Colonial Trust Co. v. Fidelity & Deposit Co.

Offutt, J., delivered the opinion of the Court. At some time prior to August 10th, 1912, Abner Green-leaf owned eight “Virginia debt certificates,” having a face ¹²⁰ value of $20,031.72. These certifi.ca.teB> which were¡ obligations of the State of Virginia to pay to- the holder thereof the .amounts named in them and for which they were respectively issued, were negotiable and passed by delivery. Before the date referred to Abner Greenleaf appears to have lost or misplaced them, and to have made application - to Brown Brothers, a brokerage partnership then acting as fiscal agents of the State of Virginia, for duplicates of the certificates which he had held, for on that date he, as principal, and the American Bonding' Company of Baltimore’, as surety, executed a bond in the penalty of $20,000 to Brown Brothers to “save harmless and indemnify the said Brown Brothers & Company, their heirs, executors, administrators, successors and assigns from and against all manner of damage, loss, injury, or expense they may suffer, sustain, or incur for or on account of any demand made upon them by any holder of said lost or mislaid certificates.” On August 28th, 1912, he executed in due form his last will and testament, in which he bequeathed to Corinne B. Greenleaf, his sister, all of his property, real and personal, and, on or about September 10th of the same year, he died.

The will was probated on September 16th, 1912, and on October 7th of the same year Corinne B. Greenleaf sold these duplicate certificates. 'She. was then informed by Brown Brothers that before the sale which she had thus made could be consummated it would be necessary, under the rules of the Yew York Stock Exchange, to issue new “original” certificates, instead of the “duplicate” certificates theretofore issued, and they appear to have required as a condition precedent to their issuing such certificates an indemnity bond in the penalty of $40,000 “in the place of” the bond executed by Abner Greenleaf. She thereupon applied to the .American Bonding Company to act as surety on the required bond, and in her application she agreed to “at all times indemnify, and keep- indemnified, and save harmless the said company from and against any ¹²¹ and .all liability asserted against said company and from and against all loss, liability, costs, damages, charges, counsel fees and expenses whatsoever, which said company shall or may for any cause, at any time, sustain, incur or he put to, for, or by reason or in consequence of said company having executed said bond.” She then as principal and and the bonding company as surety executed to Brown Brothers a bond in the penalty of $40,000, containing the same condition as that set forth in the first bond which Abner Greenleaf had executed, and that bond (the $20,000 bond) was then returned to the surety and conceited. On or .about June 1st, 1913, the Fidelity and Deposit Company of Maryland reinsured all the business of the American Bonding Company and succeeded it as surety on the $40,000' bond. On September 24th, 1913, Corinne B. Greenleaf executed a deed of trust to the Colonial Trust Company in which “the said O’olonial Trust Company, trustee, was authorized and directed to pay over to the .above mentioned defendants, after the death of the said Corinne B. Greenleaf the following amounts of money, i. e.: Mary B. Hunter, $15,000, Theodosia Delaplaino, $5,000, L. Gibbons Smart, $10,000, Hettie F. Alnionv, $100, Catherine E. Johnson, $100, Sarah Martien Montgomery, $200, Maude Peeples Smart, $500.

