The declaration in each of these four cases, which were argued together, alleges that the defendant signed and sealed an agreement in the following form:
"Whereas, it is deemed necessary that the sum of Seven Hundred Fifty Thousand ($750,000.00) Dollars must be made available as a Guaranty Fund for The Hagerstown Bank and Trust Company under the terms and conditions hereinafter set forth, and to take the place of and in substitution for the Guaranty Fund heretofore raised.
"(1) The undersigned, each in consideration of the agreement of the others, do hereby subscribe to The Hagerstown Bank and Trust Company Guaranty Fund in the amounts set opposite their respective names and agree to pay or secure to be paid, such subscriptions to The Hagerstown Bank and Trust Company not later than the 10th day of June, 1932. The payments of such subscriptions, as shall not be paid in cash, shall be evidenced by promissory notes secured to the satisfaction of the Committee hereinafter named and payable upon the demand of The Hagerstown Bank and Trust Company.
"(2) Said Subscriptions shall be repaid within a time or times fixed by the Committee hereinafter named, in cash and/or in shares of stock of a corporation now existing or to be hereafter formed; such shares of stock to have such par value and to be accepted by the subscribers at such value as shall be determined as well as all other matters by said Committee, except that each subscriber at the time or times so fixed by said Committee shall have and exercise the option of receiving cash or such shares of stock for his or her subscription. The stockholders of The Hagerstown Bank and Trust Company shall have the right to subscribe to such new stock in proportion to their holdings, on a date to be hereafter fixed on the same basis as such stock not taken by said stockholders shall be received by the undersigned. *Page 229
"(3) Until the repayment of said subscriptions as aforesaid, said subscriptions shall constitute a guaranty fund for the protection of the depositors and creditors of The Hagerstown Bank and Trust Company and to prevent an impairment of the capital of said institution, and shall rank prior to the stockholders and shall be subordinate to all other creditors and depositors of The Hagerstown Bank and Trust Company.
"(4) The obligations of the undersigned shall be several and not joint and no one shall be liable for the obligations of any other.
"(5) This agreement shall not be binding unless (a) The aggregate of such subscriptions shall not be less than Seven Hundred Fifty Thousand ($750,000.00) Dollars.
"(6) Any subscriber hereto, who shall have subscribed to the other Subscription Agreement to The Hagerstown Bank and Trust Company Guaranty Fund in the Fall of 1931, shall, when this Agreement becomes binding as herein provided, and to the amount of his subscription hereto be released from the obligation of his subscription to said other agreement.
"(7) The Committee shall consist of Thomas W. Pangborn — M.P. Moller — J. Frank Ridenour — Harry E. Bester — Wm. P. Lane, Jr., and a majority of said Committee, is authorized to exercise all the powers of said Committee, and its powers may be exercised without a meeting by writing signed by a majority of such Committee. The Committee shall have full authority to determine all matters relating to the subject matter of this Agreement and its powers, except as herein otherwise specifically set forth, shall be as extensive as if said Committee were sole subscriber in the aggregate of such subscriptions and shall no liability, however, except for the exercise of individual good faith. In the event of any vacancy in said Committee, occurring by death, resignation, disability or refusal to act, the remaining surviving members of the Committee shall promptly call a meeting of all subscribers to be duly warned by five days' written notice and at such *Page 230 meeting, a majority in amount of the subscribers, present in person, or by proxy, shall select a successor to fill said vacancy.
"This Agreement may be signed in any number of counterparts, all of which will constitute one agreement. May 26th, 1932."
Each of the declarations included averments to the following effect:
That the Hagerstown Bank and Trust Company was the largest banking institution in Washington County, with more than eight thousand depositors, and conducted its banking business for many years continuously until February 25th, 1933, when it was closed together with all other state banks by reason of the "Bank Holiday," and was not allowed to reopen after the expiration of that period.
That for a long time prior to May 26th, 1932, many of the banks in Washington County and other parts of Maryland, including the Hagerstown Bank Trust Company, by reason of the general depression then existing, suffered great depreciation in the market value of their securities, and just prior to that time several large banking institutions in Maryland were forced to close because of depreciation in the value of their assets and the general fear and loss of confidence on the part of their depositors, and for these reasons the state bank commissioner, and the directors and stockholders of the Hagerstown Bank Trust Company, as well as the subscribers to the agreement quoted in the declaration, were in dread of a "run" on the bank, which might have resulted in its being involuntarily and permanently closed, to the great loss of the depositors, creditors, and stockholders, and of the people of Washington County generally, including all the subscribers to the agreement referred to, and were further in fear that such closing of the bank would bring ruin to other banks in Washington County, destroy the credit agencies, depreciate further the value of securities and other property, and cause the closing of factories, mills, and other agencies in the county for the employment *Page 231 of labor and capital; and that on or before the date mentioned (May 26th, 1932) the actual market value of the bank's resources had been reduced below the requirements of the law, and for a long time there had been heavy withdrawals of deposits from the bank, causing a depletion of its assets, and there was fear on the part of the bank commissioner and among the directors, stockholders, and many depositors, that the capital of the bank would become impaired.
