Gordon v. Mayor of Baltimore

Singley, J., delivered the opinion of the Court. George Peabody, one of the greatest of the nineteenth century philanthropists, cast his gift to the people of Baltimore in a form typical of his time. 1 He determined to ⁶⁸⁵ establish an “institute” which would have as its purpose “the improvement of the moral and intellectual culture of the inhabitants of Baltimore, and collaterally to those of the State; and, also, towards the enlargement and diffusion of a taste for the Fine Arts.” 2 As we shall see, nine years passed before The Peabody Institute of the City of Baltimore (the Peabody or the Institute) opened its doors on 25 October 1866, but when it did, it endeavored to adhere faithfully to the founder’s desires. 3 A library had begun to be assembled in 1861; the first orchestra concert was given in 1866; public lectures were begun soon after the opening; a conservatory of music was established in 1868, and an art gallery was opened in 1881. By the turn of the century, the public lectures had been abandoned, largely as a consequence of the founding of The Johns Hopkins University (Johns Hopkins) in 1876 and of Goucher College in 1885; in the 1960’s the art collection was dispersed by sales and loans to other institutions ; and by 1962 the Peabody trustees had definitely determined to dispose of the Institute’s library of nearly 300,000 volumes. When the negotiations undertaken with Johns Hopkins in that year proved fruitless, the Peabody’s president approached the trustees of The Enoch Pratt Free Library (the Pratt) in Baltimore. 4 These negotiations led to the execution of a “memorandum of understanding” between Peabody and the Pratt on 14 February 1966 and to the execution of an instrument assigning and transferring the books in July of that year.

In September, Douglas H. Gordon, a member of the Baltimore bar and former member of the Peabody’s board ⁶⁸⁶ of trustees, filed a bill of complaint in the Circuit Court of Baltimore City against the Peabody, the Pratt and the Mayor and City Council of Baltimore (the City). 5 Mr. Gordon’s bill sought to enjoin the Peabody from transferring books to the Pratt; to enjoin the Pratt from receiving books from the Peabody and from making any expenditures in connection with the transfer; to enjoin the City from participating in the transfer and from contributing to the cost of the transfer; and finally, prayed that an order be passed that any Peabody books transferred to the Pratt be returned and that the instrument of assignment and transfer be cancelled. The Peabody, the Pratt and the City demurred and answered. The demurrers, which challenged Mr. Gordon’s standing to sue, were overruled, and the case went to trial on the merits. From a decree dismissing the bill of complaint, Mr. Gordon has appealed.

Since at the trial below, the appellant conceded that the Peabody trustees had the power to transfer custody of the library to Pratt, there are really only two issues presented by this appeal: (i) Did Mr. Gordon have standing to sue; and, (ii) Did the terms of Mr. Peabody’s gift prevent a transfer to the Pratt of title to, supervisory control over, and responsibility for, the books which comprised the Peabody Library? (i) Did Mr. Gordon Have Standing to Sue? Mr. Gordon advances an alternative argument in support of his standing. First, he says that he is a resident of the City and a taxpayer.

His alternative proposition is that either as a former trustee of the Peabody, as a contributor to the Peabody, or as a beneficiary of George Peabody’s trust, he has standing to enforce the trust. In. the hearing on demurrer below, Judge Cardin found that Mr. Gordon had standing as a taxpayer. Because we regard this conclusion as correct, it is unnecessary for ⁶⁸⁷ us to reach the alternative proposition. See, however, Carter v. Mayor & C.C. of Baltimore, 197 Md. 70, 83 , 78 A. 2d 212 (1951) and 4 Scott, The Laiv of Trusts § 391 (3d Ed. 1967) at 3002, S. The case of Mayor & C.C. of Baltimore v. Gill, 31 Md. 375 (1869) first identified the elements which will support the bringing of a taxpayer’s suit.

In that case the City wished to raise money to assist the Western Maryland Railroad in the completion of its Williamsport line. The City proposed to do this by borrowing $1,000,000 and pledging as security certain Baltimore and Ohio Railroad Company stock which it owned. This Court held this to be in violation of Art. XI, § 7 of the Maryland Constitution, which prohibits the creation of debt by the City without the authorization of the General Assembly and approval by the voters. The complainants, who were taxpayers, had sought to enjoin the borrowing.