And the said deed of trust did further provide that the Colonial Trust Company, trustee, should invest and re-invest the sum of $10,000 in its discretion with full power to dispose of any such investments as they might deem expedient, and to collect the income therefrom for the support and education of Hosanna Elizabeth Cates, infant defendant in the above entitled cause, until she shall arrive at the age of twenty-one years, at which time the principal sum, to wit, $10,000, is to be paid to said Hosanna Elizabeth Cates; that by the residuary clause of said deed of trust all the rest and residue of said property belonging to said Oor’rinne B. Greenleaf was granted to the said Colonial Trust Company, trustee, to hold ¹²² for the use of Theodosia Oates for the period of ten years from and after the death of the said Uorinne B. Greenleaf, with full power to the Colonial Trust Company to invest and re-invest said residue of said estate and to pay the income therefrom in quarterly annual installments to said Theodosia Oates; that at the expiration of ten years after the death of the said Corinne B. Greenleaf, the deed of trust provides that the principal of the said residue of said estate be paid to said Theodosia Oates .absolutely free from any and all trusts.” Mis® Greenleaf, the life tenant, died on January 6th, 1918, and the distribution directed by the deed was made under the direction of the Circuit Court of Baltimore City, and an auditor’s account, distributing the following sums respectively to the beneficiaries named in that deed, was, on December 24th, 1918, finally ratified and confirmed, that is to say: To Mary B. Hunter, $14,250, to Theodosia Delaplaine, $4,150, to L. Gibbons Smart, $9,500, to Nettie F. Almony, $95, to Catherine E. Johnson, $95, to Sarah Martien Monto gomery, $190, to Maude Peeples Smart, $415, to Colonial Trust Co., trustee for Theodosia Cates, $6,866, to Colonial Trust Co., trustee for Rosanna Elizabeth Cates, $9,500. In October, 1920, while Brown Brothers were engaged in transferring’ to holders of Virginia debt certificates West Virginia 3%% twenty year gold bonds in exchange for such certificates, the original certificates formerly owned by Abner Greenleaf and claimed by him to have been lost or mislaid were presented for exchange, as were also the “new original” certificates issued in 1912. Brown Brothers then demanded that the surety named in the $40,000 bond purchase from them a sufficient amount of West Virginia gold bonds to enable them to deliver to the holders of the original certificates the bonds which those certificates entitled them to receive in exchange therefor. The surety, upon receiving that demand and before complying with it, made a thorough investigation to ascertain whether the holders of the original certificates presented for exchange had .acquired them in good ¹²³ faitli.

Finding nothing to justify a suspicion that they were not holders in good faith, it, in compliance with the demand, bought in December, 1920, the required bonds for $15,339.12 plus $65.40 for accrued interest, and the bonds thus purchased were delivered to the holders of the original certificates in exchange therefor, and the claim of Brown Brothers arising from their obligation to issue bonds to the holders both of the “lost” originals .and the “new” originals of the debt certificates held by Abner Greenleaf was completely; satisfied. Before the original certificates were presented for exchange, the estate of Miss Greenleaf had been distributed in accordance with the provision of the deed of trust to the. beneficiaries named in it, in the proportions referred to above. After purchasing the West Virginia gold bonds for $15,339.12, the surety demanded that “Mary B. Hunter, Theodosia Delaplaine, L. Gibbons Smart, Nettie F. Almony, Catherine E. Johnson, Sarah Martien Montgomery, Maude Peeples Smart, The Colonial Trust Company, trustee for Theodosia Cates and Rosanna Elizabeth Cates, an infant,” the defendants in this case, who as beneficiaries under the deed of trust had received the amounts respectively audited to them in the distribution of Miss Greenleaf’s estate, reimburse it for the purchase of such bonds. Upon their refusal to do so it filed the hill of complaint in this case in the Circuit Court of Baltimore City, in which it prayed the court “to require the above mentioned defendants to answer this hill of complaint and disclose the amount of assets of the said estate of the said Corinne B. Greenleaf that were actually received by them, and that the said defendants may further be required to bring into this honorable court the entire amount of assets so. received by them to the end that your orator’s claim may be paid in full with interest, and the balance of said assets, if any, be redistributed to the said defendants in accordance with their several interests, therein.” The ¹²⁴ defendants severally demurred to that bill and, the demurrers having been overruled, they have taken this appeal.

As a result of the form in which the case comes before us we have assumed that the allegations of fact in the bill of complaint are true, and from those facts the following questions of law arise: First: Has the appellee the right to require the distributees of the estate of Oorinne B. Greenleaf to reimburse it from the amounts of money respectively distributed to them under the deed of trust for its purchase of the West Virginia bonds which Brown Brothers gave the holders of the original debt certificates in exchange therefor? Second: Has a court of equity jurisdiction to enforce such a right ? and, Third: Are the allegations of the bill of complaint sufficient to' invoke the exercise of that jurisdiction? ' And these questions we will now consider in their order. The appellants deny that the surety on the $40,000 bond' is entitled to be reimbursed from the monies paid by the estate of Oorinne B. Greenleaf to the distributees named in the deed of trust for its purchase of the West Virginia bonds, because, they say, there was no consideration for the $40,000 bond, and the payment made by the bonding company for the purchase of the West Virginia bonds was voluntary, and imposed no obligation upon the principal to reimburse it for the money thus expended. They rest that contention upon the proposition that, upon the execution and delivery by Abner Greenleaf of the $20,000 bond