished by the amounts allotted to the other' set; necessarily it was required that the shares of each set should be determined. The Railroad Company duly represented the twenty-odd thousand assigning members, and did not and could not make them parties to the suit. Its right to represent this large body of members was fully recognized by the Courts throughout the litigation. It must be seen that all the members of the Relief Association have been made parties to the proceédings in these consolidated cases; the non-assigning members by name, and the assigning members by representation. It is only because they are parties, that members of this latter class are bound by the audit which determined the amount which the Railroad Company is to hold for their benefit. By the consolidation of the different cases, the *117Court had full and complete jurisdiction over all the parties interested in this litigation, and over all the subjects embraced in the different suits..
A question has been made as to the right of Flaherty to proceed by way of petition. The large sum of money already mentioned had been audited to the Railroad Company in trust for the benefit of the relief feature of the relief depertment. Flaherty was one of the members of the relief department. The moneys held by the Railroad Company in trust for it, were under the jurisdiction of the Court; and of course Flaherty had a right to apply to the Court to secure the fund if it should be in danger. And there could be no more appropriate method of making such an application than by petition. All the other members of the relief department were in Court as parties by representation in the person of their trustee, the Railroad Company. It would cause a most useless and unjustifiable accumulation of costs to file an original bill for the purpose of bringing before the Court the matters which were already on record in the litigation between the parties concerned in the subject on which the action of the Court was desired. There is no rule of practice in this State which sanctions such procedure. Without considering any vexed questions of practice which have been the subject of controversy in other jurisdictions, we are content to abide by the rule which has been established by the wisdom and thoughtful providence of our predecessors. In Hayes v. Miles, 9 Gill & Johnson, 198, it was said: “A petition may not in all cases be the proper course to reach a fund in chancery: as where new parties are to be made, not necessary to have been made to the original bill, and where the investigation may involve inquiries calculated, by protracting the cause, to delay others, not having an interest in such controversy. -But we think it may be safely stated as a general rule, that a petition is the proper mode of affecting a fund in equity where no other parties are to be brought in to litigate the application, than such as are, or *118ought to have been parties to the original bill.” We believe that this is the settled practice in this State. A similar course was approved in Balch v. Zentmeyer, 11 Gill & Johnson, 283. And Hayes v. Miles, has been repeatedly cited as a decisive authority. Griffith v. Parks, 32 Maryland, 5; Thomas v. Farmers' Bank, 46 Maryland, 56; Brown v. Thomas, 46 Maryland, 641.
Flaherty’s petition alleged that the funds which had been allotted to the Baltimore and Ohio Railroad Company by order of the Court in trust for the relief department had not been invested, but had been borrowed by the Railroad Company to be carried as a part of its floating debt. On the thirtieth day of Nov., 1895, an entry was made on the books of the Baltimore and Ohio Railroad Company shewing a money credit of $364,666.56 in favor of the relief department. This amount is $25,606.48 less than the sum» of money with which the B. & O. Railroad was charged in the audit and does not include the securities. The ninth regulation of the relief department is in these words: “ All moneys and securities of the department, with the exception of the mortgages made to secure loans from the savings feature, shall be entrusted to the official custody of the treasurer of the company, to be held subject to proper requisitions. All such securities will be held in the name of the company in trust for the relief department. Interest at the rate of four per cent, per annum will be paid on the monthly balances for cash deposited with the treasurer for the several features of this department, including in such balances the amount of checks not presented for payment or unclaimed on the last day of the month.” It is important to ascertain in whose custody the moneys and securities were at the time the petition was filed. Mr. Ijams, the treasurer of the Railroad Company, was examined as a witness. He testified that he had been the treasurer, for thirty-seven years. We make an extract from his testimony as it appears in the record:
“3rd Int. During your connection with the Railroad Com*119pany as treasurer, have the moneys deposited by the Relief Association up to March 31st, 1889, and by the relief department since that time been kept separate from the moneys of the B. & O. Railroad Company ?
A. I presume so ; that is a question the auditor will have to answer.
4th Int. In what banks were the moneys of the B. & O, Relief Department kept prior to the time of the receivership ?
A. There was no separate bank account kept by the B. & O. Relief Department; they were kept right in with the other moneys of the B. & O.
