Read v. Reynolds

²⁸⁵ Pearce, J., delivered the opinion of the Court. This is an appeal from a decree of the Circuit Court of Allegany County, as a Court of equity, passed in a cause submitted upon bill, answer and exhibits. The case presented is a novel one, and as such has received careful examination, since we recognize the fact that while the science of law, upon which the administration of justice depends, is more rigidly guided and governed by precedent than any other science, it yet should, and does respond to the demand for the application of correct legal principles to the exigencies of new situations. The bill in this case was filed by William J. Read, and sets forth that on January 22nd, 1896, his brother, Robert C. Read, with their mother, Sarah H. Read, made a mortgage to George Glick to secure a debt of $6,000, due three years after date, contracted by Robert C. Read, for the exclusive benefit of William J. Read, who received the $6,000 for his own use, and promised the said Robert C. Read to pay the said mortgage when due; that Sarah H. Read owned the life estate, and Robert C. Read owned the remainder in the said mortgaged premises, and that Sarah H. Read has since died; that on April 7th, 1897, William J. Read and wife, together with Robert C. Read, made a mortgage to Warren C. White upon all the real estate of William J. Read, and upon the real estate of Robert C. Read previously mortgaged to Glick, to secure a debt of $8,000 due from William J. Read to said White; that on November 5th, 1897, William J. Read and wife conveyed all their property embraced in the White mortgage to DeWarren H. Reynolds, Robert R. Henderson, and James W. Thomas, as trustees, with power to sell the same for the payment of all the debts of William J. Read which included the Glick and White mortgages; that these trustees accepted the trust, sold all said property, and have received all the purchase-money, and have distributed the same under audits duly ratified by the Court; but that instead of paying all the debts of William J. Read as he confidently expected, there is only $2,532.71 to be applied to the White mortgage; that on August 18th, 1897, ²⁸⁶ the White mortgage was assigned to DeWarren H. Reynolds, and on January 21st, 1899, the Glick mortgage was also assigned to him, and that said Reynolds was a practicing lawyer, and the attorney of William J. Read and Robert C. Read during the whole period covered by these transactions, and procured as their attorney the $8,000 loan from said White, and knew that the $6,000 loan from Glick was for the exclusive use of William J. Read, and that he had promised to pay the same; that after the assignment of the Glick mortgage, and while acting as the attorney for William J. Read, as one of said trustees, and as agent for Robert C. Read, the said Reynolds, acting under a power of sale contained in the Glick mortgage, advertised the mortgaged premises for sale, and himself became the purchaser thereof for the sum of $15,150; that the sale has since been ratified and the property conveyed to Reynolds by Benjamin A. Richmond, the trustee appointed for that purpose, and that Reynolds has since sold and conveyed the same to the Inter-State Trust and Guaranty Company for $16,500; that said company was incorporated by the Legislature of Maryland by ch. 181 of the Acts of Assembly of igqo, and that before and at the execution of said last-mentioned conveyance, said Reynolds was a stockholder, director and president of said company, and was personally cognizant of all the facts alleged in the bill, and that the company therefore had notice thereof; that in the audit of the proceeds of sale under the Glick mortgage, $1,212 was allowed Reynolds as commissions, and after allowance of the costs and the amount of the Glick mortgage, there remained $5,901 which should be distributed as a payment on the White mortgage, but which has never been so credited, and that even if so credited, there would still be a considerable balance for which the plaintiff would be liable to Reynolds as assignee; that said sale was a forced sale for cash, when real estate values in Cumberland was much depressed, and that the sale was for a greatly inadequate price, the property being at that time worth at least $20,000; .that sometime before the sale, Reynolds took pos-, session of the property, and collected the rents and profits. ²⁸⁷ paying therefrom the sum of $40 per month to Sarah H. Read up to the time of her death, and thereafter $30 per month to Robert C. Read, but that no account of said rents and profits was ever rendered to Robert C. Read in his life, and no part thereof was ever applied on either of said mortgages, though the rents were ample to pay the taxes on the property, and the interest on both mortgages, in addition to the payments above mentioned; that Robert C. Read died January 17th, 1903, and that neither he, nor William J. Read were made parties to the proceeding for sale, nor assented thereto; the bill then charges “that'although the property of Robert C. Read conveyed in the Glick mortgage was not a part of the property conveyed by William J. Read and wife to said trustees, yet the said property of Robert C. Read, was, and is, so closely and intimately connected therewith, as that a Court of equity will fasten upon it in the hands of said Reynolds, or his vendee with notice, a trust for the benefit of said William J. Read * * * , because a sale of Robert C. Read’s property embraced in the Glick mortgage, for less than its true value, would diminish the amount to be applied on the White mortgage which was a second lien on the property of Robert C. Read.” The prayer of the bill- was, xst: That the sale by Reynolds to himself be vacated and-set aside, and his conveyance from Mr. Richmond, as trustee, be annulled. 2nd: That the sale from Reynolds to the Trust Company, and his conveyance to it be vacated and annulled. 3rd: That Reynolds be required to return to the Trust Company the purchase-money paid by it. 4th: That he be required to render an account of the rents and profits of the property from the time when he took possession up "to the present time; and for such other relief as the case may require.

