Page images

Vol. II.]


[No. 1.

It is settled, as a judicial question, that the Constitution confers upon Congress the power to establish a bank or a system of banks, as necessary instrumentalities for executing the powers expressly given it and performing the duties imposed upon it. This was decided by the supreme court of the United States in 1819, in the case of M'Culloch v. Maryland, 4 Wheat. 316. Chief Justice Marshall, in delivering the opinion of the court, puts the case upon the ground that a national bank was a convenient, useful, and essential instrument in the prosecution of the fiscal operations of the government.

In the later case of Osborn v. United States Bank, 9 Wheat. 738, 859, the question was reconsidered, and the doctrine reaffirmed, that a national bank was an instrument which was necessary and proper for carrying into effect the powers vested in the government; that Congress had the power to create a bank for national purposes and to endow it with such faculties and functions as were necessary to enable it to effect its object, and that among these is the faculty of lending and dealing in money.

The precise question in these cases was as to the right of a state to tax the national bank, but the principles upon which this question was decided are decisive of the case at bar.

The power of the government to create a bank is supreme; from its nature it includes the power to endow it with all such faculties as are appropriate to accomplish its object. It is clear, as stated in Osborn v. United States Bank, supra, that the faculty of lending and dealing in money is an appropriate and necessary faculty for a bank, and that without it the bank would want the capacity to perform its public functions in the most efficient manner. The rate of interest to be charged for the use of money is a necessary incident of a loan, and the power in Congress to authorize a bank to lend money involves the power to fix the rate of interest and the penalty for taking a greater rate. If a state may fix the rate of interest, it may practically destroy this faculty of the bank. The power to create a bank includes the power to fix the limitations within which it may exercise its functions and faculties, and to determine the causes for which and the manner in which it may be destroyed. This power vested in Congress is inconsistent with a power in any state or territory to affix penalties upon the bank for taking unlawful interest, or for any other violation of the act of Congress. We are of opinion that it was within the constitutional power of Congress to fix the rate of interest which a national bank might take upon a loan of money, and to determine the penalty to be imposed for taking a greater rate; that such power, when exercised by Congress, is exclusive of state legislation; that the provision of the thirtieth section of the act of Congress we are considering, imposing a penalty for taking unlawful interest, applies as well to banks established in states where a rate of interest is fixed by law, as to banks in states where no rate is fixed, and therefore that the laws of New York imposing penalties for taking usury do not apply to national banks established within its limits. The supreme court of Ohio has taken the same view of the constitutionality and construction of the statute which we entertain. First National Bank of Columbus v. Garlinghouse, 22 Ohio St. 492. We are aware that the court of appeals of New York has decided differently upon both points. First National Bank of White

Vol. II.]


[No. 1.

hall v. Lamb, 50 N. Y. 95. But, notwithstanding the great respect we have for that eminent tribunal, we are unable to concur in the conclusions it reached. Judgment for plaintiff.




(To appear in 39 Maryland.)

A purchased in good faith, for its full value, without notice of any defect in his title, and believing it to be good, a lot of ground, described as part of Military Lot No. 3905, and erected thereon a valuable building. B was the owner of a tract of land, called "The Trap," but was ignorant of its precise limits until its location was ascertained by actual survey, some years after the erection of the building by A, and it was found to include a part of Military Lot No. 3905. B thereupon instituted an action of ejectment against certain persons in possession of parts of the said military lot, and recovered judgment, which was affirmed on appeal. The lot of ground which had been purchased by A was found to be included in the lines of the tract called "The Trap," but A was not made a defendant in the ejectment suit. A writ of habere facias possessionem having been obtained by B under his judgment in ejectment, and the sheriff having declared his purpose to assert his authority by force, if necessary, A surrendered possession of his lot. Upon a bill filed by A against B asking relief, it was held, that A was entitled to relief in respect to the valuable improvements made by him, but that B should have the option to accept from A payment for the lot of ground estimated at its just value, without the improvements thereon, and should, on its receipt, convey the lot to A by a sufficient deed; or to take and hold the lot with the improvements, paying to A the actual value of such improvements, to the extent of the additional value which they had conferred upon the land; and in default of such payment the same should be a lien and charge on the property, to be enforced by a sale thereof.

APPEAL from the circuit court for Allegany County.

The bill of complaint in this case, the object and purpose of which are stated in the opinion of the court, was filed by the appellant against the appellee. The circuit court (Motter, J.) passed a decree dismissing the bill, and the complainant appealed.