5th Int. Did you have in your hands the securities belonging to the relief department ?
A. I was the custodian of the boxes in which they were contained.
6th Int. Do you know what securities belonging to the relief feature of the relief department were in your possession at the time of the appointment of the receivers ?
A. I do not know the contents of the boxes.
yth Int. Who has the authority to open these boxes ?
A. The chairman of the relief committee, Aubrey Pearre, and the chief clerk of the relief department, John P. Hess.
8th Int. Did you or not in August, 1895, receive any orders from any official of the Railroad Company to hold a large sum of money for the benefit of the relief department ?
A. I do not recollect of receiving any.
9th Int. Do you remember of receiving any order to transfer or hold any sum of money amounting to $300,000 or $400,000, for the benefit of the relief department, since the first day of August, 1895, up to the time of the appointment of the receivers for the B. & O. Railroad Company ?
A. I do not.”
Mr. Pearre was also examined as a witness. We make an extract from his testimony :
“1st Int. Are you a director of the Baltimore and Ohio R. R. Co. ?
A. I am a director of the Baltimore and Ohio R. R. Co.
*1202nd Int. Were you a member of the board of directors through the month of Sept., 1895 ?
A. Yes, sir.
3rd Int. And continuously from that time until now ?
A. Yes, sir.
4th Int. Have you been during the past year a member of the committee of management of the relief department?
A. I have, sir.
5th Int. Do you have charge of the investment of funds held by the railroad in trust for the relief department ?
A. The committee on the relief department has charge of those investments.
6th Int. Can you state what investments your committee has made of the funds audited to the Baltimore and Ohio Railroad Co. in the Baltimore and Ohio Employees’ Consolidated Cases, by the report of the auditor finally ratified September 14th, 1895 ?
A. We have only invested $2,500 in City of Brunswick Bonds.
7th Int. Where is the balance of that money now deposited ?
A. With the treasurer of the Baltimore and Ohio R. R. 8th Int. Do you know in what banks it is deposited ?
A. I do not.
9th Int. Can you state whether, at the time this auditor’s report was ratified, any separate account was opened in any bank by the Railroad Company in which this special fund was deposited ?
A. I cannot.
loth Int. Did your committee make any report advising that such a special account be opened ?
A. No, sir.
1 ith Int. Do you know whether the treasurer can now point out where this particular fund is to be found, or whether it was merged in the general cash balances of the R. R. Co. ?
A. I cannot; I do not know.
12th Int. What officer is possessed of this knowledge ?
*121A. That I do not know.
13th Int. What inquiries have you made as to the whereabouts of this trust fund under your charge ?
A. We have made no special inquiries. All the funds of the relief department passes through the hands of the treasurer. I do not know whether they are separated or not.” He also testified that he had been chairman of the committee on the relief department six or eight years. It is shown by the testimony of Mr. Ijams that on the thirtieth day of Nov., 1895, the balances of the Railroad Company in bank amounted to $1,306,869.90; but of this amount certain deposits in the hands of the Maryland Trust Company and of the United States Trust Company were made for special purposes, and were not subject to check for any general use of the Railroad Company. These deposits amounted in the aggregate to $1,387,500.00; so that the Railroad Company had overdrawn its account in bank and had nothing in the hands of its treasurer which could be applied to the payment of the credit on its books in favor of the relief department. So it is shown that the Railroad Company has broken its covenant with the Relief Association, whereby it agreed that all the property, assets, credits, &c., of the association which were to be conveyed to it should be kept distinct and separate from the property of the company held for its railroad purposes. Neither has the ninth article of the regulations of the relief department been observed, which required that the moneys should be entrusted* to the official custody of the treasurer of the Railroad Company to be held subject to proper requisitions. The Baltimore and Ohio Railroad Company committed a breach of trust of a very serious character. The trust fund confided to it has disappeared, and it is not showm in the evidence what has become of it. The relief department is one of its agencies established, regulated and controlled by it. A construction cannot be given to the ninth article of the regulations, issued March 15th, 1889, which would’release the Railroad Company from its solemn contract under seal made on the twenty-*122ninth day of the same month. Far less would a Court of Equity regard this article as an excuse for the misapplication of funds which by its own order it had placed under the control of the trustee. The insolvency of the trustee and the placing of its property in the hands of receivers are proved in the proceedings. The duty of a Court of