Miller v. Hospelhorn

Mitchell, J., delivered the opinion of the Court. The appeal in this case is from an order of the Circuit Court No. 2 of Baltimore City, passed on the sixth day of October, in the year nineteen hundred and thirty-eight, dismissing the petition of Edith Davison Miller, the appellant. The petition was filed in proceedings pending in said court wherein the State of Maryland was plaintiff and The Baltimore Trust Company, a body corporate, was defendant, and in substance embraced the following allegations: (a) That by a previous order of the above court, John D. Hospelhorn, receiver of The Baltimore Trust Company, had been authorized, ordered and directed to distribute the funds in his custody as such receiver, belonging and pertaining to the trust estate of the Interocean Oil Company — Oil Run Account, amounting to §28,-228.37 in cash and §8512.88 in restricted funds, to the true and lawful owners of notes of said Interocean Oil Company at the rate of 3.3428 per cent in cash and at the rate of 1.0282 per cent in certificates of indebtedness of The Baltimore Trust Company. (b) That the petitioner was the owner of notes of said oil company .numbered from 10 to 22 inclusive, aggregating the sum of §66,655.51, in which sum she was entitled .to participate in the distribution directed by said order, and that in compliance with the requirement of the receiver, the petitioner had duly filed with him her proof of claim; b-cd- that payment of her claim had been refused by the receiver, and the proof of the same, together with the original notes also filed with the receiver, had accordingly been returned to her.

(c) That all of said notes were dated December 1st, 1928, and were made payable, on demand, to the order of a certain Grace L. Selby; that in form they were negotiable promissory notes, title to which passed by delivery, not registered as to ownership, nor were they required to be registered by the obligor company; and ³⁵⁹ (d) Notwithstanding that said notes were made payable to the order of Grace L. Selby, they were never in fact the property of the said Grace L. Selby. The petition then alleged that the reason the notes were made payable to a payee other than the petitioner was for the purpose of convenience, and that, on the date upon which they were received by the original payee, they were indorsed by her “and possession thereof yielded up,” as would appear by an affidavit of the said Grace L. Selby, filed with the petition and prayed to be considered as part thereof; and that said notes were the property of the petitioner, purchased with money belonging to her and had been under her control since the date of issuance. Finally, the petition prayed the court to pass an order directing the receiver of The Baltimore Trust Company to pay the petitioner the distribution alleged to be due her by virtue of her ownership of said notes, in accordance with the previous order of the court in the premises. The proof of claim referred to in the petition, and filed as an exhibit in connection thereto, sets forth the serial number and amount of the respective notes upon which the petitioner’s claim is based, and, in addition to an affidavit of ownership of the notes on the part of the claimant, is accompanied by an affidavit of Grace L. Selby, as of May 25th, 1938, which, after setting out the description of the several notes and the aggregate amount thereof, avers that the same “were immediately after being received by me, indorsed and delivered by me to the true and lawful owner, and that since said indorsement and delivery, neither directly or indirectly, have any of said notes been in my possession or under my control or ownership.” The answer of the receiver to the petition, after admitting his refusal to pay the claim as filed, avers that all of the notes set forth in the petition were not registered in the name of the petitioner, but were registered in the name of the said Grace L. Selby, who, accordingly was the registered owner of said notes, as of March 28th, 1938, the date on which the order directing the payment ³⁶⁰ of the distribution upon them was passed by the court.

In support of which averment, it was stated that, according to the records of The Baltimore Trust Company, trustee under an indenture of trust securing said notes, the same were not the property of the petitioner; and that the notes secured by said indenture were not “ordinary promissory notes, negotiable with title thereto passing by delivery.” Under a stipulation appearing in the record, but one of the notes involved in this appeal is set forth therein; it being agreed that, except as to the respective amounts, all of said notes, in every respect, are similar to the one embodied in the record. And for the purpose of this opinion it may be stated that, as indicated, all of the notes were dated December 1st, 1928, and were payable on demand to the order of Grace L. Selby, upon presentation at the office of The Century Trust Company of Baltimore, with interest from date. On the face of each note it is recited that it is one of a series of notes of like tenor but varying as to the date of issue, maturity and amount, limited in the aggregate amount outstanding at any time to the sum of $950,000, issued, or to be issued, in pursuance of, and equally and ratably secured under, the terms of an indenture dated December 1st, 1926, and successive extension agreements to which reference is made; all between Interocean Oil Company, the obligor, and The Century Trust Company of Baltimore, as trustee, copies of which indenture and extension agreements, it is recited, were open for inspection at the office of the trustee, and to which reference was made for the provisions thereof and the terms and conditions upon which said notes were issued and secured. It was thereafter set forth that the note would not be valid until after the same had been authenticated by the certificate thereon duly signed by the trustee under the indenture, which certificate was duly executed by the above named trustee.

