Leonard v. Peirson

²⁶ Boyd, C. J., delivered the opinion of the Court. The .appellant, plaintiff helow, filed a bill in equity to enjoin the appellees (defendants) from- disposing of or conveying all or any of ninety-eight lots of ground conveyed by him and his wife to the defendant Peirson by deed dated the 29th of August,. 1917. The bill alleges that the plaintiff borrowed from the Union Trust Company of Maryland, ■ one of the defendants, the sum of $2,500 up'on a promissory note signed by himself and wife, and that although the deed upon its face is an absolute conveyance of the entire interest of the plaintiff in said lots, which are worth many times the amount of the note, the deed was intended, both by the Union Trust Company and himself, to be only a security for the repayment of the money so borrowed, and there was no other consideration passing to him from the trust company, or from Peirson, who was agent of said company, being its treasurer. It is further alleged that there was an oral agreement between the company and tire plaintiff, made contemporaneously with •the execution of the deed, that, upon default of payment of the note, the trust company should sell the property in the most advantageous way-and for the greatest price obtainable, in connection with other property adjoining and controlled by it, for development purposes, but that said lots should be sold only in due course of the sale of the whole property of the trust company in that locality, as and when developed.

It is .also alleged that the trust company and Peirson had done nothing to develop the property conveyed by the plaintiff or the other property adjoining it and controlled by said company; that although payment of the note was demanded in the year 1918, when plaintiff was unable to pay it, the trust company refused to return the property when offered the amount due in the year 1921. It then charges that Peirson is about to transfer the lots conveyed to him to the trust company, which had agreed to sell and convey the whole thereof at the price of $150 per lot; that such sale is a grossly inadequate price, is in violation of the rights of the plaintiff under the agreement, and, if consummated, will result in irreparable ²⁷ loss and damage to him. There are prayers for the injunction and for general relief. The trust company filed an answer admitting the loan and the conveyance, but- denying that the deed was given merely for the indebtedness of $2,500, and alleging that it was delivered as security for the entire indebtedness of the plaintiff to the trust company and also for certain debts and obligations of the Amieisite and Stone Company, a Delaware corporation, of which the plaintiff was president; that the entire indebtedness of the plaintiff and the debts .and obligations of the Amiesite Company have not heen paid to the defendant, and, that company having become insolvent, a receiver was duly appointed to take charge of all its. assets, which have been disposed of, and that the defendant has no means of obtaining payment except by a sale of the lots.

The answer denies the oral agreement alleged, admits that it has not developed the lots, and avers that Peirson and wife conveyed them to it on May 20th, 1919, and that it has endeavored from time to time, without success, to dispose of the lots, but that it now has under consideration the sale of them at about $150 per lot. It denies that such sale would be in violation of the plaintiff’s rights, or would result in irreparable loss and damage to him. It then prays that the court shall take jurisdiction over the said land and fix and determine the meaning and effect of any and all agreements between them in any manner connected with or growing1 out of the conveyance to Peirson; that all accounts between them he determined and adjusted and appropriate decrees be passed. Peirson filed an answer .admitting the conveyance of the lots, to him, that he was treasurer and agent of the trust company, and adopting as. his own the answer of that company.

The trust company filed a cross-bill against Leonard, and in substance makes thei charges set out in its. answer and prays the court to take jurisdiction over the land, etc., that an account he -stated between the parties and prays for general relief. ²⁸ Mr. Leonard answered the cross-bill, in which answer he denied that there is in equity and good conscience any indebtedness due by him. to the trust company, except that represented by the $2,500 note, which he has always been willing and is still willing to pay upon the performance by said trust company of the conditions upon which it is due and payable. His answer alleges that in 1917 he was president of the Amiesite and Stone Company, owned stock in it, and the said company had the opportunity to take certain profitable construction contracts, but was not able to finance the same; that the trust company urged him to have said company take said contracts and to allow the trust company to finance them, taking ,as security an assignment to it of the estimates as they were issued; that he declined to do ,so because of the risk attending, the financing of said contracts, and the trust company “of its own volition agreed that if he would have the said Amiesite and Stone Company take such contracts, it would finance the same on said estimates, and would see to it that he was not called upon to pay any money on said contracts. And this respondent avers that it was not the intention of said Hnion Trust Company to so finance said contracts, but to fraudulently get the said Leonard into its power”; that when the contracts had been taken, the trust company violated its contract and compelled the said Leonard, on August 17th, 1917, to personally endorse a note for said Amiesite Company for the sum of $5,000. It is further alleged that said Leonard was fraudulently induced to endorse said note, believing that the trust company would carry out its contract as to the rest of said construction contracts; that it did not carry out its said contract and, on February 24-th, 1920, sued said Leonard on said note in the Superior Court of Baltimore City and subsequently, on the removal of the suit to the Baltimore City Court, the case was tried, and the court would not allow respondent to show the agreement under which the note was issued, so judgment was obtained .against him, but the Court of Appeals reversed the judgment, ordered it to be stricken out, and sent ²⁹ the ease back for trial.

