Bailey v. Poe

Adkins, J., delivered the opinion of the Court. In April, 1920, Charles S. Bailey, brother of appellant, entered into a contract with the Metropolitan Savings Bank, to purchase the banking property at the Hortheast corner of Calvert and Lexington Streets, Baltimore, for $200,000, paying] $10,000 on account of the purchase money. The original contract provided for .a cash payment of $50,000 and a mortgage for $150,000. Subsequently the bank agreed to take a mortgage for $165,000.

This left $25,000 to be raised by Bailey. Bailey bought this property with a view to erecting- a large office building] on that corner, to take the place of the old building, which was. not only not susceptible of modern improvements, but had become greatly dilapidated. This ⁵⁹ plan Involved the raising of a large sum of money in addition to the $25,000 necessary to settle with the hank. For the purpose of capitalizing this project he undertook to organize a, corporation.

In furtherance of this scheme he sought the aid of Poe & Davies, the appellees, he having heard of their desire to secure more commodious and satisfactory quarters for their business. It seems that, shortly before the purchase of the property by Bailey, Poe & Davies had been negotiating for its purchase, and were offered it in fee for $180,000. The negotiations were terminated by the financial stringency which occurred about that time. But apparently the site was still attractive to them as a location for their offices.

So, when they were approached by Bailey, they agreed to purchase one-third of the preferred stock provided he could dispose of the remainder of the preferred stock elsewhere. Part of the arrangement with Poe & Davies was that they were to have their offices in the proposed building on very advantageous terms to them. This plan, however, failed of accomplishment because of another disturbance in the money market. .This left Bailey without means to make the payments which were overdue to the Metropolitan Savings Bank. Besides he was indebted to a number of others.

So the building scheme had to be abandoned, and the property was placed for sale by Bailey in the hands of several brokers, but no purchaser was secured. ITe also sought the assistance of Mr. IT. Walter Ganster in procuring a loan. This effort also failed.

Then some one suggested, whether it was Poe or Bailey is a matter of dispute, a plan by which Poe & Davies should lend Bailey $25,000 to enable him to settle with the bank, and rake from him a mortgage for $35,000 subject to the bank's mortgage of $165,000, the said second mortgage to hear interest at the rate of six per cent., to he made to a "Mr. Iloblitzel, a clerk of Poe <fc Davies, and to be assigned by Mm to them. This plan failed because of the advice of Messrs. Machen and Williams that such a loan would he usurious and illegal. ⁶⁰ After an interval of some days a proposition was made— whether by Poe or by Bailey is again a matter of dispute— that Poe should put up $25,000 (as contended by appellees as purchase money for Bailey’s equity of redemption, but, according'; to the testimony of Charles S. and Marion R-. Bailey, as a loan) and take a deed of the property subject to the bank’s mortgage of $165,000, the deed to be accompanied by a, collateral agreement whereby, in the event of a sale for more than $35,000 over and above the bank’s mortgage, and all interest, brokers? commissions, lawyers’ fees, taxes and expenses of every sort in connection with the property, the excess should go to Bailey.

This suggestion, according to Poe’s testimony, was preceded by a proposal by Charles S. Bailey that Poe should buy Bailey’s equity in the property by reimbursing him for the $10,000 he had paid the bank and take an assignment of his contract with the bank; which proposal Poe refused to consider. The subsequent suggestion above mentioned, however, was received favorably by him, and was referred to his counsel, Messrs. Machen and Williams, to be put in legal form, and on September 20th, 1920, the following papers were executed, viz.: 1. A deed from the Metropolitan Savings Bank to Marion R. Bailey. 2.

