Rogers, Brown & Co. v. Citizens' National Bank

Briscoe, J., delivered the opinion of the Court. This controversy arises upon the distribution of the assets of the Campbell & Zell Company of Baltimore City, a corporation of the State of Maryland, and now in the hands of its receiver, Charles C. Homer, in the Circuit Court of Baltimore. There is no dispute as to the facts of the case, and in so far as they bear upon the questions presented for our consideration, are set forth in the record by “ an agreed statement of facts.” The questions relate solely to the distribution of ⁶¹⁵ the funds of the corporation among its creditors and which are now held by the receiver. The facts appear from the record to be as follows : The Campbell & Zell Company of Baltimore City, a body corporate, duly incorporated under the laws of Maryland, issued under Article 23, section 294, of the Code of Public General Laws, preferred stock to the amount ofj^OjOOcqon the 13th day of November, 1895.

Subsequently, the funds derived from the issue of this stock were found to be inadequate to supply the necessary capital for the success of the corporation, and in order to obtain a loan from the banks of the city of Baltimore, all of the preferred stockholders consented to postpone their lien in favor of any of the banks of the city that would accommodate it. On the 21 st of April, 1896, the following endorsement was written on the face of each preferred stock certificate and signed by the holder : “ The preference created by the issuing of this certificate over subsequent creditors of the corporation herein named is waived and postponed to any and all claims against said corporation for money which has been or may be loaned to said corporation by any of the banks of the city of Baltimore.” In consequence of this waiver of the security created by the preferred stock in favor of the banks of Baltimore, the Campbell & Zell Company was enabled to obtain a loan which now amounts in the aggregate to the sum of $46,690.54 from the three appellee banks, to wit: The Citizens’ National Bank, the Second National Bank and the Manufacturers’ National Bank of Baltimore. Subsequently this corporation became embarrassed, and on or about November 25th, 1896, upon a bill filed in the Circuit Court of Baltimore City by George B. Hunting et al. v. The Campbell & Zell Company of Baltimore City, alleging its insolvency, Henry James and Charles C. Homer were by the Court appointed receivers of the corporation. Henry James died on July 27, 1897, and Charles C. Homer, as surviving receiver, after conducting the business of the corporation for several years under direction of the Court, sold the greater part of its assets, but a portion still remains unsold ⁶¹⁶ •or uncollected.

It appears, upon the reports of sales and •collections made by the surviving receiver, and in the distribution of the assets of the company, the auditor of the Court .■stated three accounts, “A,” “B” and “C” respectively. It is agreed that account A was an expense account, that no exceptions were filed to it, and it was ratified on the 30th of June, 1900. It is not in the record, but it is agreed that it finally ascertains a balance of $22,027.27 for distribution among “the general creditors ” which is carried to and distributed in account B. There is nothing in the record before us to show that any objection was made to this account in the Court below or that an appeal was taken from the order of its ratification. On the contrary it is admitted by the agreed statement of facts that no exceptions were filed to it in'the Court below and it was ratified in regular order.

The propriety then of the passing of this order of ratification is not before us and cannot be reviewed in this appeal. The audit when ratified and affirmed had the effect of an adjudication in rent and the distributions contained in it are res adjudicata. Thurston v. Devecmon, 30 Md. 210 ; Owings v. Rhodes, 65 Md. 408 ; Taylor v. State, 73 Md. 208 ; Citizens' Land Company v. Wilson, 50 Md. 90 . The remaining questions to be determined are presented by exceptions to accounts B and C, filed by the appellants, Messrs.

Rogers, Brown & Company, who are general creditors, of the insolvent corporation to the extent of $4,688.32 for iron sold it. These appellants rely upon the following objections filed on June 22, 1900, to accounts B and C, first, because the auditor in stating account “B,” has erroneously allowed dividends to the Citizens’ National Bank, to the Second National Bank and to the Manufacturers’ National Bank, upon the full amount of the claims of the banks, and interest thereon, as unsecured or general creditors of the Campbell & Zell Company; second, because the auditor in stating account “C” has distributed to the above named banks, pro rata, the proceeds of the property subject to the lien of the preferred stock of the Campbell & Zell Company upon the basis of the claims of said banks and ⁶¹⁷ interest, deducting therefrom the dividend improperly allowed upon said