In discussing their standing this Court said: “* * * [T]hese complainants, as taxpayers of the city, and others similarly situated, in whose behalf as well as their own the bill is filed, constitute a class specially damaged by the alleged unlawful act of the corporation, in the alleged increase of the burden of taxation upon their property situated within the city.” * * * “In this State the courts have always maintained with jealous vigilance the restraints and limitations imposed by law upon the exercise of power by municipal and other corporations; and have not hesitated to exercise their rightful jurisdiction for the purpose of restraining them within the limits of their lawful authority, and of protecting the citizen from the consequence of their unauthorized or illegal acts.” 31 Md. 394, 395 . Other cases where taxpayers were recognized to have standing because of a clear showing of potential pecuni ⁶⁸⁸ ary damage are Masson v. Reindollar, 193 Md. 683 , 69 A. 2d 482 (1949), where the plaintiffs sued to enjoin the State Roads Commission from awarding contracts for the building of the Chesapeake Bay Bridge until it had sought bids to determine the cost of a tunnel as an alternative, and Pressman v. Barnes, 209 Md. 544 , 121 A. 2d 816 (1956), where the plaintiff attacked an ordinance creating the position of Baltimore’s Director of Traffic and authorizing him to promulgate traffic regulations. Perhaps the most liberal application of the test may be found in Castle Farms Dairy Stores, Inc. v. Lexington Market Authority, 193 Md. 472 , 67 A. 2d 490 (1949). There, the plaintiffs were taxpayers and stall owners who unsuccessfully sought to have the Act establishing the Lexington Market Authority declared unconstitutional.

The Court held that they had standing as taxpayers: “If the Act is unconstitutional, the project is unlawful, and even though the City would not be obligated for the project, it presumably would incur some expense or loss in extricating itself and its property. As taxpayers, therefore, plaintiffs, are entitled to sue to enjoin such an unlawful project.” 193 Md. at 482. A contrary result was reached in Ruark v. International Union of Operating Engineers, 157 Md. 576 , 146 A. 797 (1929). There, the plaintiffs sued to enjoin the City from permitting certain contractors on City jobs to violate the maximum hours and minimum wage laws.

Their standing, if any, was as taxpayers, but the Court held that since no pecuniary loss to the taxpayers of the City was alleged or proved, the standing must be denied and any redress against the violators would have to be obtained through criminal prosecutions. “The special damage which the taxpayer of the political division sustains in a public wrong is the prospective pecuniary loss incident to the increase in the amount of taxes he will be con ⁶⁸⁹ strained to pay by reason of the illegal or ultra vires act of the municipality or other political unit. Hence, the taxpayer’s interest in the subject matter is not general, but special only, because of the future individual monetary burden cast upon him or his property.” 157 Md. at 589 . A similar result was reached in Citizens’ Comm. v. County Comm’rs, 233 Md. 398 , 197 A. 2d 108 (1964) where no monetary damage was shown. The appellees make much of the fact that the Pratt, like the Peabody, is a private institution and that the City’s obligation toward the support of its operation is limited by contract to an annual appropriation of $100,-00G. 6 We find this argument both unrealistic and unpersuasive.

The simple facts are that except for the Peabody, the Pratt is Baltimore’s only public library, which was found to be a “public or municipal purpose,” in Johnson v. Mayor & C.C. of Baltimore, 158 Md. 93 , 148 A. 209 , 66 A.L.R. 1488 (1930), where a similar point was made. Its buildings are owned by the City, as are the books in its collection, other than those purchased from the Pratt’s limited endowment; and finally, and most significantly, the City’s annual appropriation in support of the Pratt is in the area of $6,000,000, and there is no suggestion that this pattern is likely to change. There is testimony in the record before us that by accepting the Peabody collection, the Pratt has assumed an annual obligation of some $100,000 for salaries alone. For reasons to be developed later, the cost of preserving the collection itself may exceed $1,000,000.

That these expenses are and will be borne by the City’s taxpayers, including Mr. Gordon, is beyond question. In fact, the memorandum of understanding provides in part that “Pratt will seek to have [certain operating] expenses included in its annual ap ⁶⁹⁰ propriations from the City of Baltimore.” We are of the opinion that Mr. Gordon has standing to question the acceptance of the books by the Pratt because of the responsibility which the City will assume, and this challenge necessarily calls for a consideration of the question whether the terms of Mr. Peabody’s gift prevent the transfer. (ii) Did the Terms of Mr. Peabody’s Gift Prevent a Transfer to the Pratt of Title to, Supervisory Control Over, and Responsibility for the Books which Comprised the Peabody Library? On 12 February 1857, Mr. Peabody wrote to 25 of his friends in Baltimore, inviting them to serve as the trustees of the institute he proposed to establish.

