145 Md. 1

WILLIAM PENROSE vs. GEORGE W. PAGE, Receiver of the Lafayette Bank.

*2 Decided February 1st, 1924.

The cause was argued, together with that next following, before Boyd, O. J., Thomas, Pattison, Urner, S:tockbridge¡, Adkins, and Oefutt, JJ.

Edwin T. Dickerson and Lindsay G. Spencer, for the appellant.

Samuel J. Fisher, for the appellee.

*3Thomas, J.,

delivered the opinion of the Court.

On April 9th, 1923, William Penrose, Esq., the appellant, filed in the Circuit Court of Baltimore City, in the case of the State of Maryland v. Lafayette Bank, his, “petition and claim,” in which he alleged that the Lafayette Bank was a corporation organized under the State hanking laws, and “that its affairs were placed in the hands of the State Bank Commissioner as receiver on the 28th of November, 1921”; that about the 1st of October, 1921, prior to the appointment of the receiver, the board of directors of said bank passed a resolution by which the petitioner' was appointed “special counsel” of said bank, and that from 'the time of his appointment until the bank was closed by the State B'ank Commissioner he devoted his entire time to the affairs of the bank, “which was then in a critical condition”; that during said period he collected overdrafts to the amount of about $13,000, sold stocks and bonds belonging to the bank for the purpose of meeting demands of depositors, borrowed large sums of money for the bank, was in daily consultation with the board of directors, which required his services “until late at night,” and provided several plans for the liquidation of the bank and the settlement of its obligations, which would’ have averted the failure of the bank if he had not- been prevented from carrying out the same. The prayer of the petition was that the receiver be directed to hold out of the undistributed assets of the bank sufficient funds to satisfy the claim of the petitioner, and for general relief. The receiver of the bank answered the petition, admitting the incorporation of the bank and tire appointment of a receiver, and stating that he was without knowledge of the other matters alleged.

At the hearing of the petition counsel for the petitioner and the receiver entered into the following agreement:

“It is stipulated that either side may refer to any testimony or proceedings in the case of Page, Receiver,' vs. Penrose (Baltimore City Court), and the Court of Appeals in deciding this case may consider any such *4testimony or proceedings to the same extent as if it were fully incorporated in this record, and that the Court of Appeals has decided that the Hontrose Building Association, of which "William Penrose was, at the time of the rendition of the services, vice-president and a director, owned at that time one-half of the capital stock of the Lafayette Bank, and at the time of the filing of the claim for said services two dividends of twenty-five per cent, each, had been paid by the receiver to the general creditors of the Lafayette Bank.”

The plaintiff then offered in evidence the following resolution of the board of directors of the Lafayette Bank, passed at a special meeting on October 14th, 1921: “On motion, Hr. Drayer, seconded by Hr. Wilson, Hr. William Penrose was appointed special counsel for the bank, and authorized on behalf of the bank to borrow from time to time such sum or sums as may be needed,” and testified that he had been a member of the Bar of Baltimore City for over thirty years; that he had been a director and counsel for the Canton National Bank, had been an active director of the Union Trust Company for eight or ten years, and had been “called in” bv the Bank of Laurel when it was in difficulties; that prior to the resolution mentioned he was neither a director, stockholder or an officer of the Lafayette Bank, and that the only service he had rendered the bank was the securing of a loan of $40,000 from the National Bank of Baltimore, which was “needed in a great hurry,” and which he had to guarantee; that after the passage of said resolution he put in all of his time during the day and a part of the night in work for1 the bank; that he collected about $13,000 of unsecured overdrafts, borrowed in all $97,000 for the bank from the National Bank of Baltimore, and became personally responsible for it; that the only agreement between him and the Lafayette Bank was the resolution referred to1; that the directors of the bank asked him at the time what his fee would be for his services, and that he told them that he could not tell because he did not know “what the work would be, and that if *5they could not agree they would leave it to arbitration”; that after the passage of the resolution lie was in almost daily consultation with the directors and officers of the bank, and gave them the best legal and banking advice be could, and advised several plans of liquidation and reorganization, and that if the directors had pulled together there would have been no receivership; that for securing the loan of $40,000 from the First National Bank of Baltimore, for which he became personally responsible, and which was procured prior to the resolution employing him as special counsel, he received $1,600, $200 of which he paid to Hr. Haydon; that he borrowed for the bank from the Equitable Trust Company, from October 19th to November 18th, 1921, various sums aggregating $92,000, for which service he received “no compensation whatever,” and that he also obtained a loan of about $50,000 from the Harvland Title Company; that from his experience with various banking institutions, and from what he had been told by bankers and lawyers, he was able to state that the fair value of the services rendered by him to the bank as special counsel was $20,000. On cross-examination the plaintiff testified that the services for which he was claiming compensation were rendered between the 15th of October and the latter part of. November, 1921; that he had never sent the bank a bill for his services, and had not filed a claim for same in the receivership case prior to filing his petition in this ease; that he had testified before Judgr Bond “in the Montrose case six months previous,” and that in his testimony in that ease he said that he was called in in September, 1921, and that the bank’s affairs were in a critical condition, although he could not find out how badly off they were,” and that in reference to the charge contained in the answer in that case that he and his partner had figured iu a number of transactions with the bank in which the bank had been induced to loan large sums of money on inadequate security and lost money, and in which they were compensated by their clients, be said that he had never asked for a loan from the bank, never induced any one to-, and never *6profited to the extent of one penny in any transaction with the hank, except in one instance where he borrowed $40,000' for the bank and was paid a fee.

