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Vol. II.)

PRICE v. GOVER.

(No. 4.

It is believed the final decree should have proceeded upon the following basis :

1. The administrators should account for the proceeds of the sales of personal property in December, 1861, and January, 1862, in the currency of the United States. Those sales were on a gold basis. They could have been on no other. There was at that date no Confederate currency. And besides, as a general rule, calculations of Confederate currency do not begin until May 1, 1862. Laws of 1867, approved February 19, 1867, p. 373.

2. The hiring of slaves in 1862, 1863, and 1864 were manifestly with reference to Confederate money.

3. It does not appear in what currency debts were paid. This should be inquired into and adjusted accordingly.

4. Receipts after the war were of course in United States currency.

5. There was some evidence of the sale of cotton by the administrators, unaccounted for by them. This should be further investigated, and a decree according to the facts.

6. The record as it is now presented shows the administrators to have loaned the funds of the estate to their friends and neighbors, at a liberal interest, and to have substantially mingled the funds of the estate with their individual funds. This should be further investigated, and the · administrators charged with the interest, if justified by the facts.

In addition to the foregoing suggestions, it ought, perhaps, to be added that it was the duty of the administrators to pay the debts of the estate, and, if in their power, to use the depreciated money in their hands for that purpose. Good faith required an effort on their part to do this. If they neglected or failed in their duty in this respect, the loss should fall upon them.

In view of these suggestions, the decree is reversed, and cause remanded for further proceedings, in accordance with the rules stated herein.

PEYTON, C. J. dissented.

COURT OF APPEALS OF MARYLAND.

( To appear in 40 Maryland.)

WHEN PAROL EVIDENCE MAY BE ADMITTED TO SHOW THE TRUE CHAR

ACTER AND PURPOSE OF A MORTGAGE. — MORTGAGE OF INDEMNITY.WHAT CONSTITUTES A SUFFICIENT CARRYING OF STOCK BY A BROKER FOR A CUSTOMER.

PRICE v. GOVER.

A mortgage executed by P. and wife, recited that P. stood justly indebted to L. & Co. in the full sum of $30,000, upon his six promissory notes, drawn by him to their order, each for $5,000, dated the 1st October, 1857, and payable two of them at six, two at nine, and two at twelve months, and all bearing interets from date, and that the mortgage was executed to secure payment of the said sum of $30,000 and interest, agreeably to the tenor of the said note. After the usual conveyance and defeasance clauses and assent to a decree for a sale, there was the following : “Memorandum - Whereas the

Vol. II.]

PRICE v. GOVER.

(No. 4.

parties hereto of the second part as copartners aforesaid are the holders of eleven hundred and fifty shares of the capital stock of the Baltimore and Ohio Railroad Company, which they have agreed to carry for and on account of said P. for the period of twelve months from the first day of October, 1857, at forty-five dollars per share ; now it is hereby declared to be the express agreement and understanding of the parties hereto, and one of the considerations for making this mortgage, that in case of a sale of said railroad stock or any part thereof during said period of twelve months at an advance over forty-five dollars per share, such advance is to be credited to the said P. on account of the debt secured by this mortgage, and likewise that all dividends received by said parties of the second part on said stock during the period aforesaid is to be credited on account of the said debt hereby secured.” This mortgage being assailed for fraud by a bill in equity, filed by the mortgagors against the mortgagees and the

trustee appointed to sell the mortgaged property, it was held : 1st. That parol evidence was admissible for the purpose of showing the true character

of the instrument, for what consideration it was given, and what purposes the parties

to it intended it should subserve. 2d. That it was simply a mortgage of indemnity - its sole purpose being to secure L.

& Co. against loss in carrying the eleven hundred and fifty shares of stock to the extent of their sales as low as $45 per share, they taking upon themselves the risk of all

additional loss that might be incurred by a sale at a less rate. Where a broker agrees to carry for and on account of a customer, for the period of twelve

months, a certain number of shares of railroad stock, at a specified price per share, he is not bound to retain in his possession during the pendency of the carrying contract the identical stock which he agreed to carry; he may sell the whole or any part thereof; all that the law requires of him is, that during the pendency of the contract he should have on hand, in his possession, or under his control, an equal number of other shares of the same stock, ready for delivery when his customer should pay what he owed on account thereof, or to be sold on his account when he should so direct.

APPEAL from the superior court of Baltimore city.
The case is stated in the opinion of the court.

The cause was argued before Bartol, C. J., Grason, Miller, Alvey, and Robinson, JJ.

Messrs. Thomas W. Hall, Jr. & S. Teackle Wallis, for the appellants.

Messrs. William A. Fisher, Wm. Henry Norris, f I. Nevett Steele, contra. MILLER, J., delivered the opinion of the court.