The cause was argued before Bartol, C. J., Stewart, Bowie, Miller, and Alvey, J.

The facts are stated in the opinion.

R. T. Semmes, for the appellant.

J. H. Gordon, contra.

BARTOL, C. J., delivered the opinion of the court.

The questions presented by this appeal arise upon the following state of facts: The appellant, an association duly incorporated, purchased from Thomas Hammond a small lot of vacant ground 50 by 130 feet in extent, situated in Hammond's Addition to Westernport, in Allegany

Vol. II.]


[No. 1.

County, for $125.00, which, according to the proof, was its full value, went into possession thereof and erected thereon an expensive building, costing $3,000. The building was erected in 1859-1860. On the 23d day of April, 1861, the lot was conveyed to the appellant by Thomas Hammond, and is described in the deed as part of Military Lot No. 3905. It appears that in March, 1814, a patent had been issued by the state to one Thomas Johnson, of Military Lot No. 3905 (with others), and that the title thereto has been conveyed by regular mesne conveyances down to Thomas Hammond, from whom the appellant purchased.

The appellee held title to a tract of land called "The Trap," which had been patented to Magruder, in 1803; but was ignorant of its precise limits, until in 1867 its location was ascertained by actual survey, and it was found to include a part of Military Lot No. 3905, whereupon the appellee, in 1868, instituted an action of ejectment against certain persons then in possession of parts of the said military lot, and recovered judgment, which was affirmed by this court, in 33 Md. 95, on the ground that Morrison's title was superior to Hammond's. The lot of ground which had been purchased and improved by the appellant was included in the lines of the tract called "The Trap," but the appellant was not made a defendant in the action of ejectment. Afterwards, on the 24th day of September, 1870, a writ of habere facias possessionem having been obtained by the appellee under his judgment in ejectment, the sheriff demanded thereunder the possession of the house erected by the appellant; and declaring his purpose to assert his authority by force if necessary, the possession thereof was surrendered by Fredlock, the president of the association; and the appellee asserts his title thereto, and claims to hold the same as legal owner.

Whereupon the bill of complaint in this case was filed by the appellant, alleging that it purchased the lot of ground and made valuable improvements thereon in good faith, believing that its title thereto was good, and without any knowledge of any adverse claim in any one, and without any notice that the appellee had any right or claim whatever thereto. The bill alleges that the appellant is without remedy at law, by reason of the defect in its title purchased in good faith, and prays relief; averring that it has an equitable claim against the appellee to be remunerated for the valuable improvements erected upon the lot, and that for its claim in this behalf it has an equitable lien upon the land. It avers that it is ready and willing to account to the appellee, and pay him a fair and reasonable compensation as ground rent for the use of the lot, without the improvements, to be fixed by a decree of the court; and prays that the appellee may be decreed to pay to the appellant whatever balance may be found due upon the statement of an account allowing him a fair ground rent as offered; and that the lands may be sold to satisfy the lien of the appellant; or that it may have such other and further relief as its case may require.

The bill charges substantially, as one ground for relief, that the appel lee had full knowledge of his title since 1842; and while he was all the time cognizant of his right, and living in the neighborhood, suffered the appellant to go on in the erection of the building upon his ground, and to expend large sums of money, without giving the appellant any notice of his claim, and did not set up his rig till afterwards.

Vol. II.]


[No. 1.

The general principle is well established that "if a man, supposing he has an absolute title to an estate, should build upon the land, with the knowledge of the real owner, who should stand by and suffer the erections to proceed, without giving any notice of his own claim; he would not be permitted to avail himself of such improvements, without paying a full compensation therefor; for, in conscience, he was bound to disclose the defect of title to the builder." 1 Story Eq. Juris. § 388.

This general principle has been recognized by the court of appeals in Casey v. Inloes, 1 Gill, 432; Hoffman v. Smith, 1 Md. 475, 491; Tongue v. Nutwell, 17 Md. 212; but in those cases it was held to be inapplicable. A reference to them will show that the general principle must be understood with certain qualifications. Some of these are thus clearly stated by Judge Story, 1 Eq. Juris. § 386: "In order, however, to justify the application of this cogent moral principle, it is indispensable that the party so standing by and concealing his rights should be fully apprised of them, and should, by his conduct or gross negligence, encourage or influence the purchase; for if he is wholly ignorant of his rights, or the purchaser knows them; or, if his acts, or silence, or negligence, do not mislead, or in any manner affect the transaction, there can be no just inference of actual or constructive fraud on his part. [For a right can be lost or forfeited only by such conduct as would make it fraudulent, or against conscience, to assert it."]