Mortgage from Marion R. Bailey to Metropolitan Savings Bank for $165,000' balance of purchase money. 3. Deed from Marion R. Bailey to' Philip' L. Poe, Edward L. Pittroff and Charles J. Heilman, co-partners trading as Poe & Davies, as joint tenants', conveying the property in question to them in fee .simple, for “five dollars and other good and valuable considerations,” subject to the above mortgage. 4. Agreement between Marion R. Bailey, party of the first part, and Philip L. Poe, Edward L. Pittroff and Charles J". Heilman, co-partners doing business under the firm name of P’oe & Davies, parties of the second part, as follows: ⁶¹ “This Agreement, Made this twentieth day of September, in the year 1920, by and between Marion R. Bailey, party of the first part, and Philip L. Poe, Edward L. Pittroff, and Charles J. Heilman, co-partners, doing business under the firm name of Poe & Davies, parties of the second part: “Whereas, The Metropolitan Savings Bank of Baltimore has by deed dated the twentieth day of September, 1920, and intended to be recorded among the Land Records of Baltimore City on the 29th day of September, 1920, sold and conveyed unto the said partv of the first part the property hereinafter described; and “Whereas, The said party of the first part, in order to secure to the said bank that portion of the unpaid purchase money for said property, has executed a mortgage to the said bank in the sum of one hundred and sixty-five thousand dollars ($165,000), as will appear by the terms of said mortgage, which is dated the 20th day of September, 1920, and is intended to be recorded among the Land Records of Baltimore City on the 29th day of September, 1920; and “Whereas, The said party of the first part has sold and conveyed the' aforesaid property unto the said parties of the second part, subject to the aforesaid mortgage of $165,000.00; and “Whereas, The aforementioned property is described as follows: “Beginning for the same at the corner formed by the intersection of the north side of Lexington Street and the east side of Calvert Street, and running thence northerly binding on the east side of Calvert Street seventy-two (72) feet; thence easterly parallel with Lexington Street one hundred (100) feet to the west side of Davis Street; and running thence southerly binding on the west side of Davis Street seventy-two (72) feet to the north side of Lexington Street; and running thence westerly binding on the north side of Lexington Street one hundred (100) feet to the place of beginning. ⁶² “How, therefore, this Agreement witnesseth: “That in consideration of the mutual promises and covenants óf the parties hereto, the said parties hereto do hereby agree with each other as follows: “Pirst — That until the 28th day of September, 1925, or earlier maturity of said mortgage to the Metropolitan Savings Bank of Baltimore, the parties of the second part may rent the premises hereinabove described, or such part or parts thereof as they shall deem proper, for such rent and on such terms as the said parties of the second part may deem proper.

All rents so derived from said property up to said time shall be collected by the said party of the first part for the account of the said parties of the second part, and shall forthwith be paid over to them, and disposed of by them as hereinafter expressed. Out of the same all taxes, water rents, insurance, necessary repairs, interest on said mortgage to the Metropolitan Savings Bank and any other necessary carrying charges or expenses shall be paid. The net rents derived from said property after payment of taxes, water rents, insurance, interest, and other charges or expenses aforesaid, shall up to the amount of two thousand, one hundred ($2,100) dollars per annum, belong to the said parties of the second part. The said party of the first part guarantees the said parties of the second part that a net rent of hot less than two thousand, one hundred ($2,100) dollars per annum will be derived from said property after paying all taxes, water rents, insurance, interest and other charges and expenses aforesaid so far as the same shall not have been paid out of the net rents aforesaid.