The plaintif further testified on cross-examination that he did not state in the Montrose case that he had a claim against the bank for $20,000, that his connection with the bank was not gone into in that case, that he was not asked what his charge was for the work he had done for the bank, and that there Was no occasion at that time to mention his claim against the bank; that the reason he mentioned the compensation paid him for securing the loan of $40,000 was because that was the only thing for which he had received any compensation, and he had not profited in any way by loans made by the bank; that very few of the overdrafts, amounting to $13,000, were secured, and that it was hard work to collect them; that he was not asked to collect them, but that he did it because he felt it was his duty to do so as special counsel. On re-direct examination he stated that he had no claim in the Montrose Building Association case, but was simply summoned as a witness by both sides; that he was not asked in that case by either side anything about his personal claim, but thinks that Mr. Page asked him, some time after the appointment of the receiver, what his “status with the bank was,” and that he told Mr. Page that “he was employed by the board of directors.”

Mr. Dolfield, president of the Canton National Bank, testified that there was no precedent in Baltimore “with regard to reasonable compensation for securing loans under the circumstances detailed by the plaintiff,” but that he was able to place a value on the services of the plaintiff, and, over the objection of the defendant, stated that in his opinion it was “at least $20,000,” and that “the fee of $20,000 would cover all his services.” Mr. Jeffery, president of the Equitable Trust Company, who stated that the loans of his company of $92,000 to the Lafayette Bank came under his supervision, testified that his company would not have made the loans but for the solicitations of the plaintiff; that the plaintiff had “a *7very difficult proposition to perform,” and in his opinion “$10,000 would be ample compensation.” for his services. On cross-examination he stated “that he had no precedent for the valuation of the services, it was just an impression without being able to give all the reasons.” Mr. Alexander, vice-president of the Equitable Trust Company, after being told the services rendered by the plaintiff, testified that in his opinion $10,000 would be “a fair fee” for such services. On cross-examination he testified that he was viewing the matter as a whole proposition; that his bank would not have made the loans “except they felt that somebody that Was different from that crowd was guaranteeing it,” and that if he “tried to appraise the services in securing the loans it would be a minimum of $5,000, or as high as $10,000, but that he could not get his mind away from the whole atmosphere of the thing.” Mr. Addison, one of the directors of the Lafayette Bank, testified that between the- 14th of October and the time of the receivership “there was not any disapproval at any board meeting of Mr. Penrose’s handling of the bank’s affairs; that he was present at the meeting when plans devised by Mr. Penrose for saving the bank were presented, and they were under the impression Mr. Penrose could save the bank.” Mr. Ganster, a member of the bar, who was formerly in the office of the plaintiff, testified that between October 14th and November 28th the plaintiff' devoted practically all of his time to the Lafayette Bank; that he was borrowing money from the National Bank of Baltimore and the Equitable Trust Company; that the plaintiff guaranteed the loan by the Lafayette Bank of $27,000 on the South Charles Street property with him, and that the plaintiff did it at his request, and the bank loaned the money on the strength of the plaintiff’s “guarantee”; that he had been after tbe plaintiff “for tbe past year” to file his claim against the bank for his services, and that they had talked it over on many occasions in the office, hut that the plaintiff’ takes care of everybody but himself and put it off’; that the plaintiff had determined on $20,000 as the value of his services ,and had *8bis claim typewritten before he was sued, and that be told tbe plaintiff that be should have made bis claim larger. Mr. Thomas, president of the National Bank of Baltimore; upon being “told what services bad been rendered by” tbe plaintiff to tbe Lafayette Bank as special counsel, testified that, with tbe plaintiff’s “guarantee of the paper and the amount of work be put on the matter” $80,000 would be a reasonable fee, and that without bis persona] guarantee the fair value of tbe services would have been from $15,000 to $20,000.

