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Baltimore Daily Record Newspaper Archives Apr 11 1890, Page 3

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Baltimore Daily Record (Newspaper) - April 11, 1890, Baltimore, Maryland The daily record Friday april la 1890. 347court of appeals of Maryland. Mary Healey administer matrix of Maurice a. Healey is. Henry Loveridge it Al. March 19, 1890. Appeal from the circuit court for Allegany . In. Ircne Crow David w. Sloan for Appellant. Ivy. Walsh for Appellee. Argued before Robinson Irving Mcsherry Bryan and Fowler . Robinson is an Allegany county Case and the questions Are mainly questions of fact involving charges of bad Faith and fraud against High Railroad officials against presidents of Coal companies and against leading members of the bar. The record is a voluminous one with no less than five Hundred pages of testimony a Good Deal of which is conflicting and contradictory painfully so we May add and it is a difficult matter to get at the truth of some of the transactions closely connected with the questions at Issue. The Bill is filed by the administer matrix of Maurice a. Healey to set aside a Transfer by him to the defendant Loveridge of d52 shares of Stock being a majority of the entire number of shares of Stock of the Pennsylvania Railroad in Maryland on the ground that the Transfer was obtained of fraud and without consideration. To understand properly the object and purposes of this Transfer it is necessary to refer briefly As we can to some facts about Winch there is no dispute. The Pennsylvania Railroad in Maryland was chartered in 1876, to run from the City of Cumberland to the Pennsylvania state line a distance of six Miles and there to connect with the Bedford and Bridgeport Railroad a part of the Pennsylvania Railroad system. The object in construct ing this Road was to give to the City of Cumberland the Benefit of a competitive Road with the Baltimore and Ohio Railroad then its Only outlet. Its estimated Cost was $50,000, and this sum was to be raised by the Issue and Sale of $85,000 first mortgage Bonds and $05,000 Cumberland City Bonds which that City had generously loaned to the company for the completion of the Road. There was a capital Stock it is True of $35,000, divided into 700 shares All of which was taken but with the exception of a few Hundred dollars for preliminary surveys no Money it seems was paid by the persons to whom the shares were issued. Of these shares 500 stood in the name of Healey the Active promoter of the Road and its first president and too shares stood in the name of Laing and too shares in the name of Zackarius. In the Early part of 1878, the 65,00# Cumberland City Bonds were delivered to Healey the president of the Road and were sold by him through col. Schley at of cents of their face value. With the proceeds arising from the sales of these Bonds the work of construction began under a contract with messes. Wingate Saxton amp co., and progressed satisfactorily apparently so at least till about the Middle of november of that year when for reasons satisfactory to themselves Wingate Saxton amp co. Abandoned their contract. Healey then attempted to carry on the work but being unable to negotiate the $85,000 first mortgage Bonds and being without Money or credit All further work on the Road was entirely suspended. The whole amount expended in grading and construction up to this time did not according to the estimate of Engineer Gaffney exceed forty thousand dollars. The proceeds from the Sale of the $65,000 Cumberland City Bonds had been deposited in Bank by Healy to his own credit and of the sum thus deposited not less than $15,000 had been used by him for disown purposes. A agree that the Prospect of completing the Road was in the Winter of 187�?~j, gloomy Aud discouraging. The company was largely indebted to material men and employees All of whom were clamouring for the payment of their claims Aud there was besides a widespread feeling of discontent Aud indignation on the part of the people of Cumberland growing out of the suspension of the work and the reckless management of the affairs of the company and the general apprehension of the loss of the $65,060 loaned to the company without the Prospect of any corresponding Benefit to the City. No one realized More fully the condition of affairs than Healey himself a Maud tormented and worried to death a he says against the Earnest entreaties of both Williams the counsel of the Road and Haydon its Engineer he determined to leave Cumberland his precise whereabouts being unknown. Before going however he executed a Power of attorney authorizing Williams and any other person whom he might see proper to associate with him to negotiate tile $85,000 mortgage Bonds on such terms As they might seem Best and to apply the proceeds to the completion of the Road. All efforts however on the part of Williams and col Schley associated with him to negotiate these Bonds were Una Vaing. A the touched a says col. Schley a the Money Power of the country a but not a Dollar could they get. So in this emergency they applied to the defendant Loveridge to Aid them in disposing of the Bonds. Loveridge was the president of the Maryland Coal company which was the owner of Large and valuable Coal Fields in Alleghany county and resided in new Jersey with an office in new York City. The company of which he was the president Aud the american Coal company were at that