It is further alleged that on February 26th, 1919, the trust company also brought suit upon the $2,500 note and the defendant filed a plea which set forth the agreement nnder which it was given, but tbe court refused to allow him to prove said facts., and a judgment was. obtained against him, which also, was reversed in the Court, of Appeals and the case sent back for trial. The answer further alleges that if there is any trnth in the claim made by the trust company, it has a perfect and complete remedy .at law. A considerable amount of evidence was taken and a decree was passed determining: (1) that tbe deed was given as a security in the nature of a mortgage and was intended to secure to the trust company the entire indebtedness of the Amiesite and Stone Company to it except. $10,000, and also the entire indebtedness of said Leonard to the trust company; (2) that the Amiesite and Stone Company is indebted to- the trust company and now owes it the sum of $13,100.38, which amount, less the sum of .said. $10,000, leaves the amount of $63,100.38, which is. now secured by said lots, and that there is in addition now due and owing personally by Leonard to the trust company the sum of $6,344.63, which is also secured by said lots; (3) that within ten days from the entry of the decree said Leonard shall pay or cause to be paid said two sums, together with interest, from the date of the decree; (4) that in default of such payment within ten days from the entry of the decree all equity of redemption be forever barred, and that all said land and premises be sold, free; clear and discharged from all claims of the parties thereto; and also of the mortgage from said Leonard and others to the Safe Deposit and Trust Company of Baltimore, dated August 1, 1911; (5) that Walter H. Buck be and is hereby appointed trustee to make the sale and the usual terms, and provisions in decrees are set out. From that, decree this appeal is taken.

According to Mr. Leonard’s, testimony, the Amiesite Company needed $10,000 more, and the trust company agreed to lend it on one hundred lots at Oaton Heights, the title to which was held by tbe Amiesite Company. At the time that ³⁰ company owed the trust company about $'50,000, which it had advanced on some road contracts which the Amiesite Company had as collateral. H'e had conveyed to the company the hundred lots in March, 1917, and there was a previous mortgage on those lots held by the Safe Deposit and Trust Company of Baltimore, on which there was a balance due of $16,000 plus some interest and taxes — the mortgage also including the ninety-eight lots in controversy. When the hundred lots were conveyed to the Amiesite Company, the understanding was that it was to assume the payment of $10,000 of the mortgage to the Safe Deposit and Trust Company, and Leonard agreed to pay the balance of that mortgage.

Later he sold his home place and reduced the mortgage to ten thousand dollars. The only lien on the ninety-eight lots which he still held and which he conveyed to Peirson was the blanket mortage to the Safe Deposit and Trust Company which covered them and the hundred lots. After Leonard had arranged to' borrow the $10,000 for his company, which loan was consummated on August 29th, 1917, he arranged to borrow the $2,500 which he claims was the consideration of his lots — that being a separate and individual transaction, according to his claim. He had a personal account with the trust company, had borrowed $6,900 on a second mortgage and was an endorser with Dwight D. Mallory on a note of the Amiesite Company for $15,000 and owed some smaller items amounting to $2,000.

The $6,900 note was secured by some real estate which was sold and the note paid off. He .also said that the note he and Mr. Mallory had endorsed had been reduced about half and had since been paid, .and claims that all his personal indebtedness to the trust company except the $2,500 has been paid. He denies that the lots were security for anything but the $2,500, excepting, of course, it was liable for the $16,000 mortgage which he says has now been paid off, and, as will be seen later, he admitted that all except $10,000 of his personal debt was to be paid before the lots were to be re-conveyed to him. He ³¹ ■claimed that the Amiesite Company had property with which it could have secured the trust company outside of the lots mortgaged for the $10,000.

Mr. Leonard on cross-examination said that he suggested to Mr. Pearson, in arranging for the $10,000, that in case his personal debt to the trust company was not reduced to $10,000, he would not insist on the return of the lots. Edward Pilert, who w.as connected with the Amiesite Company, testified that he was present when the arrangement was made to borrow tbe $10,000 for the company, and when the trust company agreed to loan Leonard $2,500. He said that Mr. Grape said to Leonard, “Say right now, whether that $10,000 will .answer the purpose” and then Mr. Leonard said there were some personal matters pressing him; that he (Pilert) was rather “peeved” at this because he did not think Leonard ought to inject personal matters into the company’s business; that Mr. Grape asked him how much he needed and Leonard said $2,500, and upon being asked what security he could give he said the ninety-eight lots; that he called Leonard to one side and asked him why he wanted toi give that many lots for $2,500 security, and Leonard replied that he could pay that back shortly and get his lots back again; that Leonard didn’t say a word about the lots being security for any other indebtedness than the $2,500. Those are the two witnesses who testified for the plaintiff to the effect that it was agreed that the lots should only be security for $2,500, and there was some difference between the two, for, as we have seen above, Mr. Leonard on cross-examination said that he had suggested that he would not ask for a return of the lots if his individual indebtedness to the trust company was not reduced to $10,000.

On the other hand, Mr. Buck, who was attorney for the trust company, testified as to a meeting held on the morning of August 24th, 1917, at which there were present, in addition to himself, Messrs. Leonard, Pilert, Grape, a vice-president of the trust company, Peirson, another officer of that company, and also Mr. William P. Lyons, who Was attorney for Mr. Leonard. ³² As will be seen later, it is evident that Mr. Buck was mistaken about Mr. Lyons being present at that meeting on the morning of August 24th, but he was present that afternoon and the next day, when the matter was under consideration. Mr. Buck said that a paper, a copy of which he had, was dictated in the presence of the above parties. In answer to the question, what the terms were which wore agreed upon for the loan of the $2,500, in