to in the motion were not, for the same reason, objectionable.

The defendant was not prejudiced by the errors in the rulings in the second, third, fourth, fifth, seventh, eighth, and tenth exceptions, because there was no evidence in the case to show that the $5,000 mentioned in the first release was not paid on account of the death of the deceased, or by the errors in the rulings in the nineteenth exception on the plaintiffs' special exceptions to his prayers, as the prayers were properly rejected on other grounds, and the errors are not therefore reversible errors, but, because of the errors pointed out, the rulings in the nineteenth exception, on the second, fourth, fifth, sixth, seventh, ninth, tenth, and eleventh prayers of the plaintiffs, and the fourth, sixth, ninth, tenth, eleventh, and first prayers of the defendant, must be reversed, and a new trial must be awarded.

Rulings reversed, as above specified, and new trial awarded.

(108 Md. 689)

LANSBURGH v. DONALDSON. (Court of Appeals of Maryland. Nov. 14, 1908.) TAXATION (8 674*)-DUTY TO PAY TAXESTENANTS-ACQUISITION OF TAX TITLE.

Where a tenant who was bound to pay taxes on leased premises by Code Pub. Gen. Laws 1904, art. 81, § 69, omitted to do so, and bought the property at tax sale, he held the tax title in trust for the landlord, who was therefore entitled to sue to have such title set aside.

[Ed. Note.-For other cases, see Taxation, Cent. Dig. § 1358; Dec. Dig. § 674.*]

Appeal from Circuit Court, Prince George's County; Geo. C. Merrick, Judge.

Appeal by Max Lansburgh against George T. Donaldson. Judgment for defendant, and plaintiff appeals. Reversed.

Argued before BOYD, C. J., and BRISCOE, PEARCE, SCHMUCKER, BURKE, WORTHINGTON, and THOMAS, JJ.

Clayton E. Emig, for appellant. Fillmore Beall and Charles H. Stanley, for appellee.

BURKE, J. This is an appeal from an order of the circuit court for Prince George's county sustaining a demurrer to the bill of complaint and dismissing the bill. The bill, among other things, alleges the following facts, which are admitted by the demurrer to be true, and which, for the purposes of this appeal, are all the facts that need be stated: The complainant was the owner in fee of a farm situated in Prince George's county, and in the year 1892 he leased this farm to George T. Donaldson, the appellee, who agreed to pay an annual rental of $100. The appellee entered into possession of the premises, and from time to time paid rent. The relation of landlord and tenant existed for a number of years, and during that time the

tenant removed from the premises valuable mineral under contract with the landlord, but has never accounted to him therefor, and he also became further indebted to the complainant on other accounts which he has failed to discharge. Donaldson failed to pay his rent promptly, and because of his failure in this respect the complainant was not able to pay the taxes due upon the property, and the farm was sold by public authority to enforce their collection. Donaldson was then in possession of the property as the tenant of the complainant purchased the premises at the tax sale. It is alleged that he fraudulently acquired the tax title to the premises, and that, while the relation of landlord and tenant existed, he fraudulently and without the knowledge and consent of the plaintiff applied moneys for the payment of said taxes on the premises at a time and period when he was indebted to the complainant for rent and for other moneys due under various other agreements arising and existing during the period of his tenancy. The plaintiff has made various efforts to reimburse Donaldson for moneys expended by him for taxes, and has offered and has been ready and willing to pay him any and all taxes which he may have paid for state and county purposes on account of the rented premises, but has been unable to effect a satisfactory settlement with him. The complainant tenders himself ready to account to the defendant for all taxes paid by him, provided the defendant account and pay for the use and occupation of the premises. The prayer for relief is (a) that the defendant may be decreed to hold the tax title to the land and premises described in the bill in trust for the complainant; (b) that an accounting may be had between the parties whereby the defendant may be charged with the use and occupation of the premises from the time he entered into possession thereof as tenant, and that he be credited with whatever sums of money he may have paid for state and county taxes on account of the land, and for other and general relief. The grounds assigned for the demurrer are (1) that the plaintiff has not stated such a case as entitled him to any relief; (2) that the plaintiff has adequate relief in a court of law. The court in its opinion found that the plaintiff was out of possession, and treated the proceeding as one to annul the tax deed under which the defendant has acquired a good prima facie title to the property, and dismissed the bill, for the reason that the plaintiff had "a full and adequate remedy at law by an action of ejectment in which proceeding all disputed questions raised by the bill can be fully adjusted."