Mr. Page, tbe receiver, when called as a witness for tbe defendant, testified that be bad been State Bank 'Commissioner for four years and deputy “for six years prior to that,” and that be took charge of the bank on the 25th of November; that be found on tbe books of tbe bank the loan of $40,000 from the National Bank of Baltimore, and that $1,600 bad been paid as a commission for securing the loan, and that when be asked tbe plaintiff about it, be said “be bad gotten $400 of it and felt be was entitled to it as one per cent, of the amount of the loan,” which be thought was a fair charge to make; that the plaintiff also told him that Mr. Haydon felt that, be ought to get something out of it, and that be bad divided the $400 with Mr. Haydon; that be, witness, bad seen the plaintiff “about a great many matters that involved tbe” bank “and bis connection with it, but that” the plaintiff “never made any mention of any amount due him for services ; * * * that tbe benefit received by tbe bank, assuming that tbe plaintiff negotiated these loans, was that tbe bank needed the money at that time; * * * that all tbe plaintiff was doing was taking tbe collateral down to the Equitable Trust Company and the National Bank of Baltimore and borrowing money from time to time to tide the bank over from day to1 day; that this seemed what the plaintiff was doing most of tbe time, but that be did have in mind turning tbe bank over to another institution and discussed that matter with the witness a number of times.” "When asked what in bis opinion “would be a fair and reasonable compensation” for tbe services “testified to by him,” be said,.over tbe *9objection of the plaintiff, that he knew the plaintiff did devote some of his time to the bank during the period of six weeks, and “that it may be that he is entitled to compensation for it, but supposes that the $1,600 he got would be at the rate of $12,000 a year,” and he thought that was “pretty fair compensation for the work he did for the time he had been in it,” and that the plaintiff “would be entitled to $1,890 for borrowing the loans, and he thought this was fair”; that the plaintiff told him that he had been asked to be vice-president or counsel of the hank, hut that the bank was not in a position to pay him any salary, and he felt he could not give his services or a part of his services without compensation; that he thought he ought to have $8,000 or $9,000.” On cross-examination the witness testified that the plaintiff discussed with him the methods of saving the hank, and that they were feasible; that about the first of November he, witness, told the directors “there was still time to save the bank, but that they could not be made to act”; that he knew that the plaintiff was rendering services right along; “knew he was retained there and seemed to be devoting a good deal of his time to the bank,” but that he never said anything to witness “as to whether he was rendering the services gratis”; that he did not know the extent of the services rendered by the plaintiff, and does not know whether it was hard to borrow money at that time; that if the plaintiff assumed liability for the loans from the National Bank of Baltimore he might be “justified in charging something additional for it” ; that he did not put a value on plaintiff’s services, “except that he felt that $1,600 represented $12,000 a year; that the brokerage for procuring loans was from nothing to twb and a half per cent., and that he does not know that there is any rule and he does not think two and a half per cent, would he a fair rate for securing a loan on collateral ; * * that two and a half per cent, is an ordinary hanking charge, but he can’t see why there should be any compensation for it.” jVTr. Boone, who was called in rebuttal by the plaintiff, testified that he was the secretary and treasurer of *10the Baltimore Finance Coiporation, and that certificates of deposit of the Lafayette Bank were sold at a discount of two and one-half per cent, in the month of September, 1921.

It appears from the record in No. 105 of this1 term that the plaintiff in this case and II. Walter Ganster, Jr., were sued on the 8th of February, 1923, by the receiver of the Lafayette Bank to recover the balance of the mortgage debt of Karl M. Bubert and Nina.K. Bubert, his wife, mortgagors, on the following guaranty:

“Baltimore, Md., February 19th, 1921.
“For value received, and at the request of Karl M. Bubert and Nina K. Bubert, his wife, we, the undersigned, H. Walter Ganster, Jr., and William Penrose, hereby guarantee the payment of principal of note of Karl M. Bubert and Nina K. Bubert, his wife, dated February 19th, 1921, and payable to the order of the Lafayette Bank, one year after date, and secured by mortgage on property Nos. 104 and 106 South Charles Street, to William H. Haydon, which mortgage is to be assigned to the said Lafayette Bank, as collateral security therefor, and the liability of the undersigned shall not become due and payable until default in said mortgage, and sale and payment' under foreclosure proceedings.
“H: Walter Ganster, Jr.,
“William P. Penrose.
Witness: Charles Mulligan.”