That during the month of April and the early part of May, 1932, the directors of the bank were advised by the bank commissioner that in order to keep the bank open as a going concern it was necessary that the capital structure be fortified, and that steps be taken to that end without delay.
That in order to restore confidence in the bank and protect its depositors and creditors, and in order to comply with the demands of the bank commissioner and keep the bank open and prevent the impairment of its capital, a committee was designated to secure subscriptions to a fund of not less than $750,000, to be paid into the bank on or before June 10th, 1932, or to be evidenced by promissory notes to be secured to the satisfaction of the committee and payable on demand of the bank, and thereupon numerous persons, including the defendant, executed the agreement, which the declaration proceeded to quote in its entirety.
That the bank and the state bank commissioner, relying upon the agreement so executed by the defendant and others, and depending upon the payment by the subscribers of the amounts of their respective subscriptions, allowed the bank to remain open to receive deposits and to carry on its business in the usual way continuously from May 26th, 1932, until it was closed on February 25th, 1933, by reason of the "Bank Holiday," when the bank was found to be insolvent, and therefore was not allowed to reopen, but was in possession of a conservator for the state bank commissioner from March, 1933, until December, 1934, when the bank commissioner was appointed *Page 232 receiver of the bank by the Circuit Court for Washington County, with authority to take charge and possession of its books, papers, property, and effects of every kind, and to collect the outstanding debts due to the institution.
That by orders of the Circuit Court for Washington County, the receiver was authorized to bring suit upon any promissory notes or any choses in action which had come into his possession, and was provided with special counsel to advise and represent him in all matters relating to the agreement set forth in the declaration, including the collection of any subscriptions to the guaranty fund to which the agreement referred.
That the bank was allowed to remain open for the usual transaction of business after May 26th, 1932, by virtue of the quoted agreement, and the bank accepted substantial deposits and permitted withdrawals of large amounts in excess of deposits from the date of the agreement until the closing of the bank in February, 1933; that the agreement was primarily intended to secure the depositors and creditors of the bank and constituted a contract between the bank and the subscribers for that purpose; and that in consequence of its execution and in reliance thereon, the bank released each of the subscribers, to the amount of his new subscription, from his obligation under the guaranty fund agreement executed in the fall of 1931.
That the aggregate of the subscriptions under the agreement of May 26th, 1932, signed and delivered to the bank, including that of the defendant, was in excess of $750,000; that almost all the persons who executed the agreement met their obligations thereunder promptly by paying the amounts of their subscriptions in cash or giving their promissory notes properly secured; and that the amount so paid in cash amounted to more than $300,000, and the amount secured by promissory notes also aggregated more than $300,000.
That the Hagerstown Bank Trust Company is insolvent, and even if the receiver succeeds in the collection of the stock liability of all the owners of capital stock of *Page 233 the bank and the full amount subscribed in the agreement of May 26th, 1932, the assets in the hands of the receiver will not be sufficient to pay the amounts due to the bank's depositors and other creditors.
That the plan to raise the guaranty fund of $750,000 was approved by the directors of the bank at their meeting on May 24th, 1932, and that the committee named in the subscription agreement, acting for the bank and the subscribers, after its execution, delivered the agreement to the bank and issued a certificate, duly signed by all of the committee, stating that the agreement had been "executed in accordance with the conditions therein by subscriptions in the aggregate exceeding the sum of $750,000.00, as stipulated in paragraph 5 thereof."
The defendants in the various cases are alleged to be indebted to the receiver for the amounts of their respective subscriptions under the agreement sued on, but to have refused to comply with demands for payment. Two of the suits are for $10,000, and two for $5,000, subscriptions.
Demurrers to the declarations were sustained, and from the resulting adverse judgments, the plaintiff has appealed. It is argued for the appellees in support of the demurrers that the subscription agreement never became binding because the specified sum of $750,000 was not paid in cash or secured by promissory notes, and that the agreement was not sufficiently definite in its terms to be enforceable.
