Court Opinion

ID: 7899552
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:54:35.326932+00
Date Added: 2024-06-11T16:32:12.668997
License: Public Domain

Boyd, J.,
delivered the following opinion in which
Fowler, J., concurred.
Although I concur in the conclusion reached by the Court, that the facts presented by the record authorize the appointment of a receiver of the Transportation and Terminal Company of Baltimore City, I cannot agree with all that is said in the opinion of some of the persons connected with' the company. It is true that certain expressions used in it were somewhat modified after the motion for a reargument was made and considered, but it fails to state some, evidence given by William Gilmor and others, which to some extent, at least, explains some of the transactions that without such explanations may be susceptible of the construction placed on them in that opinion.
The dealings with Herbert Du Puy, which resulted in his purchasing 800 shares of preferred stock of the par value pf $80,000, and eight hundred shares of common stock of the same par value for $60,000, were carried on through Gustav Lindenthal. A very careful and thorough examination of the record has convinced me that Lindenthal was fully aware of the character and condition of the company. With the knowledge he actually had and the opportunities afforded him of acquainting himself with the general scheme and status of the company, it would be asking a great deal of a Court of Justice to give him relief for fraud and deception practiced on him, if he was a plaintiff seeking redress on that ground. The sale of the stock was to him and not to Du Puy, although it was. known that he expected to get other parties interested in the transaction. The stock was issued to him and the two receipts for $30,000 each, signed by Mr. Gilmor, stated that the money was “ received of Gustave Lindenthal,” and Du Puy’s *453name does not appear in them. Lindenthal prepared a “Sample letter,” in which he gave an outline of what should be written to him by John Henry Miller — on which he wrote “ Private.” “ Sample letter. Word it as you think best.” On January 31st, 1890, Miller'wrote in accordance with the suggestions in the “ Sample letter,” and on the same day wrote another letter to Lindenthal enclosing a statement which is spoken of in the majority opinion as a “ Prospectus,” in which he says, “ Kindly read the statement over carefully, so that you will be fully apprised of what this company is in your scheme. In a few,words it represents our ‘ pool ’ or ‘ syndicate ’ into the treasury of which are now put, and will hereafter be put the stocks and bonds of all the companies in the project.” William Gilmor also signed a letter dated Feb. 6, 1890, and addressed to Lindenthal, which is very similar to the one written by Miller in the line of the “ Sample letter.” Miller swore that it was also pepared by Lindenthal. Du Puy testified that Lindenthal only showed him the letter of Gilmor and the statement, but Lindenthal’s account of what he told Du Puy shows that he gave him sufficient information to inform any intelligent man that all the proposed plans of the company had not yet been accomplished. But assuming that Du Puy was deceived and without meaning to be understood as attempting to justify all the statements in the “ Prospectus,” as it is called, I do think the conduct of Miller in sending it was not as reprehensible as it would have been if it had been sent to one unacquainted with the facts. If we accept 'Lindenthal’s evidence as true, there is no-reason to suspect any collusion between him and Miller to impose on Dii Puy or any one else.
There are undoubtedly assertions in that “ Prospectus ” that were not true and which one having a proper regard for his own reputation or the rights of others should not have made, but there is not sufficient evidence in the case to enable me to reach the conclusion that any officer of the company had anything to do with its issue. It was not *454.properly speaking a “ Prospectus.” It did not profess to 'be issued by the company and only two or three typewritten copies were ever made, so far as the evidence discloses, and the one sent to Lindenthal by Miller is the only one shown to have been sent to anyone. Mr. Gilmor, who is president of the company, swore concerning it, “I hadn’t .any part in the preparation of that paper and hadn’t any .knowledge of its preparation; it was not issued to my knowledge by the Transportation and Terminal Company, nor ordered by it to be issued; I hadn’t any knowledge that it had been placed in the hands of Mr. Lindenthal, or that Mr. Lindenthal had exhibited it to Mr. Du Puy.” That statement of his stands uncontradicted and it is therefore unjust to infer any connection with it by him. Both Gilmor and Miller swore that the gentlemen whose names are mentioned in it as officers and directors of the company 'had consented to serve as such, and if that was not true it 'would have been an easy matter to contradict them, as many of the parties named lived in Baltimore and all could have been reached, but that was not attempted. In j ustice to Miller it is proper to say that he swore that the statement was made with reference to what was expected to be done by the company when fully organized and when all was accomplished that they expected and believed they would do, although, as I stated above, the condition of affairs at the time the statement was made did not justify many of the assertions contained in it.