time constructing the Georges Creek Railroad As an outlet for their Coal and Loveridge had Felt he admits a great interest in the completion of the Pennsylvania Road in Maryland because he expected to make a connection of the Georges Creek Road with it. With this View he expressed his willingness not Only to negotiate the mortgage Bonds hut to Complete the Road upon the condition however that Williams As attorney for Healey would Transfer to him 352 shares of Healey a Stock being a majority of the entire Stock of the company and upon the further condition that he was to have the absolute control and management of the affairs of the company. Accordingly on april 2d an agreement was made Between Williams attorney far Healey and Loveridge by which 352 shares of Stock were transferred to Loveridge to enable him says the agreement a to obtain the absolute control of the Pennsylvania Road in Maryland a and Loveridge on his part agreed to negotiate the Bonds at not less than 80 per cent. Of their face value the proceeds to be applied to the completion of the Road and while retaining the entire control and management of the company he agrees that Healey shall remain As president. Now a great Deal was said about the authority of Williams to Transfer the 352 shares of Healey a Stock but in View of the subsequent agreement of april 26tli Between Healey himself and Loveridge this seems to us to be an immaterial question. Whether strictly speaking he had the authority under the Power of attorney to Transfer Healey a Stock All will agree that it was made by him in perfect Good Faith and for the Best interests of not Only Healey but of All parties interested in the Road. The Stock he knew was in fact without any Market value besides he knew that Healey was indebted to the company All the Way from $10,000 to $15,000, for Money belonging to it which had been used by him for his own purposes. He knew too thai Healey had Given Bond to the City of Cumberland in the sum of $75,000, with sureties for the completion of the Road As a competitive Road. The Paramount object of All parties was to secure the Means necessary to Complete the Road and having failed to negotiate the Bonds himself he knew that this object could Only be accomplished through the assistance of love ride. The agreement thus made by him was approved by Schley and by Haydon the Engineer and by Beall the trusted Friend of Healey by the entire Board of directors and would no doubt have been approved by Healey himself if instead of going away he had been on the spot. No sooner however was his agreement made than Healey returns to Cumberland. The completion of this Road which seemed almost hopeless when he left was now through the agreement of april 2d assured. He was not however it seems satisfied with it and denied the authority or Williams to Transfer his Stock and said he a would go to new York and see Loveridge and get $5,000.�?� the result of their interview in new York led to the execution of the agreement of april 26th Between Healey and Loveridge by which the former transferred to Loveridge the 352 shares of Stock and Loveridge on his part agreed to negotiate a loan of $5,500 for Healey by the 1st of july on his note secured by the pledge of his Stock As collateral Security and also agreed that Healey should be paid a fair compensation for his services As president of the company the amount to be agreed upon and All accounts Between him and the company to be audited by Beall and Loveridge. Immediately upon the execution of this agreement Loveridge advanced to Healey $500 of the $5,500. Thus All obstacles in the Way of the completion of the Road were removed. Money was advanced of Loveridge at once to pay the indebtedness to the material men and the employees the mortgage Bonds were sold by him none at less than so per cent. And some As High As to per cent. And with the Money from the Sale of the Bonds and additional Means furnished by him the Road was in a few months completed and fully equipped As a first class Road. The balance of the $5,500 loan to Healy was not however it seems negotiated nor did Beall and Loveridge Ever Settle the accounts Between Healey and the company or agree upon the compensation to be allowed him whilst he was president. And the Contention of the complaint is that Loveridge never had any intention of carrying out his part of the agreement and that it was used by him As a device or trick for the purpose of getting Possession of the 352 shares of Healey a Stock be iffy a majority of the entire number of shares of Stock and thereby securing the control of the company. And in support of this Contention the Appellant relies 1st. Upon the failure to negotiate the $5,500 lean. 2d. The failure to adjust the accounts Between Healey and the company and to agree upon the compensation to be allowed him As president. 3d. Upon the election of Schley to succeed him As president. 