The paragraphs relevant to the issue before us are quoted: “In presenting to you the object I propose, I wish you to understand that the details proper to its organization and government and its future control and conduct, I submit entirely to your judgment and discretion; and the perpetuity of that control I confide to you and your successors, to be appointed in the manner prescribed in this letter.” * * * “You and your successors will constitute forever a Board of Trustees, twenty-five in number, to be maintained in perpetual succession, for the accomplishment, preservation and supervision of the purposes for which the Institute is to be established. To you and your successors, therefore, I hereby give full and exclusive power to do whatsoever you may deem most advisable, for the foundation, organization and management of the proposed Institute: and to that end I give to you, and will place at your disposal, to be paid to you as you may require,_ for the ⁶⁹¹ present, three hundred thousand dollars, to be expended by you in such manner as you may determine to be most conducive to the effective and early establishment and future maintenance and support of such an Institute as you may deem best adapted to fulfil my intentions as expressed in this letter. “In the general scheme and organization of the Institute, I wish it to provide — “First. — For an extensive Library, to be well furnished in every department of knowledge, and of the most approved literature; which is to be maintained for the free use of all persons who may desire to consult it, and be supplied with every proper convenience for daily reference and study, within appointed hours of the week days of every year. It should consist of the best works on every subject embraced within the scope of its plan, and as completely adapted, as the means at your command may allow, to satisfy the researches of students who may be engaged in the pursuit of knowledge not ordinarily attainable in the private libraries of the country. It should be guarded and preserved from abuse, and rendered efficient for the purposes I contemplate in its establishment, by such regulations as the judgment and experience of the Trustees may adopt or approve.

I recommend, in reference to such regulations, that it shall not be constructed upon the plan of a circulating library; and that the books shall not be allowed to be taken out of the building, except in very special cases, and in accordance with rules adapted to them as exceptional privileges.” Succeeding paragraphs called for “lectures by the most capable and accomplished scholars and men of science, within the powers of the Trustees to procure” on subjects in “science, art and literature”; for the establishment of ⁶⁹² “an Academy of Music * * * By providing a capacious and suitably furnished salon, the facilities necessary to the best exhibitions of the art, the means of studying its principles and practicing its compositions, and periodical concerts * * *”; and for the “establishment of a Gallery of Art in the department of Painting and Statuary.” Two days later, Mr. Peabody sent the trustees a list of 200 names, from which future trustees could be chosen. Five days later the trustees, save one, accepted the appointment. Peabody funded the trust with an initial contribution of $300,000 and formalized the arrangement by deed of trust dated 4 March 1857. An interesting sidelight is found in the fact that Mr. Peabody originally contemplated that the Maryland Historical Society would, according to his letter, become “the guardian and protector of the property of the Institute” and would assume “management and administration of [its] operations,” with the Institute’s trustees retaining “visitorial” powers.

That Peabody may have had some doubts about this can be gleaned from the deed of trust which authorized the trustees “to select some other agency, competent in their judgment to carry out [his] wishes in the premises,” should the Historical Society fail to act. In fact, the Society withdrew, by formal action taken at Mr. Peabody’s request, five months before the Institute opened. By Chapter 209 of the Laws óf 1858, the General Assembly of Maryland granted a charter to the Peabody. The bill incorporated the Peabody letters of 12 and 14 February 1857, the trustees’ acceptance, referred to the deed of trust and granted to the trustees “all the powers of a body corporate, necessary or proper, to accomplish and carry out the purposes for which said Institute is designed, as declared and set forth in said letter [of 12 February 1857]” and in the deed of trust.

On 18 October 1858, Peabody promised to contribute $25,000 annually for six years and on 19 October 1866, added $500,000 to the endowment. In 1869 he made a final gift of bonds in an aggregate principal amount of $400,000. Mr. Gordon argues that the library was intended by ⁶⁹³ Mr. Peabody to be a first charge on the resources he provided. For a half century, this was the case.

The purchase of books commenced in 1861, five years before the Institute opened, and was pursued assiduously for half a century. After ten years the collection consisted of 44,000 volumes; by 1878,-a wing had been added to house the library, which had then grown to about 67,000 volumes. By 1913, there were 200,000 books in the Peabody Library which was a widely known research and reference collection, particularly strong in the classics, in history and in nineteenth century literature and scientific works. From the founding of Johns Hopkins in 1876 and until 1886, when the Pratt opened, the Peabody was not only the library of the University, but Baltimore’s only public library, as well.