The purpose of the agreement was to make available to the Hagerstown Bank Trust Company a "guaranty fund" of $750,000. To that end the subscribers agreed to pay or secure to be paid, not later than June 10th, 1932, the amounts set opposite their respective names. The sealed agreement by which they entered into that covenant was dated May 26th, 1932. Their obligations as subscribers originated when the agreement was signed for subscriptions to the total amount required. It is conceded, for the purposes of the demurrer, that the committee named in the agreement, and invested with *Page 234 comprehensive authority, certified that the agreement had been signed in accordance with the conditions of the paragraph which provided that it should not be binding unless the subscriptions should equal at least $750,000 in the aggregate. That condition having been fulfilled, the agreement became binding according to its terms. It then effectively imposed upon the contracting parties the duty to pay their subscriptions, or secure them by promissory notes, on or before the date specified. The settlements for the subscriptions were thus to be made in pursuance of a conditional agreement which had become definitely obligatory. While the term "subscriptions" is used in some of the other paragraphs of the agreement to indicate the amounts of cash or notes received by the bank from the subscribers, it was accurately and appropriately used in paragraph (1) to describe the obligations thereby created for later performance. It is certain that the contractual undertaking of the defendants and other subscribers was sufficiently complete and effective to accomplish the purpose of enabling the bank to continue its operations. The subscription agreement, when signed for the prescribed total amount, was accepted by the bank, and treated by the committee and the bank commissioner as an adequate and a dependable support for the bank's financial position. Upon the faith of the covenant in which the defendants joined, the bank was allowed to remain open for business and was thus afforded an opportunity to receive new deposits and permit withdrawals from its funds. Most of the subscribers demonstrated their confidence in the effectiveness of the agreement by acting in pursuance of its requirements to the extent of providing $600,000 in cash and securities. In thus performing the agreement on their part they presumably relied upon its corresponding performance by all of the co-subscribers. It was evidently not contemplated that the subscriptions would all be simultaneously satisfied with cash or notes, or that subscribers should delay compliance until the last moment of June 10th in order to be sure that none of them would default. *Page 235
The failure of the defendants to comply with the terms of their pledges did not relieve them of that duty. A breach of contract is not equivalent to a release from its obligations. Certainly the defendants could not be permitted to rely upon their own default as a ground of exemption from their covenanted liability, nor could they successfully claim exoneration because their subscriptions were not promptly enforced. Their financial responsibility may have been such as to justify a reasonable belief that their signed pledges afforded the same assurance of payment as the secured promissory notes with which their subscription liabilities might have been discharged. At all events, their duly executed agreement was accepted as an available asset of the bank in furtherance of the purpose to which the defendants and their co-obligors were committed.
In our opinion the agreement is sufficiently definite to be enforceable. It provides for the creation of a "guaranty fund" of $750,000 to be made available to the Hagerstown Bank Trust Company by a method which is distinctly prescribed. The fund was designed to be "for the protection of the depositors and creditors" of the Bank, and "to prevent an impairment" of its capital. The right of the subscribers to the repayment of the fund was to "rank prior to the stockholders," and was to be "subordinate to all other creditors and depositors" of the institution. It was left to the judgment of the amply authorized committee named in the agreement to determine when the amounts of the subscriptions to the fund should be repaid, either in cash or in corporate stock, at each subscriber's option. While the term "guaranty" is used as generally descriptive of the fund to be made available to the bank, the purposes to be served by the fund are specified; and the liability of the subscribers to contribute to it became absolute when the requisite amount was pledged. The repayment of the subscriptions was manifestly contingent upon the hoped for future success which the subscribers were giving the bank an opportunity to achieve. Meanwhile their interests were being *Page 236 represented and protected by a committee having "full authority to determine all matters relating to the subject" of their agreement.
There were substantial considerations for the liabilities which the defendants agreed to assume. Not only was every subscription expressly made in consideration of the agreement of other subscribers, who have fulfilled their pledges, but a prior subscription agreement was to be, and was, in fact, released to the specified extent, when the new one became binding, and the consent of the bank commissioner to the continued functioning of the bank was thereby induced. The sufficiency of such considerations cannot be doubted. Gittings v. Mayhew,6 Md. 113; Hughes v. Antietam Mfg. Co., 34 Md. 316; Erdman v.Trustees of Eutaw M.P. Church, 129 Md. 595, 99 A. 793; 38A.L.R. 881, 906, annotation.
No point is made in the brief for the appellees as to the right of the plaintiff, as receiver of the Hagerstown Bank Trust Company, to bring this suit, if the declarations state a good cause of action. The asserted liability was contracted to be discharged directly to the bank, for the protection of its capital and the benefit of its creditors, in pursuance of a plan formally approved by its directors, and the agreement to that end was delivered to the bank and came into the hands of its receiver as one of the assets justly applicable to the payment of its debts. In Small v. Schaefer, 24 Md. 143, Northern Central Ry.Co. v. United Rys. Elec. Co., 105 Md. 345, 66 A. 444, andMackenzie v. Schorr, 151 Md. 1, 133 A. 821, this court applied the principle that one for whose benefit a contract has been made by others may sue for its enforcement. In the last of those cases the principle was stated in support of an action by the receivers of a corporation upon an agreement for its benefit between a third person and owners of its capital stock. The suits in those instances were upon simple contracts. But by chapter 108 of the Acts of 1914 (Code, art. 75, sec. 15), it is provided: "In suits brought upon any instrument or writing under seal executed on and after *Page 237 June 1, 1914, any person entitled to sue or liable to be sued thereon but for such seal, shall be entitled to sue and liable to be sued notwithstanding such seal." There is consequently no reason to deny the receiver's right to maintain this suit, as we have also concluded that the declaration is not otherwise demurrable.
Judgment in each of the cases (Nos. 45, 46, 47, 48), reversed,with costs, and cases remanded for further proceedings.