Hollomon v. Baltimore & Virginia Railroad

Pattison, J., delivered the opinion of the Court. In this case the appellant, plaintiff below, filed his bill against the appellees, The Baltimore and Virginia Railroad Co., The Calvert Securities Company, Henry M. Thompson and The Maryland Trust Company, alleging that he, with Littleton M. Sturgis, C. Henry Anderson, Arthur C. Grlanville and Wililam J. Cromwell, caused The Baltimore and Virginia Railroad Company to be incorporated on the 14th day of June, 1911, with them as incorporators. This company was incorporated as it is alleged “with the purpose in view of constructing and operating a steam railroad between Baltimore, Maryland and Drum Point, Calvert county, Maryland.” That the Public Service Commission of the State of Maryland upon petition caused to be filed by the plaintiff and the said Sturgis and Anderson on behalf of said company, granted to it the privilege of constructing a railroad between said points upon the route formerly proposed by the old Drum Point Railroad Company and upon which said last named company had expended about $743,000 in grading, etc., and also permitted the said defendant railroad company to issue common stock to the amount of $1,000,000 and bonds to the amount of $500,000. The bill also alleges that the plaintiff and said Sturgis and Anderson “had expended large sums of money and labor in securing the rights of way for engineers and in clearing about eighteen miles of said road.” The bill further alleges that the plaintiff with Sturgis and Anderson interested the Merchants and Manufacturers’ Association of Baltimore City in the construction of said railroad, and that, said association appointed a “committee of investigation,” with Henry M. Thompson as its chairman.

This committee so appointed conferred with the plaintiff and his associates and a favorable report was made by the committee and adopted by the association. . Thereafter it is alleged Thompson stated to the plaintiff and his said associates that Henry M. Baker, the president ⁶³⁰ of said association, had agreed to become president of said railroad company and the members of said association had agreed to subscribe to its stock in order to insure its completion within four months, but as a condition precedent to Mr. Baker becoming president of the company and the members of the association subscribing to its stock, the plaintiff and his associates were to give to said Thompson “a power of attorney to act for them and that they should assign their interest in said railroad under the terms of a secret trust as follows: That said Henry M. Thompson, David B. Stewart, Hyland P. Stewart and William B. Bahn should act for the best interests of yo-ur orator and his associates and in every manner preserve the rights of your orator and his associates, whereupon your orator relying upon the truth of said statements, conveyed without consideration on April 1, 1912, to said defendant, Henry M. Thompson, the legal title to his said interests, reserving the equitable title aforesaid in himself, and did also execute a power of attorney as demanded by him, as aforesaid. That two days prior to said assignment, the plaintiff and his associates entered into a contract with the said Thompson, David B. Stewai-t, Hyland P. Stewart and William B. Balm, whereby the plaintiff and his associates agreed to give to said Thompson and his. abovemamed associates “ten per cent each of the net profits derived from the promotion of said railroad.” And at such time the plaintiff and Sturgis “as owners or incorporators of said railroad, entered into an agreement with the Baltimore and Yirginia Bailroad Company by the terms of which they were to procure for and sell and deliver to it the rights of way and secure bona fide subscriptions of responsible and approved subscriptions for 10,000 shares of the capital stock, as will more fully appear by reference to the original copy of said agreement now in the hands of the Maryland Trust Company.” That the said Thompson, Hyland P. and David B. Stewart “acting in a fiduciary capacity with your Orator and his asso ⁶³¹ ciates, only secured 400 shares of $20,000 of bona fide, responsible subscribers, and only $2,000 of which was paid in, and although the law specifically provides that there shall be $100,000 worth of stock actually subscribed and ten per centum of which shall be paid in before organization, the said parties, in order to defeat the purposes of said law, ^caused to be incorporated the defendant, The Calvert Securities Company, with an authorized capital stock of $30,000 of which there has only been $18,000 actually subscribed and paid for, and through which, in order to avoid personal liability, they subscribed to $180,000 worth of the stock of said railroad and paid all of the capital stock actually subscribed, leaving said company without any further assets or funds to pay the second subscriptions of ten per centum” which the bill alleges .“constitutes a fraud upon the law” and does not “comply with the contract between the railroad and the bona fide subscribers, which