Upon the reverse side of the notes, prior distribution payments on account of principal, and prior interest pay ³⁶¹ ments are credited by the trustee, and there then appears in typewritten form, the following indorsement, over the handwritten signature of the payee: “For Value Received I hereby assign the within Collateral Note to Edith D. Miller.” “(Signed) GraceL. Selby. “Dated..........,19.....” The case was heard upon petition, answer and proof, the testimony in support of the petition being taken in open court. At the hearing, Grace L. Selby testified that she was secretary to C. Wilbur Miller, the husband of the petitioner, at the time the notes were purchased in her name. She identified the several notes; stated that they never in point of fact belonged to her; that they were each indorsed by her in blank at or about the date of issuance, and identified her signature as such indorser.

As to the typewritten matter appearing above and below her signature, her testimony was entirely hearsay, as she was not present when the same was written. She was then asked the following question: “Q. Mrs. Selby, after you first received those notes and when you endorsed them in blank, did you ever after that have personal possession or control over them?” And her reply was “No.” “Q. And that was at least ten years ago? A. Yes, sir.” As a reason for the issuance of the notes in her name, the witness gave testimony tending to show that the transaction was effected in that manner for the purpose of convenience; that Mr. Miller had other securities issued in her name, so that in his absence she would handle them, and when asked by the court how she could handle them if the notes had passed from her possession, as she had previously testified, she stated that: “They were filed in the safe in our office.” The testimony under interrogatories propounded by the court then proceeds as follows: “Q. What about The Baltimore Trust stock? Whose stock is that, that is in your name?

A. It is not mine. Q. How did you get it in your name? A. That was a matter of convenience, too. Q. You mean he (referring to Mr. Miller) was the real ³⁶² owner of it?

A. He purchased it. I never had anything to do with it? Q. Did you know it was in your name? A. Yes, sir.

Q.. You acted as a straw woman? A. Yes, sir.” The witness then testified that for a number of years she had been the confidential secretary of Mr. Miller, who was formerly president of the Davison Chemical Company, and that the Baltimore Trust Company stock, referred to by the court, was acquired subsequent to the acquisition of the original notes of the oil company, which were afterwards renewed. She was then asked by the court the following questions, and gave answers as follows: “Q. Then both of them belong to Mr. Miller?

A. Yes, sir. Q. You have no interest in them? A. No.” Counsel for the petitioner thereupon asked the following question: “Q. You have stated that they both belong to Mr. Miller. You don’t say that those (indicating) belong to Mr. Miller?” Whereupon the court, based upon her previous, in part hearsay, testimony, made the following observation: “she says they were kept in the safe and that some time thereafter, without her knowledge, Mr. Miller put this indorsement over her signature. * * * She just said that they were delivered to Mr. Miller and put in his safe in her control; indorsed in blank and later put in bank, and without her knowledge she learned from Mr. Miller that he had written an indorsement transferring them to his wife, in Mr. Karr’s office.” The witness then proceeded to give testimony tending to show that she did not intend by her previous answer to indicate that the notes were the actual property of Mr. Miller, and explained that above five years previous to the date of the trial she was present and heard a conversation between Mr. and Mrs. Miller, the latter being the petitioner, in reference to the payment of the notes.

That Mr. Miller, conceding that the notes belonged to the petitioner, then expressed a desire that, if they were paid, the latter would give the witness §5000, to the end that she might be reimbursed, to that extent, for certain ³⁶³ investments which the witness had made in Davison Chemical and Silica Gel securities, and that Mrs. Miller had assented to the conditional gift. In answer to the court’s questions, she admitted that all interest and dividends previously collected on the notes (the last payment on which, according to the credit on the note shown in the record was January 1st, 1931), were made payable to her, and that, with one exception, she indorsed the checks and deposited them to the credit of Mrs. Miller. On cross-examination Mrs. Selby admitted that she executed the several amendments to the original indenture agreement securing the notes, the last one of which appears from the record to have been executed December 1st, 1928; that on January 5th, 1931, she executed, with other note holders, a request that the trustee make a distribution of funds then in its custody to said note holders, and that she never advised the trustee that the notes did not belong to her. She also admitted that a large block of stock in The Baltimore