The appellants, on the 6th of October, 1857, executed to the firm of Josiah Lee & Company a mortgage of certain real and leasehold property in the city of Baltimore. This mortgage contains the assent of the mortgagors to a decree for a sale under the Act of 1833, ch. 181, and its supplements, and upon petition of the surviving partners of the firm, a decree to that effect was passed by the superior court on the 3d of May, 1860. The bill in this case filed by the appellants on the 29th of June, 1860, charges that this mortgage is fraudulent and void, and prays that it may be vacated, the decree set aside, and for an injunction against the sale of the property thereunder. The injunction was granted, and after answers and replication, testimony was taken at various times between the 20th of June, 1862, and the 8th of June, 1873. The case was then brought to final hearing, and the superior court, on the 15th of July, 1873, passed a decree dissolving the injunction and dismissing the bill, and from that decree this appeal is taken.

In view of the large interest at stake as well as the very able and earnest arguments at bar by counsel on both sides, we have given to the case a full and careful consideration. Especially have we done this in reference to the voluminous testimony in the record, for upon the conclusions to be

Vol. II.]

PRICE v. GOVER.

(No. 4.

to an arrangement, and Puthat month. Ithe company Shamount

drawn from that, rather than upon the solution of any difficult questions of law, our decision must rest. It cannot however be expected of us that we should in this opinion review in detail all the mass of proof in the case, and comment upon each item of testimony contributing to the formation of our judgment. All that we can do is to state the general features of the case as we find them established by the evidence, and our conclusions upon such controverted questions as are important, and upon which the reversal or affirmance of the decree appealed from must depend.

At the time of the transactions in question the appellant, Price, was a man advanced in years, uneducated, being unable to read or to write more than his name, but of good natural capacity and judgment, perfectly capable of contracting, and well able to protect himself in his business operations. He lived in the city of Baltimore, and owned there valuable property, and his credit was good. Lee & Company were doing a large business as bankers and stock-brokers in the same city. In or prior to May, 1857, Price had purchased through Purvis & Co., another firm of brokers, 1,000 shares of Baltimore and Ohio Railroad stock which they were holding for hiin, and for which he was indebted to them in the large amount of $67,109.90, payable when the transfer books of the company should be reopened, namely, on the 26th of that month. It being inconvenient for him to make this payment, and Purvis & Co. desiring it to be paid, he entered into an arrangement with Lee & Company to carry the stock for him, that is to say, that they should pay Purvis & Co., the amount due on the stock, receive it from them, and retain it for him and on his account, to be delivered to him or sold, whenever by the terms of their agreement a delivery or sale could be required. Lee & Company accordingly, on the 26th of May, 1857, paid to Purvis & Co. the whole $67,109.90, and took the stock into their possession. On that day the stock was selling for $52 per share, so that they advanced $15,109.90 more than its then market value. In June and August following they purchased by his order 550 other shares of the same stock, and agreed to carry 150 of them in the same way as the 1,000 shares, thus bringing 1,150 shares within the terms of the contract. The remaining 400 shares of these subsequent purchases they sold by his order and rendered him an account of sales, which resulted in losses. There is a conflict in the testimony as to how long this stock was to be carried under the terms of the original agreement, whether so long as Price might choose to keep it unsold, or only so long as either party should desire it. It is not important to determine this question, because whatever may have been the terms of the original agreement, they were superseded by the memorandum contained in the mortgage of the 6th of October, 1857, by which a new and definite contract in writing respecting the carrying of these shares was made, and our duty is to decide upon the validity of that instrument.

This mortgage recites that Price “ stands justly indebted” to the firm " in the full sum of $30,000” upon his six promissory notes drawn by him to their order, each for $5,000 all dated the 1st of October, 1857, and payable two of them at six, two at nine, and two at twelve months, and all bearing interest from date, and that the mortgage is executed to secure the payment of said sum of $30,000 and interest agreeably to the tenor of these notes. Then after the usual conveyance and defeasance clauses and assent to a decree for sale there is the following:

1,000 g, stock, allowing theo more-ork was sell, and "tothe

and vening 400 ringing to carchased bits then for 8529

Vol. II.)

[No. 4.

PRICE v. GOVER.

Memorandum - Whereas the parties hereto of the second part as copartners aforesaid are the holders of eleven hundred and fifty shares of the capital stock of the Baltimore and Ohio Railroad Company, which they have agreed to carry for and on account of the said William Price, for the period of twelve months from the 1st day of October, 1857, at forty-five dollars per share; now it is hereby declared to be the express agreement and understanding of the parties hereto, and one of the considerations for making this mortgage, that in case of a sale of said railroad stock or any part thereof during said period of twelve months at an advance over fortyfive dollars per share, such advance is to be credited to the said William Price on account of the debt secured by this mortgage, and likewise that all dividends received by said parties of the second part on said stock during the period aforesaid is to be credited on account of the said debt hereby secured.”

