Caughy v. Hearn

Sloan, J., delivered the opinion of the Court. Frank J. Oaughy and Benjamin F. Hearn were, and for many years had been, partners, engaged in'the real estate business in Baltimore under the style of Caughy, Hearn & Company. The partnership was terminated January 4th, 1921, by the death of Mr. Hearn. 47 G. J. 1111. A’settlement of the partnership affairs was made on July 22nd, 1922, by an agreement between Mr. Caughy and Mrs. Ethel D. Hearn, administratrix of Benjamin F. Hearn, which is set out in full in the record.

By that agreement it appears that the share of the Hearn estate in the business, exclusive of the “St. Helena” ground rents, was $119,535.07, all of which was provided for by the payment of $31,853.07 in cash, $6,800 to be paid within sixty days of the ratification of the agreement by the orphans’ court, $1,000 in stock of the Maryland Title Guaranty Company, $49,900 in mortgages, and the balance, $30,000, by a note of Frank J. Caughy, to Mrs. Hearn, administratrix, dated June 2nd, 1922, payable six years after date, interest to run from January 1st, 1923, for the first year at three per cent., four per cent, the second year, five per cent, the third year, and thereafter at six per cent. One hundred and forty-two shares of the Ten Hills Corporation was delivered to Mrs. Hearn as collateral security for the note, and the note and collateral were deposited with the Mercantile Trust & Deposit Company for collection. ⁵⁹⁹ This was in full settlement of the partnership business, except what were known by the parties as the “St. Helena” ground rents, for which provision was made by the fifth paragraph of the agreement as follows: “It is also understood and agreed that in estimating the interest of the Hearn estate in the firm of Caughy, Hearn & Company as herein-before set forth, there is not included the St. Helena ground rent transaction between said firm and the Title Guarantee Company for the reason that it cannot at this time be ascertained whether a profit or loss will result therefrom. It is understood that the said Frank J. Oaughy shall have full power and authority to work out that transaction with the title company aforesaid in such manner as he may deem best, all profit or loss resulting therefrom to be equally divided between the Hearn estate and Frank J. Caughy.” Sometime in 1919 (the exact date does not appear in the record), Caughy, Hearn & Company bought 286 ground rents at St. Helena, near Sparrows Point, for $209,000, the titles to which were taken by the Title Guarantee and Trust Company (of Baltimore), which paid the purchase money, secured also by the notes of Oaughy, Hearn & Company, endorsed by Frank J. Caughy and Benjamin F. Hearn. The rentals ran from forty-two to fifty-four dollars a year, payable in semi-annual installments.

From the time of their purchase until Hr. Hearn’s death, only ten rents had been sold. In 1921 five were sold; in 1922, fifty-eight; in 1923, eighteen; in 1924, six; in 1925, twenty; in 1926, fourteen, and in 1927, one hundred and seventy-three; the last two sales in January and February, 1927, being one hundred and sixty-eight rents sold to the Eureka-Haryland Assurance Corporation for $.115,613.57. The purchase money, less commission to various brokers, was paid to the Title Company.

The rents, amounting to $71,-074.35, were collected by Frank J. Caughy until 1924, then by Caughy & Company, Incorporated, and paid over to the Title Company. The sales and collections were in charge of Frank J. Caughy until February, 1924, when he became ⁶⁰⁰ so ill that he was unable to go to his office for almost five years. The business was then incorporated under the name of Caughy & Company, Incorporated, and it succeeded to the business of Frank J. Caughy, and thereafter took charge of the St. Helena transaction under the personal and successful direction of Herman A. John, who had been with Caughy, Hearn & Company from 1918. The last of the St. Helena rents were sold on February 17th, 1927.

On January 18th, 1929, Mr. Yernon Cook, attorney for Mr. Caughy, wrote Mr. James Thomas, attorney for the Hearn estate, that there had been a net loss in the St. Helena transaction of $6,081.19, for one-half of which he made demand on the Hearn estate. The deficit was due to a charge by Mr. Caughy for commission of two and one-half per cent, on all sales and five per cent, on collections of rents. On September 28th, 1927, a supplemental agreement was made whereby, in consideration of $5,000, to be paid by October 5th, 1927, and the further sum of $15,000 at the maturity of the note, June 2nd, 1928, the time for the payment of the balance, $10,000, would be extended for one year or until June 2nd, 1929. The payments were made as agreed and the time extended.

On July 2nd, 1929, the Mercantile Trust & Deposit Company wrote Mr. Caughy that, unless the balance of this note was paid forthwith, his collateral would be sold. The same day Frank J. Caughy filed his bill against Ethel D. Hearn, administratrix, and the Mercantile Trust & Deposit Company, setting 'forth the facts herein recited, tendering a check for $6,812.56, which he claimed was the net balance due the Hearn estate, and prayed (1) an order authorizing the payment of this amount into court; (2) a decree determining the sum tendered to be the full amount due the Hearn estate, requiring the defendants to receipt for the same and to surrender the note and collateral, and, (3) to enjoin them from selling the collateral. Leave was granted to pay the sum tendered into court and a preliminary