In about 1913, Johns Hopkins moved to Homewood and began to expand its own library, but considerable reliance continued to be placed on the Peabody which had the earlier issues of scientific and scholarly journals, which the University continued. What happened next is the all too familiar story: the Peabody’s income simply failed to keep pace with rising costs. The “Academy of Music” envisioned by Mr. Peabody had become the Peabody Conservatory, described in testimony as one of a half dozen places in the United States where a student may pursue the study of music on a professional level. The Peabody trustees maintained separate operating accounts for the Library and the Conservatory.

In the last three full fiscal years of operation, the Library’s income ranged between $3,000 to $9,000 and expenses (principally salaries) were in the $70,000 to $90,000 range, with the result that deficits for the years 1964, 1965 and 1966 were, respectively, $81,079; $68,117; and $65,645. The trustees had other unallocated income, but the whole of this, after deducting unallocated expenses, was not sufficient to meet the Library’s deficit. Strapped by a shortage of funds, the Peabody trustees began in about 1910 to allocate virtually no funds for the purchase of books, and could provide only inadequate support for the maintenance of the existing collection, so ⁶⁹⁴ that in the 50 years from 1913 to 1963, the Library increased from the 200,000 volumes accumulated in its first half century to about 270,000 volumes, largely as a result of gifts and bequests. At the same time, the condition of the books was rapidly deteriorating.

Even in its present state, there is no doubt that the collection is a valuable one. In 1942, the Peabody’s librarian estimated replacement cost at $10,000,000. There was testimony that the University of Hawaii had offered $2,500,000 for the collection, and might have paid more. On 14 February 1966, the Peabody and the Pratt entered into the memorandum of understanding with the approval of their respective boards.

Its significant provisions follow: “The Trustees of the Enoch Pratt Free Library (Pratt) and the Trustees of the Peabody Institute (Peabody) agree as follows: “1. The Peabody Library collection other than the music collection will be transferred to Pratt to become a part of the Pratt collection. As a condition of the transfer, Pratt agrees that the materials from the Peabody Library collection shall be used in accordance with Mr. Peabody’s letter of February 12,1857. Pratt agrees to identify in its catalogue all materials received from Peabody so long as practicable.

If at any time Pratt shall determine that such identification is no longer practicable, it will so notify Peabody. The music collection will be retained by Peabody and be administered by it in separate quarters as a part of the Peabody Conservatory of Music. “2. Pratt will undertake to continue use of the present Peabody Library building for library purposes as a branch or facility of Pratt. It is hoped that initially, this service will include the following: (a) books and periodicals chiefly used for genealogical research; ⁶⁹⁵ (b) maps, charts, and atlases other than those required for general reference and current information service; (c) selected material for a medieval studies center; (d) picture collection; (e) supplementary educational center for student use. “It is the present joint intention of Pratt and Peabody to continue use of the Peabody building for library purposes indefinitely into the future and Pratt will use the Peabody building for library purposes at least through the fiscal year ending June 30, 1986.

It is agreed, however, that all questions of character of use and continuance or discontinuance of any particular service shall be determined by Pratt. The library building shall be known as the George Peabody Branch of the Enoch Pratt Free Library. “3. The Peabody Library building, including heat, light and other utilities, will be made available to Pratt without expense to Pratt. Peabody shall have the right, however, at any time after June 30, 1986, to terminate this obligation and may require that Pratt either vacate the building or, if it continues to occupy the building, do so on a basis other than the terms provided in this paragraph 3.

At the request of Pratt, Peabody will make renovations and improvements in the library building in accordance with plans and specifications approved by the two institutions, and Peabody shall be repaid the cost of such work on terms mutually agreed upon by the two institutions. “4. It is understood that shortly after transfer of the collection to Pratt, Pratt may decide to dispose of some items, which based on an analysis by the Directors and appropriate staff members of the two institutions, are now consid ⁶⁹⁶ ered to be items either duplicating materials already in the Pratt collection or serving no useful purpose in the combined collection. The proceeds realized from the disposition of such items shall be set aside in a special fund which shall become a part of the Pratt endowment and shall be used in the discretion of the Trustees of the Pratt for purposes consistent with Mr. Peabody’s letter mentioned above. “5. Pratt will make an annual report to the Peabody of the use made of the materials in the Peabody collection and of the proceeds of any disposition thereof.” On 3 March 1966 there was a joint press release, which outlined the arrangement, and contained the first intimation of what was to come: “Duplicate and surplus materials would be disposed of by mutual consent of the two institutions.” As of 1 July, the understanding was implemented by the execution and delivery of an “instrument of assignment and transfer” and a lease under which the Pratt could occupy the Peabody Library for 20 years, without the payment of rent, on the condition that the Pratt maintain a branch library on the premises and shoulder the operating expense.