Before considering the direct question of the validity of this instrument, it is important to dispose of a preliminary one as to its character and purpose. It has been strenuously argued on the part of the appellees that there was at this time a settlement of accounts between the parties, and that the mortgage was given to secure an ascertained debt or balance of $30,000, then due to Lee and Company, not only for loss upon the 1,150 shares, but also for losses which had accrued on the purchase and sale of other shares by them on Price's account. But we do not think this position can be sustained. The answer, which was carefully prepared after an examination of their books, and sworn to by all the defendants, takes no such view of the purpose of this mortgage. On the contrary it avers, in reference to the purchase and sale of other shares, that they were all made in June and August, 1857, and resulted in a loss of nearly $7,000, for which they demanded cash in pursuance of their agreement with Price, under which such purchases were made, but were unable to obtain it, and were finally compelled to accept his two notes, one for $3,387 and the other for $3,387.40, therefor; payable respectively on the 27th and 29th of June, 1858, both of which still remain due and unpaid ; and in reference to the mortgage the averment is, that some time prior to the 6th of October, 1857, they demanded it "in order principally to secure them against any loss which had arisen or might arise out of their contract for the carrying of said 1,150 shares of stock;” that they required of Price that he should pass to them his notes for “a sum of $30,000” and he accordingly did so, and executed the mortgage, “and they agreed to carry 1,150 shares of stock for his account for a year from the 1st of October, 1857, a memorandum of which new agreement made on the execution of the mortgage is appended thereto." The proof also seems to us opposed to this theory of the case. Reese, one of the partners of the firm, and their witness, when asked to state the principles on which the account was adjusted at the time the mortgage was executed says, “ Price was to give his notes for the amount of his indebtedness, estimating the stock at the amount of $45 per share, and we were to carry the stock for one year; the notes represent the difference between $45 per share and the cost of the stock and interest and commissions; this made up the sum of $30,000;” and in reference to the purchase of other shares besides the 1,150 the same witness testifies that such purchases were made and that account W. H. N. No. 3 shows corVol. II.)

PRICE v. Gover.

[No. 4.

rectly the prices and times at which such additional shares were purchased and sold ; that there was a loss of $6,480.90 on 300 shares of such purchases which was settled by the notes of Mr. Price, before the mortgage was given, which notes have not been paid. By reference to account W. H. N. No. 3, which is but a copy in this respect of account W. P. No. 2, we find no entries of any purchases and sales of stock besides the 1,150 shares, except in June and August, 1857, or of any notes of Price save the mortgage notes and the two for $3,387 and $3,387.40 due as the accounts state June 27 and July 29, 1858; and these two we infer to be the same, referred to in the answer and in the testimony of Reese. We find no proof in the record from which the inference could be drawn that there was any purchase or sale of stocks after the mortgage except a debit in these accounts of $6,480.90 as of October 20, 1857, for loss on 300 shares bought and sold as per statement rendered ; and we cannot escape the conclusion that this loss was on account of purchases and sales in June and August, 1857, and that it was settled by the notes of Price referred to in the answer and in the testimony of Reese. These notes were not due when the mortgage was given, and it makes no reference to them as forming any part of the consideration for its execution. By no computation we are able to make can the amount of these notes be brought in to fit and make up the sum of $30,000 mentioned in the mortgage, and we are satisfied that for whatever loss resulted from stock transactions outside of the 1,150 shares, the appellees trusted to the individual responsibility of Price and accepted his notes in settlement thereof before the mortgage was given, and that such loss formed no part of its consideration. Such would be our conclusion from the answer and the testimony of Reese already referred to. But in addition to this, the same witness, on cross-examination, testifies that the transaction amounted to nothing more than giving the notes and mortgage as margin upon the contract to carry at $45 per share, except that we took the risk of the stock going below $45 per share. So also George P. Gover, another member of the firm, in answer to the question, “ Was there any understanding or intention so far as you know, on the part of your firm that Price's mortgage was given or was to be given as for an indebtedness already ascertained, or for any other purpose than as a guaranty or margin to protect your firm against loss on the carrying of the stock ?” says, “ The only consideration was that the mortgage was to protect Josiah Lee & Company against loss from carrying the stock.” There can, we think, be no doubt that, in a case like this, in equity, where the mortgage is assailed for fraud, such evidence is admissible for the purpose of showing the true character of the instrument, for what consideration it was given, and what purpose the parties to it intended it should subserve. We are therefore of opinion, notwithstanding the formality of passing notes, and the use in it of the terms "debt" and " indebtedness," the sole purpose of this mortgage was to secure Lee & Company against loss in carrying these 1,150 shares of stock to the extent of their sale as low as $45 per share, they taking upon themselves the risk of all additional loss that might be incurred by a sale at a less rate. Viewed in this light it is simply a mortgage of indemnity and so we pronounce it. Our judgment on this question would be the same, whether the original understanding contemplated the giving of such a mortgage, or whether it was executed upon the subsequent demand of the mortgagees.

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