Equity to preserve trust property when endangered is imperative. It would be idle to discuss a matter so familiar; and it would be difficult to conceive how the trust property could be in greater peril. Flaherty proceeds in this case in his own behalf and in behalf of all others having a like interest in these funds. He is not invested with a separate- and divisible share of them ; but his interest is involved in a proper administration of all the trust property. He has a right to protect himself, and in protecting himself, he is at the same time securing the rights of all others interested in the preservation of the trust property. The fact that his individual right is of small pecuniary value imposes no disability upon him in the view of a Court of Justice. His rights must be protected by the law. And in this particular case he is proceeding for the benefit of all others similarly situated. The order of the Circuit Court requiring the fund to be paid into Court was a wise and provident step for Securing it for the benefit of all concerned in it. It is the usual course taken in like cases. It was pursued in Ehlen v. Ehlen, 63 Maryland, 267. In that case on the petition of a party entitled to one-fifth interest in trust property, the Court ordered the trustee to bring into Court the securities and money held in trust, it being shown that the property was in danger. This order was passed, notwithstanding the fact that the other parties interested in the trust were willing that the trustee should retain the property. The Court said that the fund was an entirety, and that the petitioner’s interest, could not be protected without securing the whole fund, and this the petitioner had a right to do, although the other persons interested in it were willing to relinquish their rights. It is well to notice that the petition was filed in the Ehlen *123case, in a suit where by a decree in equity property had been divided, and certain stocks and bonds had been allotted to Ehlen, the trustee, to hold in trust according to the provisions of his father’s will. It was not suggested in any quarter that the jurisdiction of the Court over the trustee terminated when by its order the stocks and bonds were allotted and delivered to him, nor was it suggested that a petition was not the proper mode of proceeding against him by a beneficiary of the fund. If the trustee is unable to produce the fund, it must show some satisfactory reason for its inability, and must disclose where the fund is, so that it may be recovered for the benefit of the trust. As germane to this matter the remarks of two eminent Judges may be quoted. A bill in equity had been filed to restrain a breach of trust, in behalf of an infant interested with many others in the property, but whose own interest in the property was very small. In deciding the case Sir W. M. James, L. J., said : “ The cestui que trust has a right in this Court to prevent the sale when a breach of trust has been committed, and it would be pessimi exempli for us to say : ‘ A breach of trust has been committed, but the amount which any one cestui que trust suffers by reason of that breach is not sufficient to justify a chancery suit.’ That is not an effectual answer in this Court.” And Lord Justice Mel;lish said : “ I also agree that the small interest of the infant can make no difference. The interest of each of them may be so small that no one of them might think it worth while to file a bill at his own risk, but the bill being filed on 'behalf of one infant, we must look at the whole substantial interest which is in question, not merely at the individual interest of the infant.” 8 Law Reports, Ch. App. 902.
Flaherty’s petition in this case was filed on the twenty-sixth day of February, 1896. Subsequently to this petition proceedings were instituted in the Circuit Court of the United States for the District of Maryland, whereby all the property of the Baltimore and Ohio Railroad Company was placed in the hands of receivers. When a Court once *124rightfully acquires jurisdiction over a subject, no other Court can interfere with the matter by subsequent pro-' ■eeedings. “The rule is well established, that when two Courts have concurrent jurisdiction over the same subject-matter, the Court in which the suit is first commenced is ■entitled to retain it, and the other co-ordinate Court has no authority to interfere, and will, as soon as judicially informed of the pendency of the prior suit, dismiss the subsequent proceedings.” Dunnock v. Dunnock, 3 Maryland Chancery, 150. To the same effect Albert v. Winn, 7 Gill, 447; Jenkins v. Simms, 45 Maryland, 537. All Courts desire that the administration of justice shall be conducted in an orderly and harmonious manner. The rule which has been universally adopted prevents conflict of jurisdiction; a great evil which cannot be too earnestly deplored. There is no reason to apprehend anything of the kind in this case. If the fund which is the subject of this controversy shall be found to be in the possession of the receivers, we shall •confidently believe that the United States Court will promptly order it to be delivered to the Court which has the rightful custody of it.
(Filed January 5th, 1898).