McIntyre v. Smith

Offutt, J., delivered the opinion of the Court. Edward McIntyre, late of Baltimore City, died intestate on or about March 6th, 1927. He had been twice married, and was survived by four children by his first wife, and by his second wife and two children by her. He had been at one time a tug boat engineer, and later, with J. Edward Henderson, engaged in the business of repairing boats.

In 1922 Henderson bought out his interest in that business, and McIntyre found himself in the possession of a considerable fortune, which was largely invested in bonds. He was a skilled mechanic, thrifty and industrious, but without any knowledge or experience in matters of business or finance, and he turned over all of his personal property, including his securities, to Margaret M. McIntyre, Marie C. McIntyre, and Robert E. McIntyre, children of his. first marriage, and they kept them and had them in their possession at the time of his death. Upon his death letters of administration were granted to Charles P. Coady and Samuel K. Smith, who demanded of the three children named all securities delivered to them by their father, but they turned over only such securities as could not be passed by delivery, and refused to surrender to the administrators bonds valued at $86,500 which would pass by delivery. The administrators then filed in the Circuit Court of Baltimore City the bill of complaint in this case to compel the three children to deliver to them the bonds which they had received from their father.

In addition to the facts to which we have referred the appellees in their bill -alleged that Edward McIntyre, their ⁶⁶³ decedent, who was at the time of his death seventy-one years old, “knew little or nothing about the handling of even his own finances; that he was untrained in and unfamiliar with the making of investments * * * that the defendants acted as his confidential agents, and that he placed in their hands all of his personal property, and that they placed the evidences of said property and the securities in a safe deposit box or boxes controlled absolutely by them; and that the said Edward McIntyre had every faith and confidence and trust in them, and that their possession and custody of said property were upon trust fox him, and that he and his said property were entirely in their hands; and that, having such confidence in them, it never occurred to him that they would betray his trust; * * * that your orators aver that after the death of the said Edward McIntyre, the said defendants turned over to them only such securities as could not be passed by delivery and retained all bonds that could pass without endorsement, and among the bonds so retained were fifty-four thousand dollars ($51,000) Federal Land Bank bonds, thirty thousand dollars ($30,000) United States Liberty bonds and twenty-five hundred dollars ($2,500) foreign bonds (French, Belgium and Denmark), and ihait these bonds' and others they concealed from your oirators and refused to turn over the same as property of their deceased father,” and that they, “in utter violation of the trust reposed in them in their reversed confidential relationship, had withheld and retained from' your orators unregistered negotiable coupon bonds of the value of approximately ninety thousand dollars. * * * That when your orators demanded the delivery to them of said bonds, the defendants frankly admitted that they had such ‘bonds in their possession, but they absolutely refused to turn them over to your orators,” and that “although the defendants received all of the securities .from their father to he kept by them as his confidential agents and trustees., and to be delivered by them to him in his lifetime or, upon his death, to his personal representatives; nevertheless, in absolute disregard of the trust so. reposed in them, the said defendants, accounted with your orators for otaly the nonnegotiable securities and kept in their possession said unreg ⁶⁶⁴ istered bonds of the value of approximately ninety thousand dollars ($90,000); * * * that such unconscionable action on the part of the said defendants was a part of a scheme conceived by said defendants to obtain a greater share of then father’s estate than they were entitled to under the law; * * * that there was and could ha no devolution of title to said bonds upon the defendants, because they held said bonds as the confidential agents, trustees and custodians of their said father; * * * that the effect of the retention of said bonds by the said defendants, will be the consummation of a fraudulent scheme on the part of the defendants to' acquire a greater portion of the estate of their father than they would he entitled to by virtue of a legal distribution of his entire estate; * * * that relations of the utmost confidence existed between the said Edward McIntyre and his agents and trustees, the said defendants ; and the securities which they are fraudulently and unlawfully withholding from your orators are impressed with a trust as aforesaid in favor of your orators and belong to the estate of the said Edward McIntyre.” Hpon these allegations the appellees asked the court to declare that the bonds were their property and were held by the appellants, in trust for them, to decree their delivery to them, to restrain the defendants from selling or disposing of them or “retaining” them from the appellees, to- decree that a receiver be appointed to take charge of the bonds and collect the income “therefrom” pending the suit, and for such other 'and further relief “as the nature of their oausei” might require. The defendants demurred to the bill, but their demurrer was overruled, and from that order they have appealed. From the facts 'alleged in the bill the parties draw different conclusions, the contention of the appellees being that the appellants hold the securities involved in the appeal upon a trust which a court of equity shoiild enforce, while the appellants contend that the facts alleged are not sufficient to raise a trust in favor of appellees, but that they hold the securities’ under a claim of ownership^ which a. court of equity has no jurisdiction to decide, but that appellees must assert their claim in some appropriate action in a court of law, and ⁶⁶⁵ the issue of law raised by these conflicting theories is whether upon the facts stated the action of the appellants, in retaining possession of the securities is a breach of trust, or a breach of a contract of bailment for which they have an adequate remedy at law. Although appellants in their brief assert title to the bonds., that question is not in issue, for there is nothing in the bill to. support the inference that appellants hold the bonds under a claim of title, or that they contend that they were given to them by their father during his life, the allegation being merely that they received the bonds in trust to be delivered to the decedent during his life or to his persotoal representatives upon his death, and that, in violation of that trust, they refused to deliver them to the appellees.

