Order Directing Payment of Sum Allowed in Auditor's Account is Final, and Not Open to Collateral Attack — Interest on Sum Audited — Under Prayer Referring to the Pleadings, the Sufficiency of the Declaration Considered — Declaration in Action on Bond of Receiver — Demand on Surety.
An order of Court ratifying an Auditor's Account as to a certain claim and directing the receiver to pay it is a final adjudication binding on the receiver and his surety, unless reversed on appeal or revoked in that Court.
Consequently, in an action on the receiver's bond for failure to pay the sum so directed to be paid, the order is not open to collateral attack, and evidence is not admissible to show that the receiver did not have sufficient funds to pay the claim.
When an Auditor's Account directs a receiver to pay a certain sum, interest thereon may be recovered from the time of the demand upon him.
A prayer offered by a defendant which asserts that under the pleadings the plaintiff is not entitled to recover should be granted, when the declaration in the case fails to state a legal cause of action.
In an action against a receiver and his surety to recover a sum directed to be paid by an Auditor's Account, a declaration is insufficient which does not allege that the receiver had notice of the audit and of its final ratification.
It is not necessary to serve on a receiver an authenticated copy of an Auditor's Account ordering him to pay a claim when he knew that the account had been stated.
When the bond of a receiver, conditioned for the faithful discharge of his duty, does not provide that demand upon the surety for the payment of a sum due by the receiver shall be made before bringing suit, such demand is not a pre-requisite to an action on the bond.
Appeal from the Circuit Court for Howard County (BRASHEARS and FORSYTHE, JJ.).
The cause was argued before BOYD, C.J., PEARCE, SCHMUCKER, BURKE, THOMAS and PATTISON, JJ.
Edward M. Hammond, for the appellants.
Harry E. Karr, for the appellees.
BURKE, J., delivered the opinion of the Court.
The facts of this case are these: Edward L. Ward and George L. Mowen, two of the defendants, were appointed, on the 23rd of September, 1902, by the Circuit Court for Baltimore County, receivers of the Arthur B. Nitsch Brick Company, and were required to give bond in the penalty of fifteen thousand dollars for the faithful discharge of their duties as receivers. They executed and filed a bond in the penalty prescribed with the United States Fidelity and Guaranty Company as surety, which bond was duly approved, and the receivers entered upon their duties and took charge of the property of the company. The condition of the bond was that the said Ward and Mowen should well and faithfully perform the trust reposed in them by the order by which they were appointed, or which might be reposed in them by any future order or decree in the premises.
Charles H. Schlosser and Joseph T. Steinacker, trading as Schlosser and Steinacker, the equitable plaintiffs in this suit, had a valid mechanics lien claim for the sum of three hundred and ninety-two dollars and seventy-eight cents against the property of the said company. The auditor of the Circuit Court for Baltimore County, where the trust was being administered, stated and filed two accounts between the trust estate and the receivers, designated as accounts "A" and "B." In both accounts the lien claim of Schlosser and Steinacker was allowed in full. Account "A" represents the auditor's view to the proper principles upon which the distribution should be made, and account "B" was stated at the suggestion of the receivers and in accordance with the theory upon which they thought it should be stated. In both accounts the receivers are charged with the precise amount of money, to wit, $41,318.31, received by them from the sale of the property of the Brick Company. Exceptions were filed to both of these accounts by certain creditors of the company; but no exceptions were filed to the allowance of the claim of Schlosser and Steinacker, and upon their petition the Court on the 13th of July, 1907, finally ratified and confirmed both accounts of the auditor so far as they allowed the mechanics lien claim of Schlosser and Steinacker, and ordered that the receivers apply the proceeds accordingly. The testimony is clear that both receivers had notice of the audit and the confirmation thereof, and that frequent demands were made upon them for payment prior to the suit, and that they had never paid the claim as they were required to do by the order of July 13th, 1907.
This suit was instituted in the Circuit Court for Baltimore County upon the bond of the receivers, and the case was removed to the Circuit Court for Howard County where it was tried and where the judgment appealed against was entered. The defendants demurred to the declaration, but the demurrer was subsequently withdrawn, and the case went to trial upon the issues joined upon the pleas of the defendant. During the progress of the trial the defendants reserved three exceptions to the rulings of the Court on questions of evidence, one to the action of the Court upon the prayers and upon the special exceptions filed by the defendants to the plaintiff's first prayer, and one to the instruction by the Court to the jury as to the form of the verdict. In this last exception it appears that the Court merely told the jury that they must either find for the plaintiffs or the defendants, and if for the plaintiffs they must name the amount. We do not see any error in this instruction. Nothing is said about it in the brief of the appellants nor was it mentioned in the argument, and it will not be further noticed.