It is provided by section 69, art. 81, Code Pub. Gen. Laws 1904, that: "The tenant or person holding a leasehold estate shall pay to the collector the taxes levied upon the de

mised premises, and shall have his action against the landlord for the sums so paid, and may deduct the same out of the rent reserved, unless otherwise agreed between the lessor and lessee. This section not to apply to Garrett county." The defendant at the time he purchased the property, being under a statutory obligation to pay the taxes, the facts alleged in the bill bring the case directly within the principle announced in Oppenheimer v. Levi, 96 Md. 296, 54 Atl. 74, 60 L. R. A. 729. A number of cases from other jurisdictions were cited at the hearing by counsel for the appellant to the effect that, under the allegations contained in the bill, a court of equity would have power to grant the relief prayed for in the absence of an obligation on the part of the tenant to pay taxes; but we prefer to rest the decision upon Oppenheimer's Case, in which Judge Pearce collected and reviewed the authorities which, under the facts stated in the bill, abundantly support the plaintiff's position. The opinion in that case, after stating the general rule announced in all the cases in this court upon the subject, "that those only who have a clear legal and equitable title to the land, connected with possession, have a right to claim the interference of a court of equity to give them peace, or dissipate a cloud on title," proceeds to say: "There are, however, well-established legal principles, applicable to the facts of this case, which, in our opinion, take it out of the general rule, and bring it within the exceptions in which equity has jurisdiction. These principles cannot be better stated than in the language of Judge Cooley, extracted from his law of taxation: 'Some persons from their relation to the land or to the tax are precluded from becoming purchasers on grounds which are apparent when their relation to the property and to the taxes is shown. The title to be given at a tax sale is a title based on the default of a person who owes to the public the duty to pay the tax, and the sale is made by way of enforcing that duty. But one person may owe the duty to the public and another may owe it to the owner of the land by reason of contract or other relations. Such a case may exist where the land is occupied by a tenant, who, by his lease, had obligated himself to pay the taxes. Where this is the relation of the parties to the land, it would cause a shock to the moral sense if the law would permit this tenant to neglect his duty, and then take advantage thereof to cut off his lessor's title by buying in the land at a tax sale. There is a general principle applicable to such cases, which may be stated thus: That a purchase, made by one whose duty it is to pay the taxes, shall operate as a payment only. He shall acquire no right as against a third party by a neglect of the duty which he owed to such party. This principle is universal, and is so

*

*

entirely reasonable and just as scarcely to need the support of authority.'" Among the cases cited as supporting the principle stated by Judge Cooley is that of Burgett v. Taliaferro, 118 Ill. 516, 9 N. E. 334, in which it is held that "that, at most, the tenant could only become seised under the tax deed in trust for his landlord, if living; if dead, then, for his heirs, or assigns." It is stated in 24 Cyc. 954, that "a purchaser cannot acquire a title as against his landlord by a purchase of the premises at a tax sale, when the duty to pay the taxes for which the premises were sold devolved upon the tenant, either by statute or by agreement." To the like effect is the case of Smith v. Specht, 58 N. J. Eq. 47, 42 Atl. 599.

Assuming, as we must do, the truth of the facts alleged in the bill, we are of opinion that the lower court committed an error in sustaining the demurrer and dismissing the bill, and that its order to that effect must be reversed.

Order reversed, with costs, and cause remanded.

(108 Md. 640)

DAVIS et al. v. BLACKISTON. (Court of Appeals of Maryland. Nov. 14, 1908.) 1. MORTGAGES (§ 367*)-FORECLOSURE-PerSONS WHO MAY QUESTION VALIDITY.

The only person who can complain that he is directly injured by a defect of title to property sold under mortgage foreclosure is the purchaser, as all that can be sold is the title of the mortgagor at the time of the recording of the mortgage, and if, by reason of any defect in the authority of the party making the sale, that title did not effectually pass to the purchaser, he, and not the mortgagor, is the sufferer therefrom.

