Schindel v. Danzer

Offutt, J., delivered the opinion of the Conrt. The record in these cases submits appeals from decrees entered in each of four cases' by the Circuit Court for Washington County, which differ from each other in the personnel ³⁸⁶ of the parties, but which all arise from, transactions which are to some extent interrelated, and which are controlled by the same legal principles. Eor that reason it is more satisfactory to deal with them together at the same time, indicating the differences between them. They all grow out of the financial difficulties of the White Lake Lumber Company, a corporation, and the Garland Hardwood Corporation.

All the parties to the several suits, or persons whom they represent, were stockholders in the White Lake Lumber Company, which was organized in 1918 to carry on a general lumber manufacturing business, and which owned timberlands, mills, and equipment in Sampson and Bladen Counties in Horth Carolina. Its property was mortgaged to secure a bond issue of $250,000 under a first mortgage, and another bond issue of $250,000 under a second mortgage. In 1927 the trustee named in the second mortgage sold all the property covered by that mortgage to the Garland Hardwood Corporation, which had been formed to acquire it, and the plaintiffs and defendants in these cases, who had been stockholders in the White Lake Lumber Company, became stockholders in the Garland Hardwood Corporation. Early in 1928 it appeared that the indebtedness of those two corporations approximated $210,000, evidenced by commercial paper held by individuals and banks, who1 about that time began to press for the payment of their claims.

The parties to these cases, who were all stockholders in those two corporations, were all obligated either as makers or indorsers on the bills and notes of one or the other of those corporations, representing that indebtedness in varying amounts, ranging from $2,000 to over $200,000. By May of that year the insolvency of both corporations had become an established fact, and it was also' apparent that their stockholders, who had loaned their credit to them either as makers or indorsers on their bills and notes, would be called upon to pay them. In some cases the persons who are parties to these cases had signed the notes as makers, and in others as indorsers, but in all cases, as between them and the two corporations, they were sureties, and for convenience will be ³⁸⁷ referred to as “indorsers”. Nearly all of them appear to have been residents of Washington Oounty, most of them identified with the business and professional life of Hagerstown, and they varied widely in financial rating and responsibility.

And when it became evident that the “indorsers” would be required to pay debts of the corporations, amounting to over $200,000, on which they were personally liable, it was also apparent that the liability of each solvent indorser was likely to be increased by the fact that a number of his coindorsers were insolvent. The situation also became a matter of immediate concern to the banks, who feared, and with some reason, that the resources of the “indorsers” would not be sufficient to> meet the demands which the collapse of the two corporations made upon them. In that emergency it was felt by both creditors and indorsers that prompt measures must be taken to avoid consequences which would be injurious both to the indorsers and the creditor banks, if it became necessary to enforce the claims by litigation. Accordingly in May, 1928, representatives of some of the interested banks and a number of the indorsers met to consider plans for settling the claims against the indorsers in such a manner as to inflict the least possible loss or injury either upon them or their creditors.

As a result of that meeting a committee, composed of Major William P. Lane, Jr., Frank W. Mish, and Victor M. Cusliwa, who will be hereafter referred to as the “committee,” was named to devise some plan whereby the claims against the indorsers could be paid or settled without litigation. That committee, after communicating with the creditor banks, called a second meeting at which many of the indorsers were present and all but two or three of the banks represented. At that meeting the committee outlined a plan under which they were to endeavor, on the one hand to induce each indorser to subscribe as much to a general fund to be applied to the settlement of all the claims as the committee felt could be gotten without litigation, and on the other hand to induce1 the banks to settle their claims for less than their face value. They then called the indorsers singly and dis ³⁸⁸ cussed with each the amount which he was willing or able to give to be relieved from liability arising from the bills and notes of the lumber company which he had indorsed.

As a result of that procedure, the committee raised a fund of $126,000 on paper, and they again approached the creditor banks, but were unable to- secure their assent to any scheme of settlement which could be effected by that amount of money. They then called a third meeting, at which the indorsers raised their aggregate pledges to $145,000, and with the assurance afforded by those increased subscriptions they returned to the creditor banks, and were able to secure concessions from a sufficient number of them to enable the committee to satisfy and settle all claims against the indorsers arising out of their obligations as makers or indorsers of the commercial paper of the two lumber companies. Among the indorsers were Aaron M. Horst, Dr. David P. Schindel, and Charles E. Strole. They with others were joint makers with the White Lake Lumber Company of a note for $13,500 payable to1 the lumber company, discounted for it by the Lancaster Trust Company.

Strole and Schindel, with others, were also joint makers with the lumber company of a note for $15,000, discounted for it by the Nicodemus National Bank of Hagerstown, and indorsers on a note for $5,000 discounted for the White Lake Lumber Company by the First National Bank of Waynesboro, and Schindel was an endorser on a note of the Garland Hardware Company for $19,000, discounted for it by the Maryland Surety & Trust Company. Among the banks which failed to agree to accept anything less than the face value of the notes held by them against the parties to these cases were the Lancaster Trust Company, the Nicodemus National Bank, the First National .Bank of Waynesboro^ and the Maryland Surety & Trust Company, and the plan proposed by the committee contemplated paying their claims in full out of the fund, if they could not be settled on more lenient terms. But Dr, Schindel, who was liable either as maker or indorser on each of the four notes described above, was unwilling to await the settlement which the committee was attempting to make, and ³⁸⁹ although lie had assented to the plan proposed by the committee, he undertook to have those four notes paid, and was able, throngh contributions by himself and certain of the makei’s or indorsers of these notes, to pay them in full. In accomplishing that result it became necessary for him to advance a sum greater than the pro raía contribution of each solvent surety would have been, if all had contributed ratably to the payment.