This qualification of the general rule is stated in the text books, and asserted by all the well adjudged cases, which need not be here cited. It rests on the plainest principles of reason and justice which always govern the law of equitable estoppel. Applying this rule to the case before us, we concur in the opinion expressed by the judge of the circuit court, that the charge of constructive fraud on the part of the appellee is not sustained.

The facts touching this point are stated in a written agreement, signed by the solicitors, as follows:

That "James Morrison was a resident of Allegany County, and resided about three or four miles from said premises, about the time of the erection of the brick building by the Union Hall Association, and knew of its erection, and being erected, but that he had no knowledge of the particular location of said tract of land called The Trap,' or of the lot claimed by said complainant at the time of said erection, and never did know the exact location of said tract of land, until he had a survey thereof made by James Chisholm, surveyor, about the year 1867, and that he then knew for the first time that said brick building was upon said tract called 'The Trap.'

[ocr errors]

Now upon this state of facts, it is very clear that there has been nothing in the conduct of the appellee creating an equitable estoppel; his silence and acquiescence at the time of the purchase by the appellant, and during the erection of the building, cannot conclude him, because it is conceded that he was ignorant of his rights to the lot of ground in question until 1867. It has been argued by the appellant, that as he was cognizant of his title to the tract called "The Trap," the law imputes to him knowledge of its limits and extent; but such a presumption cannot arise against the positive admission, that he was in fact ignorant of its true

Vol. II.]


[No. 1.

location; and that he did not know till 1867 that the building erected by the appellant was embraced within its lines.

Nor is there any ground for imputing to him gross negligence, creating an estoppel. This is not a case to which that doctrine can apply. There was no privity between him and the appellant; they were strangers to each other, and there is no evidence that the appellee encouraged or influenced the appellant to purchase the lot or erect the building, or had any actual connection therewith.

We conclude, therefore, that the appellant is not entitled to relief upon the ground of any fraud, actual or constructive, on the part of the appellee, or of any equitable estoppel arising from the conduct or acquiescence of the latter. On the other hand, there is no doubt or question as to the bona fides of the appellant. It purchased the lot in good faith for its full value, and erected the building in the honest belief that it had a good title, and was ignorant that the same was contested by the appellee, or any other person claiming a better right. The appellant, therefore, comes strictly within the definition of a "bona fide possessor," according to the doctrine of the civil law. 31 Md. 454. The equitable rights of a party so situated to an allowance for improvements, in a suit against him by the real owner, were fully considered by this court, in the recent case of McLaughlin v. Barnum, 31 Md. 425. There is no doctrine of equity better established than that a bona fide possessor is entitled to such allowance, where he is the defendant, and the rightful owner seeks the aid of the court to recover rents and profits, or to enforce his title against him. "In such cases, a court of equity practically enforces the rule of the civil law, founded in natural justice, Nemo debet locupletari aliena jactura, as well as the cherished maxim of equity jurisprudence, that he who seeks equity must do equity.'" 31 Md. 453. In the case just cited, it was said to be doubtful" whether, from the present state of the authorities, the weight of judicial opinion and precedent goes farther than to sanction the exercise of the jurisdiction in such cases in favor of defendants, or as auxiliary to some other relief properly cognizable in equity." On that question, however, no opinion was expressed, the court said, "The case before us does not call for any judgment upon that point."

In this case, the question is directly presented, and we have given it all the consideration its importance demands. It may be conceded, that there is an absence of precedent in the English. cases maintaining the right of a bona fide possessor to sustain a bill of this kind, except upon some ground of fraud or estoppel, growing out of the conduct of the owner of the land; and consequently, we find in the text books, where the cases are referred to and the general principles stated, the rule allowing to a bona fide possessor compensation for improvements is said to be limited to cases where he is defendant. In 3 Sugden, Vendors & Purchasers, ch. 22, § 1, p. 55, the learned author says: "But if the aid of a court of equity is not required, and a person can recover the estate at law, equity, unless there be fraud, cannot, it is conceived, relieve the purchaser on account of money laid out in repairs and improvements; but must dismiss a bill for that purpose with costs."

In 2 Story's Eq. Jur. § 1238, the rule is stated in the same way; for which the passage in Sugden is cited.

« PreviousContinue »