Downing v. Robinson

The bill in this case asserts and seeks to enforce the right of the appellant to the benefit of an alleged claim of the appellee, Charles A. Macatee, against his co-appellees for a portion of the purchase money for certain building lots. The material circumstances which are asserted to have conferred on the appellant the right of subrogation or substitution to the claim of Macatee appear from the record to have been as follows:

In the year 1890 a Virginia corporation known as the Front Royal and Riverton Improvement Company, of which Henry A. Downing was president and Charles A. Macatee was a director, attempted to develop as an addition to the town of Front Royal a tract of farming land lying in its vicinity. For that purpose the means then currently employed in exploiting town sites in the Valley of Virginia were adopted. Engagements were secured from various educational, manufacturing and industrial enterprises to establish themselves on the property. The land was platted and laid out in streets and blocks and a prospectus was prepared and issued setting forth in glowing terms the present advantages and future prospects of the situation, and then building lots were offered for sale.

The appellees, other than Charles A. Macatee, were residents of Maryland, and had no interest in the improvement company; but, their attention having been called to its enterprise, they visited Front Royal and inspected the property to see whether it presented any opportunities for profitable investment.

The fever of speculation then prevalent in that neighborhood proved sufficiently contagious to induce them to agree on October 20th, 1890, to purchase from the company eleven of its building lots, embracing in all about one acre of land, at prices aggregating $8,100, to be paid one-third cash and the balance one-half in one year and the other in two years after date. A short time thereafter it was agreed between the purchasers of the lots and Charles A. Macatee that he should assume one-seventh interest in the purchase and that as a matter of convenience, the title to the property should be taken and held in his name. The first instalment of purchase money was paid by the seven appellees in equal shares and the eleven lots were conveyed by the company to Macatee, who gave to it his twenty-two individual bonds for the two deferred instalments. He then as evidence of the nature of his holding of the title as between him and his co-appellees executed and delivered to them the following declaration of trust:

"This declaration of trust made this ____ day of November, in the year eighteen hundred and ninety by C.A. Macatee of Front Royal, Virginia.

"Whereas, the said C.A. Macatee has received from the Front Royal Riverton Improvement Company of Front Royal, Va., deeds for the following lots in or near Front Royal, Va., viz: — lots No. 23 24 in block 23, Sixth St. Lot 14 in block 18, Sixth St.; Lots 1 and 2 in block 17, Va. Avenue; Lots 1 and 2, block 15, Va. Avenue; Lots 9 10, block 21, Commerce Avenue, and Lots 1 and 2, block 33, Warren Avenue, as located on a plot of the property owned by said Front Royal Riverton Improvement Company, and whereas the said C.A. Macatee has only a one-seventh interest in said lots, the other six-sevenths interest therein being owned equally by J.H.C. Watts, Martin L. Jarrett, Edwin H. Webster of Jno., William S. Forwood, Jr., Thomas H. Robinson and Frank B. Macatee, all of Harford County, in the State of Maryland, and whereas said parties have paid to the said Front Royal and Riverton Improvement Company one-third of the purchase money, each party paying one-seventh thereof (being $350.58) at the execution of said deeds to C.A. Macatee; and whereas said lots were purchased as aforesaid for the purpose of conveying them to such purchaser or purchasers at such time and for such price as the parties interested therein may direct, and to save inconvenience and delay in the execution of a conveyance it was agreed that the legal title to said lots should be put in the name of the said C.A. Macatee.

"Now, therefore, the said C.A. Macatee does hereby declare that he has only a one-seventh interest in the aforesaid lots purchased from the Front Royal Riverton Improvement Company and particularly described in the deed from said company to the said Macatee, the other six-sevenths interest therein being owned equally by the said J.H.C. Watts, Martin L. Jarrett, Edwin H. Webster of Jno., William S. Forwood, Jr., Thomas H. Robinson and Frank B. Macatee, of Harford County, Maryland.

"Witness my hand and seal the day and year above mentioned.

"C.A. MACATEE. (Seal)."

The second instalment of purchase money for the lots was paid at or near its maturity by Charles A. Macatee, to whom the other appellees each sent a check for his share of the instalment, although the improvement company and its development scheme had already sunk into a languishing condition. When the third instalment fell due Charles A. Macatee paid his own one-seventh of it, but the other appellees, with the exception of J.H.C. Watts, never paid their shares of it. By that time the speculative boom in the valley had collapsed and the improvement company and its projects had come to naught. Charles A. Macatee was financially ruined by the failure of the company, and he still remains in an insolvent condition.

On the 28th of February, 1898, Henry H. Downing was appointed receiver of the improvement company by the Circuit Court of Warren County, Virginia, and directed to collect the assets of the corporation and to institute and maintain such suits as might be necessary for that purpose. On October 21st, 1904, but three days less than twelve years after the maturity of the last instalment of the purchase money for the lots purchased from the company by the appellees, Downing, as receiver, having first obtained leave of the Court for that purpose, filed the present bill against them for the recovery of that instalment with interest.