[Ed. Note.-For other cases, see Mortgages, Dec. Dig. & 367.*]

2. MORTGAGES (§ 367*)-FORECLOSURE SALEDUTY OF ASSIGNEE OF MORTGAGE.

It cannot be insisted that it was the duty of a mortgagee, before foreclosing and selling the property, to clear the title of an alleged cloud, where it is not shown that the land sold at a lower price because of such alleged cloud, nor that there were other bidders than the actual purchaser present at the sale, who for fear of the alleged cloud refrained from bidding a higher price for the land, nor that persons were deterred from attending the sale because of the doubt as to the title.

[Ed. Note. For other cases, see Mortgages, Dec. Dig. § 367.*]

3. MORTGAGES (§ 367*)-FORECLOSURE-OPENING OR VACATING SALE.

Evidence in proceedings to prevent the ratification of the foreciosure sale of mortgaged property held not to show that the land failed to bring its true value at the sale because of an alleged cloud on the title.

[Ed. Note. For other cases, see Mortgages, Dec. Dig. § 367.*]

Appeal from Circuit Court, Allegany County; Robert R. Henderson, Judge.

John W. Davis and another appeal from an order of the circuit court overruling exceptions to a sale of mortgaged property by

D. James Blackiston and ratifying the sale. Affirmed.

Argued before BOYD, C. J., and BRISCOE, PEARCE, SCHMUCKER, BURKE, WORTHINGTON, and THOMAS, JJ.

J. W. Scott Cochrane, for appellants. Richard S. Bell and D. James Blackiston, for appellee.

SCHMUCKER, J. This is an appeal from an order of the circuit court for Allegany county overruling the appellants' exceptions to a sale of mortgaged property and finally ratifying the sale. The mortgage was made in the usual form by the appellant and his wife to John B. Widener on May 5, 1898, to secure the payment of an indebtedness of $390, which was represented by three promissory notes maturing at two, three, and four years from date, with interest. On the 20th of February, 1908, the mortgage, then long overdue, was assigned by the mortgagee for the purpose of foreclosure to D. J. Blackiston, who promptly took the requisite steps under article 66 of the Code (Pub. Gen. Laws 1904) for a sale of the mortgaged property, consisting of a farm of 332 acres. Before the sale was made, the appellant filed a petition in the mortgage proceedings for an order of court "staying and restraining the sale" because of the alleged mental incapacity of Widener at the time he executed the assignment to Mr. Blackiston. An order to show cause was passed on this petition, but, after an answer had been filed denying its allegations and testimony taken, the court dismissed the petition, and Mr. Blackiston sold the farm under the mortgage proceedings at public sale to the mortgagee, Widener, at the price of $700. After this sale had been reported to the circuit court by Mr. Blackiston and an order of ratification nisi had been passed, the appellants filed exceptions to its ratification, for the same reason which they had assigned in their previous application to have it stayed. The grounds of objection to the ratification of the sale are thus stated in the exceptions:

"First. Because the assignment of mortgage to D. James Blackiston for the purpose of foreclosure, and under which said assignment said sale was made, is nugatory and void for the reason that the assignor was at the time of said assignment, and now is, a non compos mentis and incapable of executing a valid deed or contract.

"Second. Because, by reason of the mental capacity of the assignor of mortgage, no marketable title to the property was offered at the sale reported, and the property by reason thereof did not bring half its value."

No objection was made to the validity of the mortgage itself, or the mode and form of conducting the sale, nor was any offer made to pay the mortgage debt, nor was it, otherwise than inferentially, if at all, averred in the exceptions that there were persons

