Harford Bank v. Estate of Hopper

Mitchell, J., delivered the opinion of the Court. Peter Lesley Hopper, a resident of Harford County, died intestate on or about the 13th day of February, in the year 1917, leaving personal estate duly appraised in the sum of $62,261.98, and real estate appraised in the sum of $37,190, or a total estate of $99,451.98. At the time of his death, he was individually indebted to various creditors, on loans for which he had pledged individual collateral, and he was jointly indebted with one J. T. C. Hopkins, Jr., in sums aggregating $24,000, representing money borrowed by Hopper and Hopkins for the purchase of bonds of the Havre de Grace Gas Company, secured by the pledge of said bonds. The latter indebtedness was carried in several financial institutions, and a part of it was carried by the Harford Bank of Bel Air, Maryland, in the form of notes as follows: One for $300, one for $1,000, and one for $4,000.

The decedent left as his next of kin and sole heir at law George L. Hopper, a brother, who, together with Jackson W. Maslin, qualified as administrators upon the estate on February 27th, 1917. That the estate was greatly involved at the time of the death of Peter Lesley Hopper there can be no doubt, as is indicated by the list of claims filed against it between the dates of March 23rd, 1917, and October 5th, 1918, the aggregate of which was over $100,000. It was evi ³¹⁷ dently due to this status, coupled with the fact that he was the sole heir at law, that the usual and strictly legal course of administration was not followed by the administrators. Mr. Maslin took little part in the conduct of the administration; the active negotiations were effected by Mr. Hopper, who treated the personalty in the hands of the administrators, and the realty which he took as sole heir at law, subject to the rights of the creditors of his brother, as being one and the same asset.

The securities pertaining to the estate, and their appraised value, were as follows: 432 shares preferred stock, Independent Ice Co., par value $100, @ $85.............. $36,720 18 shares common stock, Independent Ice Co., par value $100.................................. 2,000 23 shares Havre de Grace Improvement Co. stock, par value $100, @ $50 per share .................................................................. 1,150 5 shares Bauer Manufacturing Co., of no value. 5 shares Banking and Trust Co., par value $50, @ $60 per share........................ 300 11 bonds Havre de Grace Gas Co., par value $500, @ $450 each.................. 4,950 1 undivided half interest in 48 bonds Havre de Grace Gas Co., par value $500, @ $450.......................................... 10,800 $55,920 As we have heretofore observed, all of the gas bonds of Hopper and Hopkins were pledged as collateral for their joint indebtedness. In addition to this, nearly all of the other securities were pledged to secure divers loans made to the deceased by various financial institutions. Instead of disposing of these securities and paying the respective indebtedness against them, George L. Hopper sought to hold them and assume personal liability for the indebtedness. To accomplish that design, he planned to refinance certain loans, and thereby gain extensions ³¹⁸ of time for their final payment.

He was fortunate in this respect, in engaging "as his attorney and adviser the late Stevenson A. Williams, who had been the counsel of Peter Lesley Hopper, and who seems to have been in a position to negotiate loans for his client, as and when the same became desirable. The plan to refinance seems to have met with the acquiescence of the creditoi's, who, as far as the record goes, filed no objections to what was done; and, in the course of effecting the same, it became necessary to deal with the indebtedness then due the Harford Bank, of which institution Mr. Williams was president for many years, and throughout the period accounting from the date of the death of Peter Lesley Hopper to the date of his own death, which occurred on February 20th, 1932. Among the first acts of Mr. Williams was to file a petition in the Orphans’ Court of Harford County, on behalf of George L. Hopper as “sole distributee and heir,” wherein various loans made the deceased, and the collateral pledged to secure the same, were set forth; it was there recited that many of these loans had matured, and it was important that the same be refinanced to protect the collateral. In part, the petition states: “Your petitioner shows further that as heretofore stated, the said collateral is valuable, and that in addition to the number of shares of stock pledged, there are * * * shares now in the hands of said administrators unpledged, and that it is for his interest as sole distributee and heir of said estate that said loans should be refinanced, and for that purpose he and the said administrators should be permitted to use the said shares of said stock to raise the money by new loans to take up and retire the said loans now outstanding and unpaid as aforesaid, and to pledge said unpledged stock and to repledge the said pledged stock for the said purpose.