The theory of the bill is that, as the result of the relation existing between the appellees in reference to the purchase of the lots referrd to, Charles A. Macatee stands in the attitude of surety for his co-appellees, and in that situation is entitled to claim reimbursement from them to the extent of their respective portions of the unpaid balance of purchase money and interest, and that the appellant, as the creditor of Macatee, is entitled to the benefit of his claim against them. All of the appellees as defendants below answered the bill. Charles A. Macatee filed a separate answer, practically admitting all of the allegations of the bill and consenting to the granting of the relief prayed for. The other appellees, as defendants, filed a joint answer, admitting the purchase of the lots and their conveyance to Charles A. Macatee and the execution by him of the declaration of trust in their favor and the payment by them of two instalments of the purchase money and the non-payment of the third one by any of them, except J.H.C. Watts, but denying the existence of any indebtedness or obligation on their part to Macatee or to the appellant or the corporation of which he claimed to be the receiver. Their answer further set up by way of defense that they had been induced to purchase the lots by the fraudulent representations of Downing and Macatee, as president and director of the improvement company. They also set up and relied upon the Statute of Limitations, in their answer, as a defense to the bill. The case was heard in due course in the Court below and the bill was dismissed by the decree, from which this appeal was taken.

The appellant contends that in the state of facts to which we have adverted Charles A. Macatee should be in equity regarded as standing in the situation of surety for his co-appellees for the payment of the purchase money for the eleven lots, and he invokes in behalf of the improvement company, under whose title he claims, the well-recognized equitable proposition, that when a principal debtor has given any security or other pledge to his surety the creditor is entitled to the benefit of such security or pledge in the hands of the surety, to be applied in payment of the debt.

He also relies upon the other equitable doctrine, which has repeatedly been recognized by this Court, that a surety, after the debt has become due, may maintain a bill to require the principal debtor to pay it, whether the surety has been sued for it or not. Both of these two equitable doctrines are supported on the appellant's brief, by the citation of numerous decisions of this and other Courts, and if either of them were applicable to the facts disclosed by the record it may be conceded that it would be conclusive of his right to recover.

It is, however, fundamental to both of the propositions so relied on by the appellant that Charles A. Macatee be determined to have been surety for his co-appellees for the payment of the purchase money for the eleven lots, but we are unable to find in the record sufficient ground for holding him to have occupied that relation to them. He was not formally their surety, for the bonds which he gave to the company for the deferred payments were not their obligations on which he appeared as surety. They were his individual obligations for a debt for which both he and his co-appellees had been originally liable.

The arrangement, in reference to the purchase and proposed sale of the lots, into which the appellees entered, as evidenced by the declaration of trust executed by Macatee, created a tenancy in common or at most co-partnership as between them, but it did not involve a suretyship. A somewhat similar arrangement as to the purchase and sale of lands for account of several persons was held by us in Mogart v. Smouse, 103 Md. 463, to have constituted its participants co-partners. The present case fails to fall within the operation of the first mentioned of the two equitable doctrines under discussion for the further reason that the record does not show that the appellees, other than Macatee, ever placed in his hands any security or pledge which can be applied to the payment of the debt now sought to be recovered.

Nor is the appellant entitled to the benefit of the other proposition relied on in his brief and supported by the authorities therein cited, that when a surety or even an agent has paid a debt of the principal debtor he is entitled to recover from the latter the amount so paid for him, because Macatee, to whose right the appellant seeks to be subrogated, is not shown to have paid any debt for which his co-appellees were liable, otherwise than with funds furnished to him by them for that purpose.

The original liability of the appellees to pay for the lots purchased were, so far as the record shows, a simple contract obligation. If that obligation was not extinguished under the rulings of this Court in Davidson v. Kelly, 1st Md. 492, by the giving and receipt of Macatee's individual bond for the debt, it has long been barred by the Statute of Limitations, which was set up by the answer of the appellees as a defense to the present suit.

During the progress of the case below the appellees as defendants took a number of exceptions to the admission of testimony, but they were not passed upon by Circuit Court for the reason doubtless that the appellant as plaintiff had not made out a case for relief in equity. Having come to the same conclusion as to the insufficiency of his case, we deem it unnecessary to notice those exceptions. We think it due to the appellant and to the appellee, Charles A. Macatee, to say that, in our judgment, the record does not sustain the charges made against them in the answer of the other appellees of fraudulent conduct in procuring or making the sale of the lots on behalf of the improvement company.

For the reasons stated in this opinion the decree appealed from will be affirmed.

Decree affirmed with costs.