Lengthy separate answers were filed by both defendants admitting the matters of record alleged in the bill, but specifically denying many of the other-averments. The answer of Mr. Reynolds denies any knowledge that the Glick mortgage of $6,000 was for the benefit of the plaintiff, ²⁸⁸ or of his agreement with Robert C. Read to pay it when due; it denies that the deed of trust provided for the payment of the Glick mortgage, and avers that it provided only in the usual terms for payment of the grantor's debts; it admits that Reynolds, as attorney for White, negotiated the $8,000 loan and drew the mortgage therefor, but avers that in the transaction he acted only as the friend of Wm. J. Read, and made no charge against him, and received nothing whatever for his services; it denies that he was ever the attorney of William J. Read, since the execution of his deed of trust, and avers that, although various conferences were since held between them, they were all in his capacity as trustee; it denies that he was ever attorney for Robert C. Read in any transaction, or that he knew of the Glick mortgage until sometime after its execution, or that he was attorney for Wm. J. Read when either the Glick or White mortgage was assigned to him, and it avers that the sale made by him under the Glick mortgage was made on a rising land market, for a high figure, and was so regarded at the time by every one; it denies that the trust company had notice of any of the matters alleged in the bill, except those of which the records afforded constructive notice; it denies that the balance, $5,901, mentioned in the bill, is now or ever was, applicable to the White mortgage, because it avers that this sum was audited to him in trust to await the decision of the Court upon petitions of creditors still pending for the marshalling of the proceeds of sale; it admits that he took possession of the mortgaged property of Robert C. Read in August, 1900, being compelled to do so to prevent a sale for taxes and water rent which were in defaült; that the property was valuable, and under rent, and that he collected the rents, charging nothing for his services, but that he fully accounted. for all said rents to Robert G. Read in his lifetime, and that subsequently, upon the application of William J. Read, he had long since given him a statement showing the application of all said rents, a duplicate statement being filed with his answer; it admits that William J. Read was the sole heir of Robert C. Read; it avers that in addition to a compli ²⁸⁹ anee with all the requisites of law in making the sale under the Glick mortgage, he personally notified Robert C. Read of the time and place of sale, and that Wm.

J. Read knew when and where said sale was to be made, but that neither one attended the sale or paid any attention to the matter, though he denies that the property so sold was in any way a trust property for the benefit of Wm. J. Read, or that he had any right or interest therein; and there is filed with this answer a statement showing the application of the $8,000 loan from White. The answer avers that at the request of both Reads, he paid the interest on the Glick mortgage, and the taxes and water rents on the property, down to January, 1899, when the mortgage was assigned to him, and that in August, 1897, in compliance with his promise to White when the loan was made, he paid the mortgage to White, and took an assignment thereof; that after carrying these burdens for the transactions of other persons, until the winter of 1901, after the death of Sarah H. Read, he determined he could not longer continue them, and made the sale under the Glick mortgage, which was reported without objection from Wm. J. Read or anyone else, and that upon its ratification he made repairs on the property costing over $800, and afterwads sold the same to the trust company for the sum stated in the bill.

The answer further avers that at the time the White loan was made, Wm. J. Read expressed to him his gratitude for what he had done for his accommodation, and insisted upon conveying him a lot of land in Cumberland worth about $100, and which he accepted