And these several suits were brought against indorsers on those notes, who failed to contribute to their payment, to compel them to contribute such amounts as will equalize the amounts, paid by each solvent indorser. The hill of complaint in No. 23, on the docket of the ■October Term of this court, was filed by Horst, Schindel and Strole against William A. Danzer, Robert M. Rupp, Thomas I,. Rickard, W. W. Schildlmecht, Charles M. Danzer, Frank G. Wagaman, Clarence M. Stickell, Roy Danzer, Maryland Surety & Trust Company, Hagerstown Bank & Trust Company, administrator c. t. a. of Albert Danzer, deceased, Albert Heard, the White Lake Lumber Company, Inc., a corporation, D. A. Stickell. In it the complainants charged that the note discounted by the Lancaster Trust Company had been paid the following contributions from sureties thereon; D. A. Stickell, $1,937.50; A. M. Horst, $2,000; David P. Schindel and C. E. Strole, $1,500 each, and Clarence M. Stickell, Roy Danzer, Albert Danzer, Charles M. Danzer, Erank G. Wagaman and Albert Heard, $1,000 each; that Startzman, a surety on the note, was dead and his estate insolvent; that Rupp and Schildknecht, other indorsers, were insolvent, and that William A. Danzer and Thomas L Rickard, although solvent, had not contributed at all to the payment of the note.

In No. 24 on the same docket the suit was brought by Strole and Schindel to enforce contribution from their co-sureties on the note for $15,000 held by the Nicodemus National Bank, which was signed by them and William A. Danzer, Clarence M. Stickell, Chas. M. Danzer, Thos. L. Rickard, Roy Danzer, Albert Danzer, Robert M. Rupp, Albert Heard, A. R. Warner, A. V. Polack, J. Wm. Middlekauff, W. W. ³⁹⁰ Schildknecht, Eranlc G. Wagaman, Omer T. Kaylor, and which was paid by contributions from certain of the sureties as follows: C. F. Strole, $1,134.78; Albert Heard, $1,296.38; O. T. Kaylor, $1,134.77; Albert Danzer, $1,134.77; J. Wm.

Middlekauff, $1,134.77; A. R. Warner, $2,000; D. P. Schindel, $2,107.43. The bill in it alleged the insolvency of certain sureties, and that others, the real defendants in the case, Charles M. Danzer, William A. Danzer and Frank G. Wagaman, although solvent, had not contributed to the payment of the note. No. 25 on the same docket was brought by the same plaintiffs to enforce contribution from their cosureties on the note for $5,000 to the First National Bank of Waynesboro. The balance due on that note. was paid by contributions from certain sureties as follows: Albert Heard, $249.83; Roy Danzer, $249.83; Albert Danzer, $249.83; J. William Middlekauff, $321.20; Frank G. Wagaman, $312.20; Chas.

F. Strole, $373.51; David P. Schindel, $492 — totaling $2,-248.40. But William A. Danzer and Charles M. Danzer, who were also sureties on the note, refused to contribute to the payment. No. 26 on the same docket was the suit of David P. Schindel alone, brought to force his cosureties on the note for $19,-000 to the Maryland Surety & Trust Company to contribute to the payment of the balance due thereon. The complainant in his bill alleged that, while certain cosiireties had contributed to that payment the amounts set opposite their names as follows: Roy Danzer, $3,368; Albert Danzer, $2,768; J. Wm.

Middlekauff, $3,283; Albert Heard, $2,768; David P. Schindel, $7,293; William A. Danzer and Frank G. Wagaman, other solvent sureties, had refused to contribute to such payment. Answers were filed in each of those cases, in which the sureties called upon to contribute set up as a defense that all of the complainants in the four cases were parties to an agreement or plan whereby a committee of three persons was authorized to settle and satisfy not only these but all other notes of the White Lake Lumber Company, or the Garland ³⁹¹ Hardwood Company, on which the parties to the agreement-were liable, in consideration of the payment by each person who was a party to such agreement of a fixed and definite sum to a fund to be used for such settlement; that under the agreement no party to the plan was to be called upon for any contribution greater than the sum so fixed, and that the fund thus realized was sufficient to have paid the four notes to which reference has been made; that, had it not been for the action of the complainants, those notes would have been paid without further contribution by any party to the agreement; that the complainants paid the four notes in issue in those cases voluntarily; and that therefore they are not entitled to receive from the other parties to the agreement any contribution in excess of the sum which they respectively agreed to pay to the committee, and which in fact they did pay. The four cases were heard together upon the pleadings and testimony, and at the conclusion of the hearing the- chancellor entered a decree in each case dismissing the bill filed therein. From each of those decrees Dr. Schindel appealed, but pending the appeal he died, and D. Philip Schindel represents him in these four cases as the administrator of his estate.

An examination of the evidence leaves no substantial doubt that David P. Schindel was a party to the agreement under which the committee was authorized to negotiate the settlement of the notes of the White Lake Lumber Company and the Garland Hardwood Company, which he and the other parties to these proceedings had signed. He himself admitted that at the second meeting of the indorsers he signed the following paper: “Whereas I am now an endorser of certain notes of the White Lake Lumber Company and the Garland Hardwood Corporation, and am desirous of being relieved of the obligation of said endorsements. “In consideration of being relieved of the obligation of said endorsement I do hereby agree to contribute the sum of Five thousand and 00/100 — toward the liquidation of said indebtedness of said indebtedness, the manner of said liquidation to be determined by Y. M. Cushwa, F. W. Mish and William P: Lane, Jr., said ³⁹² indebtedness being set forth upon a list now in their hands. “In the event that said individuals are unable to have me so relieved, this obligation is void and shall be returned to me. “David P. Schindel.” That agreement was, it is true, superseded by another in which the amount payable by each of the indorsers was increased, but Dr. Schindel was a party to both