The more important of the two documents, the instrument of assignment, by which title to the Peabody collection was transferred to Pratt, recited only that an understanding had been reached, without describing it, and continued : “Now, Therefore, Peabody does hereby by these presents, give, grant, assign and transfer unto Pratt all its right, title and interest in the collection of library books, materials and records, heretofore known as the Peabody Library, ⁶⁹⁷ as reflected in the shelf list of said library as of July 1,1966. “Pratt agrees to use in accordance with the library purposes set forth in the letter of February 12, 1857 from George Peabody to the Trustees of the Peabody Institute, the books and materials hereby transferred, or such part thereof retained by Pratt from time to time. “Pratt further agrees that all proceeds received from time to time from the disposition of any of said books and materials, and all income from the investment of such proceeds, shall be held by Pratt as a part of its endowment funds and used, in the discretion of the Trustees of Pratt, for purposes consistent with the library purposes expressed in the said letter of Mr. Peabody. “Pratt further agrees that, so long as it deems practical, it will identify in its catalogue all books and materials hereby transferred and retained by it and if at any time Pratt shall determine that such identification is no longer practical it will so notify Peabody. “Pratt will make an annual report to Peabody of the use made of the books and materials hereby transferred and the proceeds of any disposition thereof.” Meanwhile, representatives of the Pratt had been examining the Peabody collection, and by early June of 1966 had determined that about 78,000 volumes, or about 38% of the collection could be disposed of. At the instance of the Pratt, Mr. Robert Metzdorf, a qualified appraiser, came to Baltimore and spent 58 days examining the collection. He reached the conclusion that some 115,000 volumes which Pratt did not plan to incorporate in its collection or leave at the Peabody branch had a value of $777,000 after taking a discount of 20% on the assumption that they would be transferred to another institution. ⁶⁹⁸ In the early fall of 1966, word of this had become public knowledge, leading first to the filing of Mr. Gordon’s complaint in September and in October to the adoption of a resolution by the General Assembly of the Home-wood faculties of Johns Hopkins: “The General Assembly of The Johns Hopkins University, representing the faculties of this institution, views with deep apprehension present developments in connection with the merger of the Peabody Library with the Pratt Library and the possible loss to this city of one of its richest scholarly and cultural resources. “Particularly alarming is the prospect that 100,000 or more volumes of the Peabody collection are to be sold. Among those volumes are some of the most valuable and irreplaceable books in the collection.

The loss to this city, and in particular to the scholarly-minded citizens of the community, would be enormous. “Especially distressing is the fact that apparently The Johns Hopkins University is on the verge of being forced to seek funds in excess of $1,000,000 to preserve this collection not only for the use of its own faculty and students but for the general use of citizens of Baltimore as well. “THEREFORE, BE IT RESOLVED that the General Assembly find appropriate ways to express its concern about this matter to such bodies and individuals as the Board of Trustees of the Peabody and Pratt Libraries and the Mayor and the President of the City Council through the appointment by the President of five members of this body who shall be empowered to speak publicly for the Assembly on this subject and to keep themselves fully informed of all future developments concerning these institutions.” ⁶⁹⁹ In a letter transmitting the resolution to the Pratt, the faculty committee remarked: “We find it discouraging that a private, nonprofit university should have to purchase these books from a public library in order to preserve for the public a famous collection donated to the public by one of the city’s leading philanthropists. If Johns Hopkins should find it impossible to raise the necessary funds to purchase the collection, the books might well be lost to Baltimore and scattered throughout the world, and Mr. Peabody’s purpose would be violated.” A week later, Mr. William L. Marbury, then Chairman of the Peabody trustees, wrote to Mr. Charles S. Garland, then Chairman of the Hopkins trustees. After recalling the abortive negotiations with Hopkins, and the arrangement entered into with the Pratt, Mr. Marbury said: “The Pratt trustees then offered to take over the bulk of the collections and to maintain a useful library facility on Mt. Vernon Place.

They further agreed that the collections would be maintained in accordance with the terms of Mr. Peabody’s gift. They reserved the right, however, to dispose of books which were duplicates or which were otherwise surplus to Pratt operations. “The Peabody trustees accepted the Pratt’s offer because they could not see a better solution. They recognized that a good deal would depend on the Pratt’s definition of the proper scope of its activities and that a substantial number of books might not be included within that scope. From conversations which I have had with Ed Castagna [the director of the Pratt], I find that it is not yet possible to state just what Peabody books the Pratt does not want to take over.

I gather, however, that there