4th. The Sham and pretended sales of the 352 shares by Loveridge to Stewart and by the latter to Gardner p. Lloyd president of the american Coal company. There is a Good Deal of testimony and much of it is contradictory but after a careful consideration of All of it we Are of opinion that this Contention cannot be sustained. We Are unable to find any proof to justify us in saying that the agreement of april 26th was made in bad Faith or that Loveridge did not Bona fide Meau to carry out every Promise made by him in that agreement As Well As in the agreement of april 2d. The failure to carry out these promises was owing to other causes and not from any fault properly chargeable to him. It May be proper in View of the interests involved that we should state As briefly As we can tile grounds on which this conclusion has been reached. First. The failure to negotiate the $5500 loan and Here it must be borne in mind that this loan was to be made by the 1st.of july on Healey a note with his Stock fledged As collateral Security and further the number of shares to be pledged was to be determined by Beall a Loveridge. Ail agree that the note was never presented to Loveridge nor were the number of shares of Stock to be pledged As collateral Security Ever determined nor was Loveridge Ever requested by Healey or any one else to Advance the Money. Nor does the proof so out any unwillingness on his part to negotiate this loan. On the contrary the proof is All the other Way. Beall himself says that Loveridge was ready to Advance it and requested him so to inform Healey Aud this the witness did. Williams says the same thing. And when Lynn at Loveridge a request told Healey that the loan Vas ready for him at any time he replied by saying a i done to want Aud As late As june 30th Loveridge telegraphs to Healey that he was ready to Honor a sight draft for the Money accompanied with his note and 248 shares of Stock As collateral. This offer it was argued was not made in Good Faith because Loveridge knew it was said that Healey had Only 148 shares of Stock which he could pledge. But the proof does not support this. In the second april agreement it was expressly stated that Healey Wras the owner of 600 shares and if so he still had 248 shares after the Transfer of the 352 shares to Loveridge. So it does not seem to us there is a particle of proof to show that the offer through this Telegram was not a Bona tide offer. And in addition to All this after Healey a death Widich occurred july 8th, Loveridge authorized Williams to offer the $5,000, the balance of the $5,500, to Healey a sister now complainant which offer she refused to accept. Now there cannot be it seems to us any difficulty in understanding Why this loan was not made and Why Healey never tendered his note and Stock As collateral. On the very Day on which the agreement Wras made Healey spoke to both Beall and Williams of the Large sum of Money that could be made by the Sale of his Stock and the Transfer of the Road to the Baltimore and Ohio Railroad and it was not till Williams had denounced such a purpose in the most Earnest Aud emphatic manner As a flagrant breach of Faith with the people of Cumberland who had loaned $65,000 to the company upon the pledge of Healey himself and the directors that the Road should be built As As a competitive Road that he promised to abandon the scheme and never think of it again. And later in the Day when the agreement Between Loveridge and himself was made by which he transferred 352 shares of Stock to Loveridge he had concluded no doubt to stand by his pledge and to stand by the agreement. But he was unable it seems to resist the temptation. La the Early part of june he tells Glary that he Bas had an offer of $25,000 for the Stock of the Pennsylvania Railroad in Maryland and he had a notion to let it about the same time he tells Lynn he a has a big thing on hand that he could make thousands of dollars out of it and then spoke of Selling out his Stock to the Baltimore Aud Ohio Railroad instead of to Loveridge. And when the witness asked him How he was to get Over his contract with Loveridge he replied a that was an easy that he had not a accepted the $5,000 loan and did no to mean to accept it a but was going to accept the offer from the Baltimore Aud Ohio. Ten Days after this he Renews the subject with Williams and solicits his cooperation Aud begs him to use his influence with Beall not to come to any settlement with Loveridge under the Aoril 26 agreement. Aud Iii the latter part of the month we find him in conference with the officials of the Baltimore and Ohio As to the terms Aud conditions on which he was to Transfer his Stock and the control of the Pennsylvania Road in Maryland to that company. So whatever May have been his intention at the time the 26th of april agreement was made Aud although he May have been willing at that time to have accepted the loan of $5jh u on the balance of his Stock As collateral Security we Are satisfied he had fully made up his mind a few weeks afterwards to sell his Stock and hand Over the control of the Road to the Baltimore and Ohio provided he could get rid of or to use his own language a burst up his agreement with Loveridge. And this is Why he did not want the $5,500 loan negotiated and Why it was not in fact made. Secondly. The failure to adjust the accounts Between Healey Aud the company. These accounts were not adjusted it is True but it was not from any unwillingness or want of co operation on the part of Loveridge. Beall who was to represent Healey in the audit of these accounts went to Texas immediately after the execution of the 26lh of april agreement and did not get Back tid the last week in May. After his return in the Early part of june he called on Healey for his account but it was not ready. As a matter of fact there was no data from which an account could be made. He was the president of a company expending Large sums of Money in the construction Aud grading of the Road and yet no books or accounts