The jurisdiction of a court of equity to compel a surrender of specific securities may, in such a case as this, rest upon either of two grounds: (1) That because of the nature and character of the property a court of equity is the natural and appropriate forum in which to obtain such relief, because no adequate remedy is available at law, and (2) that the property is held under a constructive trust enforceable in a court of equity. (1) In Scarborough v. Scotten, 69 Md. 137 , it appears tbat Hugh E. Scarborough endorsed and delivered certain promissory notes and single bills to William Scotten and directed him to collect them and deliver the proceeds to Francina Scarborough, the wife of Hugh E. Scarborough, but Scotten died before the notes were collected, and his executors took possession of them. Francina Scarborough tben assigned her interest in the notes to Hugh her husband, and he demanded them of the executors of Scotten, and, upon their refusal to surrender them, he filed a bill in equity against them, praying that they be compelled to surrender the notes to him. The lower court sustained a demurrer to the bill on the ground that the appellant had an adequate remedy at law.

But this court reversed that ruling on the ground that there was. no adequate or complete remedy at law, and in its opinion, after citing Story on Equity in support of the rule that equity will decree “the delivery up of ⁶⁶⁶ deeds and other writings to those who are entitled to them it quotes with apparent approval parts of the following passage from the same author: “But where the title to the possession of deeds and other writings depends upon the validity of the title to the property to which they relate, and he is not in possession of that property, and the evidence of his title to it is in his own power, or it does not depend upon the production of the deeds or writings, of which he prays the delivery, — in such cases he must first establish his title to the property at law before he can come into a court of equity for a delivery of the deeds. * * * The same doctrine applies to other instruments and securities, such as bonds, negotiable instruments and other evidence of property which are improperly withheld from the persons who have an equitable or legal interest in them, or who have a right to have them preserved. This redress a court of common law is for the most part incapable of affording, since the prescribed forms of its remedies rarely enable it to pronounce a judgment in rem in such cases, which is or can be made effectual. It is true that an action of detinue or even of replevin might in some few cases lie and give the proper remedy if the thing could be found; but generally in actions at law damages only are recoverable, and such a remedy must in many cases be wholly inadequate. This constitutes the true ground for the prompt interposition of courts of equity for the recovery of the specific deeds or other instruments.

Story Eq. Jur. (14th ed.), par. 951. That the primary ground for equitable jurisdiction in such cases is the absence of any adequate, complete, or satisfactory legal remedy is pointed out not only in the quotation from Story to which we have referred, but in Scarborough v. Scotten, supra, where the court said: “There can be no doubt that the ground of interference by a court of equity, is the inadequacy of any legal remedy to give relief.

And exemplifying that inadequacy in that case it adverted to the fact that the nature of the property was such that it could not be seized under a writ of replevin against the will of the defendants, and since the defendants had already refused to surrender ⁶⁶⁷ it upon demand, that remedy would be useless, and to the further fact that the adequacy of an action of trover could not be established without an inquiry into the solvency of the persons liable on the notes. Even more in point is Safe Deposi & Trust Company v. Coyle, 133 Md. 343 , where the facts were that Dr. Terence Coyle died leaving an estate which consisted in part of stocks and bonds valued at $86,000; that the distributees of his estate were his widow and certain collateral relatives; that she “unlawfully, wrongfully and fraudulently” seized and took possession of the bonds and converted the same to her use without taking out letters on her husband’s estate; that she falsely and fraudulently stated that Dr. Coyle had left “practically nothing”; that at her death the administrator of the estate of Dr. Coyle learned from the inventory filed in her estate that she had died possessed of stocks and bonds which she had concealed and withheld from the estate of Dr. Coyle, but which rightfully belonged to that estate, and the complainant prayed the court to administer the estate, to compel the executor of Mrs. Coyle to deliver the securities in controversy to the administrator of Dr. Coyle, that an account be taken of all interest and dividends collected by Mrs. Coyle or her executor from said bonds, and that it be required to pay to the complainant all sums