The first, second and third exceptions present substantially the same question, and may be considered together. The receivers offered to prove that they had not at the time of the trial, and have not had sufficient funds to pay the claim of the equitable plaintiffs; that the auditor's accounts "A" and "B" had not been finally ratified as to the receipts of the receivers, and that they would show that the money charged against them in that account was not, in fact, received.
All these questions were concluded and determined by the order of July 13th, 1907. That order cannot be attacked in this collateral way. It fixed the liability of the receivers, and imposed upon them the obligation of paying the plaintiff's claim. Its legal force and effect cannot be avoided in this action by the line of inquiries suggested, and the Court was right in excluding the proffered testimony. That order was a decretal order, or an order in the nature of a final decree, and must stand for what it purports to be upon its face, until revised or revoked by some proper proceeding. It has the effect of an adjudication in rem, and the distribution ordered to be made is res adjudicata. Thurston v. Devecman, 30 Md. 310; Trayhern v. Coulbourn, 66 Md. 278; Rogers, Brown Co. v. Citizens National Bank, 93 Md. 613; Marine Bank v. Heller, 94 Md. 213.
In Taylor v. State, use of Miller, 73 Md. 221, it is said that "if a decretal order, disposing of a trust estate in the hands of a trustee, be not an adjudication in rem, as respects him and his sureties, the latter, when not parties to the cause. would not be precluded by it, but might in some other Court dispute each item of the audit, and as often bring in question collaterally the propriety of the decree passed by a Court having exclusive jurisdiction over the trust property. This, as we have seen, cannot be permitted. When an audit disposing of trust money has been ratified, and the trustee has been ordered to pay out the funds as audited, the order as to him and his sureties has the force and effect of an adjudication in rem, and if he fails to make payment and his bond be put in suit, there are but two questions open for the jury, and these are: Has such an order been passed? Has the money been paid? The Court's order ratifying the audit is absolutely binding on the trustee and his sureties unless reversed on appeal to this Court, or revoked on proper proceedings in the Court by which it was passed."
At the conclusion of the whole case the plaintiffs offered one prayer, which was granted, and the defendants submitted three prayers, all of which were refused. They also filed special exceptions to the defendant's first prayer, and this was overruled by the Court. There is no error in the plaintiff's first prayer of which the defendants can complain. The prayer leaves the question of interest to the discretion of the jury; but under the established law of this State the plaintiffs in a case like this were entitled to recover the interest as a matter of right from the date of the demand upon the receivers for the payment of the sum specified in the order of July 13th, 1907. Newson v. Douglass, 7 H. J. 328; Havre de Grace v. Fahey, 108 Md. 539.
The defendant's first and third prayers should have been granted. Both referred to the pleadings, and assert that under the pleadings there was no legally sufficient evidence to entitle the plaintiffs to recover. They raised the question as to the legal sufficiency of the declaration. In Leopard v. The Chesapeake and Ohio Canal Company, 1 Gill, 222, in discussing a prayer which did not refer to the pleadings, the Court considered the Act of 1825, Chapter 117 (Article 5, § 9, Code 1904), and said: "The bill of exceptions, on which the present appeal is founded, presented for decision in the Court below no question upon the pleadings in the cause. Whether the declaration states facts sufficient, if proved, to enable the appellant to maintain his action, or whether the facts proved sustain the allegations in the declaration, are questions which in the case before us, under the Act of 1825, Chapter 117, we are not called on to decide. We are not permitted to affirm or reverse the judgment of the County Court upon any point which is not shown by the record to have been there raised and decided. The matter brought up for review in this Court is the granting by the Court below of the appellee's prayer for an instruction to the jury, that upon the evidence given in the cause, `the plaintiff (the appellant) is not in the face of said deed entitled to recover for any damage done his mills by reason of the construction of a canal across said public road, and the destruction of said public road.' The prayer as made to the Court, for the purpose of obtaining its determination thereof, since the Act of 1825, concedes by implication the sufficiency of the pleadings in the cause; and so far from inviting the Court to the examination thereof, or raising any question thereon for its decision, it in effect withdraws them from its consideration, and invokes it to decide the isolated question whether such were not the legal effect and operation of the deed referred to, that, thereby the testimony given in the cause showed no cause of action in the appellant. The question raised by the prayer made to the Court below bears no resemblance to inquiries which the Court are called on to make where an objection is raised to the admissibility of evidence offered generally in a trial before the jury. There the attention of the Court is necessarily called to the pleadings in the cause; the admissibility of the evidence being entirely dependent on them. The Court cannot judge of its pertinence or materialty but by their inspection. Nor is it like the case of a demurrer, which is a direct attack upon the pleadings themselves, wherein the Court must of necessity inspect all the pleadings in the case as well to enable it to ascertain the sufficiency of the particular pleading demurred to, as in giving its judgment thereon to mount up to the first material error in pleadings. Nor does it resemble a motion in arrest of judgment, where the Court has no means of judging of the validity of the verdict, but by referring to the pleadings and issues in the cause, upon which it wholly depends, and without which it has no operation, and is incapable of forming the basis of a final judgment in the cause.