Your petitioner further shows that in refinancing as aforesaid, it is entirely practicable to preserve the identity of said loans, so that there will be no difficulty in passing the final account of said administrators in this Court, and that your petitioner is will ³¹⁹ ing to pledge his own credit in aid of said refinancing.” Upon that petition, leave to refinance the. several loans and pledge the securities was granted, as prayed, by an order passed on August 28th, 1917. Following the aforegoing petition and order, we find in the record a second petition filed by Mr. Williams on behalf of the administrators, in which it is set forth that after the passage of the order of August 28th, 1917, the petitioners borrowed $25,000 from the Jarrettsville Building Association, with which they refinanced the various loans mentioned in their first petition, pledging the ice company stock as security; and that George L. Hopper had agreed to mortgage the real estate which had descended to him, as additional security for the loan. It is further stated that the plan of refinancing the estate had been aided through the appointment of Mr. Williams as trustee to sell the real estate of the decedent, under a decree of the Circuit Court for Harford County, in equity, passed in a creditors’ proceeding; that a number of lots belonging to the estate had been then sold, from which the trustee had realized over $30,000; the trustee being willing that the proceeds of sales be applied to the payment of the building association debt, provided the stock pledged for the same be held by him to protect him from loss by reason of such application. The petition further alleges: “That in addition to the loans secured by said stocks, there were and still are some loans for which their said decedent and another are still liable, the payment of which was secured by the collateral of bonds of the Havre de Grace Gas Company.

That for the purpose of refinancing the said loans so secured by gas bonds, and making it practicable to proceed with the settlement of the personal estate, your petitioners deem it wise to use fifty shares (50) of the preferred stock of the Independent Ice Company, inasmuch as with said collateral and the willingness of your petitioner, George, to assume said obligations individually, your petitioners have reason to believe that the liability of their decedent will be released, and it will enable them to pass another ³²⁰ account of their decedent’s personal estate. In procuring said refinancing the said gas bonds, at present collateral to said existing loans, will have to be used with said Ice stock as collateral to said new loan or loans. Your petitioners therefore pray that your Honors will pass an order authorizing and empowering them as follows, that is to say:—1. To refinance the loans for which their decedent was liable jointly with another; 2.

To use fifty (50) shares of Independent Ice Company stock as a pledge for the repayment of any new loan made necessary in such refinancing, and for which your petitioner, George L. Hopper,-is to become liable individually instead of the estate of said decedent; 3. To use the decedent’s interest in said gas bonds, namely an undivided one-half interest, by repledging them for such new loan or loans.” And upon the latter petition leave was granted as prayed, by an order of the orphans’ court passed on March 17th, 1923. . In line with the design of the aforegoing petition and order, the indebtedness to the Harford Bank was refinanced; the bank accepting the joint notes of George L. Hopper and Hopkins, retaining the gas bonds it then held as collateral, and securing as additional collateral ten shares of the preferred stock of the Independent Ice Company. In the creditors’ proceeding in which Mr. Williams was appointed trustee, the attorney himself was the complaining creditor; and the defendants, the heir at law and the administrators, filed separate answers, in which they admitted the allegations of the bill of complaint and consented to the passage of the decree.

The decree was passed on March 16th, 1918; and, acting under it, Mr. Williams, during a period of fourteen years, effected a number of sales, the total proceeds of which approximated the sum of $32,615. Nearly all of these proceeds were disbursed by the trustee, with the approval of the heir at law, toward the common cause of paying the obligations of the estate, and yet, during this long period, the record does not show that the Harford Bank was heard to complain. As a matter of fact, the Harford Bank ³²¹ renewed the original obligations of Peter Lesley Hopper and Hopkins in the early course of the administration of the estate, by accepting the notes of George L. Hopper and Hopkins, which latter notes were secured by the collateral of the gas bonds originally held by it, and were further secured by the additional collateral of ten shares of preferred stock of the Independent Ice Company appraised at the sum of $850. The pledge of the ice company stock as additional security for this indebtedness was made under the authority of the Orphans’ Court of Harford County, and, in effect, took from the general assets pertaining to the estate a part of its securities for the specific purpose of giving the bank additional security for the new loan.

It seems clear to us that at the time the new loan was made to Hopkins and George L. Hopper in his individual capacity, for the very purpose of taking care of the former indebtedness of Hopkins and Peter Lesley Hopper, the bank intended the new loan to take the place of the old one. As evidence of this fact, it renewed the indebtedness from time to time, over a long period of years; it collected interest upon its renewals, from the new promisors, and it carried the substituted indebtedness on its books as a different transaction, with additional security. It is true, it retained the original notes of Peter Lesley Hopper and Hopkins, but nothing was ever credited upon them, in the form of interest or otherwise, and nothing was done seeking their collection, besides filing them against the estate of the deceased in the early stages of its administration, until February 10th, 1933. On October 2nd, 1931, the assumed indebtedness, plus the sum of $600, which represented an additional loan made in 1928 by the bank to George L. Hopper and Hopkins, amounted to $5,600, and was then evidenced by two notes signed by George L. Hopper and Hopkins, which the makers refused to renew.