. In regard to the two receipts for $30,000, each signed by 1 Gilmor, he swore that he signed them at the request of Lindenthal and because he believed the option therein contained was valuable to the company, “ that if the project had gone on to the successful issue it then promised, that this $80,000 worth of preferred stock in my mind would have been worth considerable more money, and therefore I considered it a valuable privilege.” If, in point of fact, the object for which the company was organized had been accomplished, which was to secure terminal facilities and rail*455road connections in the city of Baltimore and to enter the anthracite coal regions in Pennsylvania, it was certainly not beyond a reasonable expectation that the preferred stock of the company would become valuable. Lindenthal, Miller, Gilmor and Case all testified they believed the enterprise would be successful. Lindenthal gave the two checks of Anderson, Du Puy & Co., which he had received from Du Puy for $30,000 each, to Miller, who was not an officer, but only a stockholder in the company, and he also paid Miller for the stock he got himself by cancelling a debt of $15,000 Miller owed him. Miller had already subscribed for the whole of the 15,000 shares of first preferred stock which had been authorized to be issued and the money did not go to the company. It is true that Miller gave Gilmor one of the checks for $30,000 out of which the latter paid himself $10,000 for a debt due him by the former and then paid the balance to Miller. Both of them explain that the check was given to Gilmor because Miller had no bank account in Baltimore. If in point of fact the stock belonged to the company, it might well be questioned whether Du Puy had any just claim against it as Lindenthal, who was either acting for himself or Du Puy in that part of the transaction, did not pay the money to the company or any of its agents but to Miller, and paid for his own stock by crediting Miller with the amount due by him. If Miller owed Gilmor $10,000, which is not contradicted by any evidence, he certainly had as much right to pay himself out of the check as Lindenthal had to pay himself with stock that belonged to the company, if the theory of the plaintiffs that the stock was the company’s be correct.
For these reasons and others that might be given, it cannot in my opinion be properly said or necessarily inferred that there was a scheme to deceive and “ to entrap the credulous and unsuspecting,” or that the president or other officer of the company is shown to be connected with the scheme, if such existed. There is no evidence in the rec*456ord that permits me to say or infer that nearly half a million dollars was realized by the sale, of stock or “ went into the pockets of the enterprising and speculative promoters.” Although the bill was filed May 15, 1891, by Mr. and Mrs. Dupuy for themselves and on behalf of other stockholders who might become parties to the suit, the record fails to disclose that any other person has appeared or complained. So far as Gilmor is concerned, he swore he never got one dollar from the company — not even his salary — and 'without some evidence or something in the record to fairly sustain the contrary, I must assume his statement to be correct.
In regard to the execution of the deed of trust and the trans'actions thereafter, it is manifest that some things were done which ought not to have been done under the circumstances. The stock of the Maryland Central Railway Company and of the Deer Creek and Susquehanna Railroad ought not to have been surrendered to Miller. It maybe true that at the time they were of little, if any, value, but if they were valuable to Miller they might have been to the company and were certainly as much so as the stock of the Terminal Company when the arrangement was made. But it does not necessarily follow that it was done with a fraudulent intent. It is not shown that Taylor, the trustee, knew of the transactions with the Du Puys, and if Miller and those associated with him were the only parties interested there could have been no serious objection to returning this stock to him. The transaction by the trustee was approved of by the Court, and although it was an ex parte proceeding, it is not probable it would have been done in that public way if there had been any fraudulent intent. It could have been much more readily concealed if the transfer had been made before the execution of the deed of trust, and if thé design was to defraud any of the stockholders or others, it is difficult to understand why they waited until after the deed of trust was executed and thus make the transaction a matter of public record. Nor do I think the fact of the *457sale of the other property to Blick is conclusive evidence of fraud. If there was any fraudulent design in that, it seems rather remarkable that one so closely connected with Mr. Gilmor was selected as the purchaser. With such an intent it is more likely they would have chosen some stranger or at least some one not so near the parties interested in the company. It may be, and doubtless was true that Blick could not furnish so much purchase money without the help of others, but if the trustee felt assured that the money or its equivalent would be paid, there was no great impropriety in • his reporting the sale to Blick. His bond was responsible for the amount of cash he charged himself with and no stockholder or creditor could suffer merely because he reported the sale to a purchaser of the financial standing of Blick. If the claims filed by the creditors of the company were honestly due, there is no reason why they should not have been paid, and if the trustee was willing to take the risk of charging himself with the cash and accepting the releases of the creditors, it by no means follows that he was guilty of fraud' by doing so. It is not an unusual thing for a trustee or an attorney named in a mortgage to sell property to the mortgagee or other creditor, and not require him to pay more of the purchase money than is necessary to cover the expenses. Of course he takes the risk of having the claims of the creditors rejected, but it would be a harsh ruling to brand the trustee with intentional fraud merely because he charged himself with the money as if cash had been actually paid. The allowance of commissions on the whole sum was improper and should not have been made in the audit, but if commissions had only been allowed on the thirty-five thousand dollars instead of on the one hundred and twenty-one thousand, there would still have been a deficiency if the claims filed are correct. There is no evidence that the property sold to Blick did not bring a fair price.
I think that the transactions were of such a character as to justify the intervention of a Court of Equity by the ap*458'pointment of a receiver, so as to have them thoroughly investigated — especially as the only creditors who filed claims were so closely connected with the company. But I cannot, in advance of such investigations by a receiver and of a full opportunity for explanations by the parties, agree to .condemn them and pronounce them guilty of actual fraud when I see that their conduct may be explained and shown to be free of any intentional fraud.
Fraud, when clearly proven or fairly inferrible, should be fearlessly condemned, but never presumed or charged unless fully justified by the facts before the Court.
'. As I believe many of the transactions so seriously criticised in the opinion of the majority of the Court are capable of explanation on grounds other than fraud, I have thought it but just to thus refer to some of them.
I am authorized to say that Judge Fowler "concurs in this opinion.
(Filed April ioth, 1896.)