"The leading motive of the Legislature in passing the Act of 1825 was to remedy an evil which had been severely felt and loudly complained of, that in this Court the judgment of the County Court was reversed upon points never raised or decided below, and which, had they been there raised, would at once, by amendment or otherwise, have been obviated and never been presented for consideration by the appellate Court. Such is the nature of the objection now taken in this Court, and such would have been its fate if raised in the County Court. It is that the plaintiff below could not recover because his cause of action had been defectively stated in the declaration, though fully established by proof. Whether this defect exists or not, we have deemed it unnecessary to inquire, because the defect, if true, is excluded from the consideration of this Court by the express word and legislative intent of the Act of 1825."
In Baltimore City Passenger Railway Company v. Wilkinson, 30 Md. 229, upon the authority of the case above cited, it was distinctly held that under a prayer which referred to the pleadings the sufficiency of the declaration could be inquired into. CHIEF JUDGE BARTOL, speaking for the Court, said: "Since the decision of the case of Leopard v. The Chesapeake and Ohio Canal Company, 1 Gill, 222 followed by Stockton v. Frey, 4 Gill, 406, and by a number of other cases, all recognizing the same rule, it must be considered as settled that where a prayer is asked or an instruction granted to a jury upon the evidence of facts in the cause merely, without reference to the pleadings, the appellate Court is precluded by the Act of 1825, Chapter 117 (Code, Article 5, § 12), from considering the state of the pleadings. But it has always been competent for a party by a prayer properly framed to call the attention of the Court to the pleadings, and to ask its judgment upon their sufficiency or legal effect; the rule being that every suitor must recover according to the allegata and probata. Berry v. Hopper, 4 G. J. 467; Bull v. Schuberth, 2 Md. 57; Burgess v. Lloyd, 7 Md. 199; Busby v. Conoway, 8 Md. 55. In this case the declaration contains five counts; and the appellant, the defendant below, by several prayers directed to that end, called on the Court to pass judgment upon the legal sufficiency of each of the counts; if any of them are insufficient, it was error to reject the defendant's prayers raising that question."
The declaration in this case, which contains but one count, is insufficient. No suit on the bond could be maintained until after audit, confirmation, notice thereof to the receivers, and demand upon them for payment. Oyster v. Annan, 1 G. J. 450; Scott v. Ducker, 2 Md. 284; Dent v. Maddox, 4 Md. 529; 1 Poe, Pl. Prac., sec. 570.
There is no averment in the declaration that the receivers had notice of the audit and of its final ratification. These indispensable facts were necessary to fix liability upon the receivers, and the failure to allege them makes the declaration, under the authorities cited essentially bad.
The defendants' second prayer was properly refused. It asked that the verdict be directed for the defendants; first, because the order ratifying the account was not served upon the defendants; and secondly, because there was no evidence that they had knowledge thereof. They knew that the account had been stated and ratified, and it was not necessary to have served an authenticated copy of the order of ratification upon them. Scott v. State, 2 Md. 291; Brent v. State of Maryland, 18 Wallace, 430.
Demand upon the surety before bringing suit was not necessary. 32 Cyc. 106. There was no such stipulation in the bond, and the authorities upon this point ( Nelson v. Bostwick, 5 Hill, 37; and Husband v. Vincent, 47 Ind. 211), cited by the appellants refer to cases where the obligation sued on made a previous demand upon the surety a part of the contract.
What we have said disposes of the special exceptions filed by the defendants to the granting of the plaintiff's first prayer. We find no error in the action of the Court in overruling these exceptions; but for the errors committed in refusing the defendants' first and third prayers the judgment must be reversed, and the case remanded for a new trial upon an amended declaration.
Judgment reversed with costs and new trial awarded.