Mayor of Baltimore v. Baltimore Trust Corp.

Urner, J., delivered the opinion of the Court. The Mayor and City Council of Baltimore, on February 24th, 1938, had a deposit account, in the name of the City Collector, with the Baltimore Trust Company, and the balance then credited to the account was $130,032.93. On that day the Trust Company issued treasurer’s checks to the City Collector for amounts aggregating $45,935.94. The checks represented tax collections made by the Trust Company for the City.

Because of the Governor’s proclamation of successive bank holidays, the Trust Company was closed from February 25th to March 4th, 1933, when it came under the custody and control of the Bank Commissioner of Maryland, by virtue of the terms of an emergency act of the General Assembly, chapter 46 of the Acts of 1933. The Trust Company remained under the Bank Commissioner’s control until January 5th, 1935, when it was committed to the custody of the receiver appointed by the lower court in this proceeding. As collateral security for its deposit account the City had received from the Trust Company, prior to February 24th, 1933, United States Government bonds of the par value of $200,000. Shortly after March 4th of that year the City sold the pledged bonds for $200,112.74, thus producing a fund of $70,079.81 in excess of the balance credited to its deposit account.

As against that surplus the City claimed a right, which was disputed, to set off the aggregate amount of $45,935.94 of unpaid treasurer’s checks issued by the Trust Company to the City Collector as remittances of tax collections. It also made an alternative claim of a preference with respect to the fund which those checks represented. The balance of the collateral fund, not affected by the City’s claim of set-off or preference, was paid to the Trust Company. Subsequently the interest of the Trust Company in the surplus proceeds of the collateral was transferred to the Baltimore Trust Corporation, which has intervened by ⁴⁵⁹ petition for the purpose of having the question as to the City’s asserted rights adjudicated.

The Chancellor disallowed its claim of set-off or preference, and decreed that the City pay to the petitioner the sum of $23,565.14, being the amount of the reserved fund ($45,935.94), less $23,370.80 which the City, as a general creditor, was entitled to receive as dividends accruing from the liquidation of the Trust Company’s assets. Upon this appeal the argument for the City made no reference to any theory of preference for the amount due on the unpaid treasurer’s checks, but was directed solely to its claim of set-off. The opposing contention is that the proposed set-off is unavailable because the debts it would involve are not mutual. The arguments on both sides agreed in regarding as a trust fund the surplus proceeds of the City’s sale of the bonds pledged with it as collateral security for its deposit.

But the parties to the appeal differ upon the question whether the treasurer’s checks held by the City represent an indebtedness which is also impressed with a trust. It is contended for the City that an affirmative answer to the question is permitted and required by the terms of the agreement under which the Trust Company made the tax collections for which its checks were issued to the City Collector. That agreement was summarized and considered by this Court in Ghingher v. Baltimore, 165 Md. 324, 329 , 168 A. 125 , but, for the purposes of a decision as to the right of withdrawal then asserted, it was found unnecessary to determine whether the checks represented a trust fund. The petitioner argues that, with respect to the checks issued by the treasurer for the taxes collected by it for the City, the ordinary relation of debtor and creditor existed and that