were kept of the receipts or disbursements. All its Money he deposited in Bank to his own credit and used it not Only to defray the expenses of the Road but for his own individual purposes instead of an accurate account showing what had been received and How it had been expended there was nothing but Loose scraps of paper memoranda and cheques drawn in Healey s name from which a statement of his dealings with the company could be made. We Are not surprised therefore that both Beall and Loveridge were unable to understand and found it impossible to adjust his accounts Ai their first meeting held in the Early part of june. Loveridge lived in new Jersey and Beall in Allegany county so another meeting was not held till the latter part of the Mouth and by this time a statement had been made out by Haydon the Engineer but made As he says at Healey a dictation. This statement was far from being satisfactory one item alone of $40,000, was claimed As a credit by Healey without a voucher As proof of Auy kind to support it. Before passing upon an item of so much importance Loveridge proposed to see Reed of Philadelphia to whom the my Ney was paid and there was therefore but Little legless made at this meeting. And thus passed away the month of june and on the 8th of july Healey died. As there was no time designated by the agreement of april 26th within which the audit was to be made Loveridge after Healey a death proposed to Beall that they should go and adjust and Settle the accounts but Beall being of the opinion that his authority to act in the premises had terminated by idea Ley a death declined to have anything More to do with the matter. Now a great Deal was said about Loveridge shaving obtained Healey a papers and statements from Beall upon a pledge by him to return them and his refusal afterwards to do so it May be proper to add that Loveridge says that Healey delivered these papers to him and he sept them because they belonged in fact to the company. But be this As it May if there was a breach of Faith on the part of Loveridge in this respect it does not appear that these papers were kept by Liim or the purpose of preventing or throwing any obstacles in the Way of settlement of Healey a account. On the contrary they were afterwards delivered by him to or. Semmes the complainants counsel for the express purpose of enabling him to make conies and when this is done they were returned to Loveridge. It thus appears that the failure to adjust these accounts and to agree upon a compensation to be allowed Healey As president instead of being the fault of Loveridge was owing in the first place to the fact that Healey himself was unable to furnish a statement of his account and dealings with the company from which an audit could have been made and in the next place to the refusal of Beall to have anything to do with it after Healey a death. And besides All this there was no motive so far As we can see on the part of Loveridge to prevent a settlement of these matters. He knew that Healey was largely indebted to the company not less than $15,000, and the very Liberal allowance of $5,000 a year for his services As president of a Road six Miles Long Aud this is All Healey claimed would not have More than offset his indebtedness to the company. On the other hand being utterly insolvent himself it was a matter of no importance to the company How much his indebtedness really Wras. We come then to the election of Schley As president in the place of Healey. We Are fully satisfied that tile agreement of Loveridge of the 2d of april that Healey should remain president was made in perfect Good Faith and that he fully intended to carry out this agreement. Accordingly upon the re organization of the Board of directors May 6th, Healey was on the motion of Loveridge elected president. At that time he did not know nor had he any reasons4.o suspect there was any purpose on idea Ley a part to sell oui his Stock Aud hand Over the control of the company to the Baltimore Aud Ohio Railroad. He knew that the Road had been chartered As a competitive Road and he knew that Healey had obtained a loan of $65,000 from the City of Cumberland on a pledge that it should be built As a competitive Road. But when he found that Healey was negotiating with the officials of that company for the Sale of his Stock Aud the Transfer of the control of the Pennsylvania Road in Maryland to that company and had consulted counsel with a View of getting rid of the 26th april agreement by which he had transferred 352 shares of his Stock to Loveridge the latter was perfectly justifiable in selecting some one else to succeed him As president. So if it be conceded that Loveridge had fully made up his mind before the annual meeting of the stockholders july isl to elect Schley president Aud we can come to no other conclusion from his letter to Schley of june 30th, written Only one Day before that meeting although in his testimony he says to the contrary yet neither Healey himself nor the complainant who now represents him have any ground to complain. By his own conduct Healy had forfeited All right to remain president of the company the interest of which he was scheming to betray and to hand Over to a rival company. Aud this brings us to the last ground relied on in support of this Bill namely the Sham and pretended Sale of this Stock by Loveridge to Stewart by Stewart to Gardner p. Lloyd president of the american Coal company. And Here we Are obliged