If the net rents derived from the property are not equal to two thousand, one hundred ($2,100) dollars per annum, or one thousand and fifty ($1,050) dollars for each six months, the party of the first part agrees to make good the deficiency ’ to the parties of the second part at the end of each six months. If the said net rents derived from the property exceed two thousand, one hundred ($2,100) dollars per annum, or proportion ⁶³ ately for a fraction o£ a year, then the excess to bo paid to the said party of the first part shall be paid over to him by the parties of the second part on the 20th day of September, 1923, or (if the parties of the second part shall before that time sell their interest in the property) then upon such sale. “Second — If the said parties of the second part shall sell their interest in the property hereinabove described before the 20th day of September, 1923, or earlier maturity of said mortgage to the Metropolitan Savings Bank, then the said parties of the second part shall receive out of the purchase price the sum of thirty-five thousand ($35,000) dollars, and all arrears of the rental at the rate of two thousand, one hundred ($2,100) dollars per annum hereinbefore guaranteed to them by the party of the first part, and not previously paid to them, and a sum equal to all expenses of every kind and description, including counsel fees, incurred, contracted or sustained by the parties of the second part in or about the said property, or in protecting their interest in the same by paying-off any charges, liens or incumbrances thereon, or in improving the same in any manner, or in or about carrying out this agreement, and all brokers’ fees and other expenses incurred or contracted in making or attempting to make a sale. All the residue or balance, if any, of the proceeds of sale of the interest of the parties of the second part in said land shall be paid by them to said party of the first part. “Third — If the parties of the second part shall not sell their interest in the property hereinabove described before the 20th day of September, 1923, or earlier maturity of the said mortgage to the Metropolitan Savings Bank, then so soon as the said mortgage shall mature and the principal of the said mortgage debt mature or become payable, this agreement shall cease and determine, and the said parties of the second part, their heirs and assigns, shall hold the said premises absolutely and in fee simple, free, clear and discharged ⁶⁴ from any claim of the said party of the first part, or any person or persons claiming by, under or through him on the said premises or on the income therefrom; subject, however, to the operation and effect of the said mortgage to the Metropolitan Savings Bank of Baltimore. “As witness the hands and seals of the parties hereto the day and year first above written. “(Signed) “Marion R. Bailey. (Seal) “Philip L. Poe, (Seal) “Edward L. Pittroff, (Seal) “Charles J. Heilman, (Seal) “Co-partners doing business under the firm name of Poe & Davies. “Witness: Charles S. Bailey.” Just why Marion R. Bailey was made the grantee in the deed from the bank is not positively proved, bu-t it is reasonably clear from the evidence that it was because' of the financial embarrassment of Charles S-.

Bailey. At any rate we concur in the conclusion of the learned trial judge that Cjharles S. Bailey was the real party in interest and that Marion R. was merely the holder1 of the legal title, and interested only as a creditor of Charles Si Bailey. The arrangement, made in this agreement, for Bailey to collect the rents', did not work satisfactorily, he having collected five hundred dollars rent from the Metropolitan Savings Bank and failed to turn it over to Poe & Davies, and for other reasons, so the collection of rents and management of the property was turned over to Francis FT. Iglehart of F. FT.

Iglehart & Co. It soon developed that Bailey’s views of the income to be derived from the property had been too optimistic, and that it was to1 be a losing proposition for Poe & Davies; so- the matter of selling the property was seriously considered. Bailey, some time in the winter of 1920-21, asked Poe if he ⁶⁵ would consent to Mr. Boisseau of the National Union Bank selling the property. This Poe authorized by a letter to Boisseau. The letter was not produced, hut Poe^s recollection of the price to he secured was $210,000.

Iglehart. and other brokers also endeavored to sell the property. Finally Iglehart reported an offer of $205,000 from the Lafayette Bank, which was a tenant of part of the building, whereupon Poe & Davies on March 7th, 1921, wrote Bailey they were thinking of accepting the offer: The offer to Iglehart appears to have been raised later to $210,000. While the negotiations between the said bank and Iglehart were pending, II. Walter Ganster, acting as attorney or broker for Bailey, was. also attempting to sell the property to the bank through Hayden, Ganster’s partner, and vice-president of the bank.

Ganster testifies they wore dickering for a couple of months and the bank finally made a flat, offer of $210,000. About March, 9th, 1921, after the receipt of Poe’s letter of March 7th, Bailey, Ganster, and Iglehart called on Poe, and Mr. Machen was called in by Poe. This meeting seems to have been marked by spirited discussion, between Ganster and Iglehart as to a division of brokers’ commissions, and between Machen and Ganster as to the true meaning of the deed and agreement between Bailey and Poe & Davies ; Ganster contending that, by a proper legal construction of these papers, the transaction amounted to a, mortgage! loan with the right of redemption in Bailey, and Machen insisting that the papers meant what they said; that the conveyance by Bailey to Poe Daviesi was absolute except as to the contingent interest in Bailey provided by the agreement in any excess over $35,000 in the