The contentions of the appellee in the case are that -it was incumbent upon the appellant to- show that it Was his intention, and the intention of the Lafayette Bank, that he should be compensated for the services he rendered the bank, and that he-has not only failed to meet that burden, but that the evidence shows that his claim for compensation was an afterthought, for the -purpose of meeting the claim of the receiver against him on the guaranty referred to. In this view, which was.the one-adopted-by the court below, we cannot concur. The only evidence in- the case tending to give the slightest color to the contentions of the appellee is the fact that the *11claim was not filed in the receivership case until two dividends had been paid to the creditors of the bank, and the further fact that the appellant did not mention his claim to the receiver. But this is met by the positive and uncontradicted evidence that at the time the plaintiff was appointed special counsel he was asked by the board of directors of the bank what his charge would be, and that he told them he could not say in advance, because he did not know what and how much work he would have to do, and that if they could not agree on the compensation after the services were rendered they could submit it to arbitration, and the testimony of fdr. Ganster that he had urged the plaintiff for- over a year to file his claim and that they had talked it over on many occasions in their office; that the plaintiff, following his habit of neglecting his own affairs, had neglected to> do it, but that the amount of his claim had been determined upon and the claim had been typewritten before 'the plaintiff was sued. A creditor may come in and file his claim any time before the final distribution of an estate or of a fund in court. Miller's Equity Procedure, sec. 540. The appellee also relies on the fact that the plaintiff, in the case referred to as the Montrose Building Association case, stated, in reference to a charge that he and his partner had been .securing loans from the bank for which he was compensated by his clients, that he had “never profited to the extent of one penny in any transaction with the bank except in the instance when he borrowed $40,000 for1 the bank and was paid a fee.” That statement bv the plaintiff is not contradicted in this- ease, and so far as the record discloses he never had, and has not yet, received any compensation “in any transaction with the bank” except the commission of $1,600, or $400, for obtaining the loan of $40,000 from the National Bank of Baltimore, which transaction was before he was appointed special counsel for the Lafayette Bank.

The cases cited by the appellee sustaining the rule that a director or officer of a corporation cannot recover for services rendered in the line of his duty, unless he can show an ex*12press contract, have no application to this case. The appellant was not an officer or a director of the Lafayette Bank. On the contrary, according to the uncontradicted evidence in the ease, he was expressly employed as special counsel, with the understanding that if they could not agree on the compensation for his services after they were rendered they would submit it to arbitration. The mere fact that he was an officer of another corporation which was interested as a stockholder in the 'bank did not deprive him of the right to accept employment by the bank as special counsel, nor would it, even in the absence of express employment, justify the inference that the services were rendered without any intention on his part to charge, or expectation on the part of the bank to pay, for the same. In the latest case cited by the .appellee (Jamaica Trading Co. v. Dinning, 141 Md., p. 322) this Court said that even a director or officer of a corporation may recover under an implied promise for services rendered by him “beyond the scope of his official duties, if accepted by the corporation.” The fact that the appellant was the guarantor of a mortgage loan by the bank is also referred to by the appellee, but that fact does not warrant the inference that in serving the bank the appellant was serving his own interest, for his obligation under 'the guaranty could not have been affected by the success or failure of -the bank.

It is also urged on behalf of the appellee that even if the appellant is entitled to compensation for the services mentioned, he is only entitled to one per cent, of the total amount borrowed by him. The evidence tends to show that the plaintiff, after he was employed as special counsel, borrowed for the bank $57,000 from the National Bank of Baltimore, $92,-000 from the Equitable Trust Company, .and about $50,000 from the Maryland Title Company, and this contention of the appellee is based on the evidence that the plaintiff received for securing a loan of $40,000 "from the National Bank of Baltimore, before his appointment as special counsel, a commission of one per cent., or $400. Even if we were to assume that, one per cent, of the loans obtained by the *13plaintiff is a fair and reasonable allowance for such services, this view of the appellee entirely overlooks the other services rendered, including the collection of overdrafts to the amount of $13,000, professional advice, etc.

As the appellant w'as employed by the bank, we think he is entitled to fair and reasonable compensation for' the services he rendered between the date of such employment and the time the State Bank Commissioner took charge of the bank on the 25th of November, 1921. But there is no evidence in the case as to what would be a reasonable allowance for the professional advice given or the collection of the overdrafts, and the evidence as to a proper allowance for securing the loans, amounting to $199,000, is far from satisfactory. The bankers who testified to the value of the appellant’s services in securing the loans mentioned did not base their opinions upon their familiarity with the charges usually made or paid for such services in Baltimore City, nor did the plaintiff state the usual charge for such services, yet there would seem to be no reason why the value of any of the services rendered by the appellant should not be susceptible of satisfactory proof. As the court below did not pass upon the value of the appellant’s services, we will reverse the decree and remand the case to the court below, with directions to allow the appellant for the services rendered by him upon the production of satisfactory evidence of their value.

Decree reversed with costs, and cause remanded in order that a decree may he passed in accordance with the opinion of this Court.

Penrose v. Page
145 Md. 1

Case Details

Name
Penrose v. Page
Decision Date
Feb 1, 1924
Citations

145 Md. 1

Jurisdiction
Maryland

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