to say and we say it reluctantly that these pretended sales arc far from being creditable to the parties concerned. Loveridge had negotiated the Bonds of the company had paid off its indebtedness and had Given to the City of Cumberland All the advantages and benefits of a first class Road. He had As we have said acquired a Bona fide title to the 352 shares of Stock transferred to him by Healey. If the Stock belonged to him lie had the right to sell it open and above Hoard to any who desired to buy it. On the other hand if he acquired it. And Field it in Trust for his of n company and the american Coal company of which Lloyd was the president then the object and Only object of these Sham sales was to make it appear that these companies were Bona tide purchasers without notice of the facts and circumstances under which the Stock was transferred by Healy to Loveridge. We say Sham sales for with the proof before us we can come to no other conclusion. Now How we Ere these sales made Loveridge says he sold his 352 shares to Ste pan who is represented As a retired merchant and a Man of wealth and that he sold it on the 1st of july the Day on which Schley was elected president to succeed Healy for the sum of $5.00, not $5.00 a share but five dollars for the entire number of shares. And then with circumstantial minuteness he says that he agreed to give Schley one third of whatever profit he might realize from the Sale of this Stock and not having the precise change one Dollar Aud sixty six cents he handed Over to him two dollars As his part of the profits. Now we do not mean to say that All this did not take place but what wre do mean to say is that such a Sale cannot be treated As a Bona fide Sale. We have seen How desirous Loveridge Wras to get this Stock that it was necessary to give him the control of the Road and the the connection of Georges Creek Road with it and that he made the Transfer of this Stock As the condition the indispensable condition on which he was willing to negotiate the first mortgage Bonds and to build the Road and now that the Road is built and the connection with the Georges Creek Road is made we Are asked to believe that he makes a Bona fide Sale of his Stock and thereby hands Over the absolute control of the Pennsylvania Road in Maryland to a stranger for the paltry sum of five dollars. But this is not All Stewart occupies the same office with Lloyd the president of the american Coal company and Lloyd Wras present when the Stock was sold by Loveridge to Stewart. Some months afterwards and after this Bill was filed. Lloyd makes up his mind to buy this Stock and although Stewart occupied the same office with him instead of buying the Stock himself he gets a third person to see Stewart and to this Persou Stewart Sells the 352 shares for five dollars the precise sum he paid Loveridge. So through Stewart the stranger and Bona fide purchaser we find the Stock Back into the Possession of the american Coal company. And on Cross examination Lloyd admits that although Stewart knew he was Selling the Stock of a stranger yet he knew it was bought in fact for the american Coal company. But we will not pursue this matter further. It is sufficient to say that these sales were Sham sales and made for the purpose of putting this Stock in the hands of an apparently Bona fide purchaser and thereby to defeat Healey and his representatives from getting Possession of it even though they might succeed in setting aside the original Transfer to Loveridge. It can hardly be necessary however to say that no court could be so Blind As not to see through such devices and shifts As these and if the proof had satisfied us that Loveridge had acquired this Stock from Healey by fraud we should have found no difficulty w whatever in dealing with the pretensions of Stewart and these Coal complies As Bona fide purchasers without notice. Decree affirmed. Collecting Agency. The h. C. Thomas amp co., Law credit and collection Bureau. 1u9 North Charles Street Baltimore my. Telephone 11w. Claims collected at All Points in the United Stales and Canadas Aud prompt returns laude. Commissioner for the states in office depositions acknowledgements Aud proof of claims taken. In Gal instruments of wit kinds no spared. A Atlas of the 41st and 44d wards. W. W. Thompsons Atlas of the Twenty first and Twenty second w Ards of Baltimore City is Complete in one volume Aud is a very Hue and valuable Book for those having in Terest in property in the Annex. For terms address e. B. Green. Tui North Carrollton Avenue hatters. Cards. Maury is Don hic Llyn a general insurance Agency Holliday a St second its. Telephone amp a. 8. W. T. Hopper in sons. 4 s. Holliday St. Agents Liverpool Loudon a so Globe a of eng. Germania fire insurance company or new Vonk Kaine building 4u7 e. Baltimore Street. E. B. Duval do co., general agents and brokers a South Holliday Street. Francis e. Frey Pai n t e a House sign Fresco no. 1918 division Street 7-1 in Baltimore. Special notices. The have on hand a lot of lease hold mortgages of the old form which we will sell at a very Low prick in of entities to Sutt. We will keep Only the typewriter forms in the future. A the daily record. Iou k. Fayette Street. Washington Keal estate brokers Dulany amp Whiting 1330 of Street n. We a Washington do City and country real estate sold and rented. Luana negotiated and Luau Moe effected. Estates managed
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