These notes were carried by the bank as overdue paper, until June 8th, 1932, when a judgment was entered upon them for $5,832, with attorneys’ fees and costs added. Meanwhile the bank negotiated loans to George L. Hop ³²² per on his single paper, and further loans to George L. Hopper on notes signed by himself and Bernice M. Hopper his wife; and upon these latter loans judgments were entered by confession, under the authority of the powers contained in the notes, on September 30th, 1931, for $4,780.70, with attorneys’ fee and costs, against George L. Hopper, and for $2,440.95, with attorneys’ fees and costs, against George L. Hopper and Bernice M. Hopper, his wife, respectively. On February 10th, 1933, the Harford Bank for the first time indicated its intention to hold the estate of Peter L. Hopper on the aforegoing judgments, by filing its petition in the original creditors’ proceeding, wherein Mr. Williams had been appointed trustee for the sale of the real estate, alleging the indebtedness and seeking to have the substituted trustee constituted a receiver for the purpose of collecting the rents and income accruing from the then unsold real éstate, and applying the same to taxes and insurance on, and maintenance of, said property, as far as necessary, until sold. Following this action, on June 5th, 1934, the bank filed a claim against the estate in the sum of $15,549.85, in support of which it exhibited and filed the three original promissory notes of Hopkins and the decedent,, bearing the stamped notation to the effect that they had been filed in the Orphans’ Court of Harford County on or about the 21st day of August, 1917; and, in further support of said claim, it filed the three judgments hereinbefore set forth.

We have detailed the several items, and their respective history, which make up the present claim of the bank as against th remaining assets of the estate, without, however, drawing a line of distinction' between the bank’s claim for $5,832 (with interest, costs, and attorneys’ fees) allegedly based on the original indebtedness of Peter L. Hopper and Hopkins, and in which the independent loan of $600 to Hopkins and George L. Hopper is included, and its claims for $4,780.70 and $2,440.95 (with interest, costs, and attorneys’ fees) representing independent indebtedness contracted respectively by George L. Hopper, ³²³ and George L. and Bernice M. Hopper, upon their promissory notes discounted by the bank subsequent to the death of Peter L. Hopper, all of which are now represented in judgment form, and which the bank is seeking to enforce against the estate. As to the two latter judgments, representing loans made by the bank to George L. Hopper, and George L. and Bernice M. Hopper, upon their respective notes, after the death of Peter Lesley Hopper, it is urged on behalf of the bank that the same are just claims against the estate, because the money was borrowed for the purposes of the estate. It is impossible to determine every item, from these loans, which was used for the purposes of the estate, but it is argued that a considerable part of the money so borrowed was applied to taxes, insurance, and maintenance; that some of it was used in paying off original claims against the estate, and that accordingly, as to this latter indebtedness, the bank should be subrogated to rights as a creditor of the estate. On the contrary, it is shown that throughout the period of George L. Hopper’s administration, which has continued until now, he has collected the rents and income from both realty and personalty, amounting to $70,039.32, as follows: Dividends, ice company stock, $29,666; interest on Havre de Grace gas bonds, $8,750; rents from real estate (net), $27,623.32; stock dividends, 36 shares Independent Ice Company common stock, $4,000.

It therefore follows that the administrators, in the course of their administration, had the benefit of a substantial income, which, properly applied, would seem sufficient to meet the ordinary demands of the creditors, and the carrying charges of the estate. Especially is this evident when it is shown that more than $32,000 net, representing the proceeds of real estate, was available. In Milholland v. Tiffany, 64 Md. 455, 460 , 2 A. 831, 834 , it is said: “The law of substitution is not founded on contract or agreement, but upon the equitable powers of the court. It is in the nature of equitable relief to protect a meritorious creditor who has paid the debt of ³²⁴ another against loss and damage.

We say ‘meritorious,’ because it will not be applied in behalf of a mere stranger who officiously meddles with a matter which in no manner concerns him. In most cases it is applied in behalf of one who was under an obligation of some kind to pay the debt of another as a surety, who is obliged to pay the debt of his principal, or one who is obliged to pay a lien or incumbrance on property purchased by him. But it is not necessarily confined to these cases; but may be applied, on equitable principles, in behalf of one who, at the instance and request of the debtor, pays a lien or