the property at the time of the sale who were deterred from bidding on it because of an apprehension that its title was doubtful or clouded. Strictly speaking, the only person who could complain that he was directly injured by a defect of title to the property sold under a proceeding like the present one is the purchaser. All that could be sold under the proceeding was the title of the mortgagor at the time of the recording of the mortgage, and, if by reason of any defect in the authority of the party making the sale that title did not effectually pass to the purchaser, he, and not the mortgagor, is the sufferer therefrom. Warfield v. Ross, 38 Md. 86. The exceptants' ground of complaint, if any they have, apart from mere inadequacy of price, in reality is that the assignment of the mortgage to Mr. Blackiston was not void, but valid, and therefore the sale made by him did pass the mortgagor's estate to the purchaser, but that there existed an apparent, though not real, mental incapacity of the assignor so notorious as to cast a cloud upon Mr. Blackiston's title to the mortgage, and prevent the property from yielding its full value at the sale. They invoke in their behalf the proposition announced by this court in Schindel v. Keedy, 43 Md. 418, in reference to a sale about to be made under a decree in chancery of land freed of certain liens and subject to others, that, "where a trustee is advised before the sale of doubt in regard to the title or the nature and character of the interest of the property to be sold, it is his duty to use all reasonable efforts to disembarrass the title of such doubt in order that the property may bring its fair market value." Assuming ex gratia that the rule applied in that case to the trustee about to sell under the decree in chancery is applicable in its full force to a mortgagee or his assignee in selling, ex parte under a power, only the interest of a mortgagor in mortgaged land, the record before us fails to present a case calling for its application. The evidence does not show that the land sold at a lower price because of the alleged cloud on its title. It does not appear that there were any other bidders than the mortgagee or his agent present at the sale who, but for fear of the alleged cloud, would have paid a higher price for the mortgaged land than that at which it sold. Nor is it shown that there were persons who were deterred from attending the sale because of doubt or apprehension of the validity of the title to be sold. The nearest approach to evidence bearing upon these essential facts is the testimony of the appellant himself, who testified, when asked why he allowed the farm to be sold for only $700: "Because I was advised that he [presumably Mr. Widener] could not give a release on the mortgage; that's the way it was." He was then asked whether he had the money to pay more than $700 for the farm, and he replied: "I did

it." His own counsel then, after calling his attention to these questions and answers, asked him: "Did not the opinion of Mr. Widener's inability to execute a release of the mortgage prevent and hinder you in borrowing money on the property?" to which he answered, "Yes, sir." He, however, mentioned the name of no one to whom he had applied to borrow money on the land and by whom he had been refused for the reason assigned by him, nor did he name or produce a single person who was deterred from attending the sale or bidding on the property because of an apprehended defect in or cloud upon the title to the land sold. This evidence, it is needless to say, falls far short of sustaining the appellants' contention that the mortgaged land failed to bring its true value at the sale because of any cloud real or apprehended upon its title. The evidence shows that the land sold for only about onehalf of the value put upon it by the witnesses, but there is no evidence that the sale was not fairly conducted, and it was admitted in argument by the appellant that this was no such inadequacy of price as of itself to afford ground for setting aside the sale. It further appears from the evidence that the appellant had not even paid the interest on the mortgage debt for several years before the proceedings for its sale. We do not regard the evidence in the record touching the mental condition of Mr. Widener when he made the assignment of the mortgage to Mr. Blackiston as relevant to the real issues presented by the case, but we do not hesitate, after carefully reading all of that evidence, to say that we fully concur in the conclusion reached by the learned judge below, and expressed in his opinion, that it entirely fails to successfully impeach Mr. Widener's competency to make a valid deed, or to show that he failed to exhibit a sensible and intelligent purpose in connection with that transaction or a complete grasp of the situation which he then occupied.

The decree appealed from will be affirmed. Decree affirmed, with costs.

(109 Md. 11)

MILLER et al. v. COSMIC CEMENT, TILE & STONE CO.

(Court of Appeals of Maryland. Nov. 14, 1908.) 1. CORPORATIONS (8 76*) STOCK SUBSCRIPTIONS PROPERTY AS PAYMENT AUTHORITY FROM STOCKHOLDERS-NECESSITY.

An agreement by a board of directors to receive a formula in exchange for stock was void, because not authorized by the "stockholders assembled in general meeting," as required by Code Pub. Gen. Laws 1904, art. 23, § 69.

[Ed. Note. For other cases, see Corporations, Dec. Dig. § 76.*]

2 CORPORATIONS (§ 456*) - CONTRACTS-PARTIAL INVALIDITY-DIVISIBILITY.

A contract, binding one to transfer a formula to a corporation and render services as a chemist in exchange for $90,000 in stock and

[Ed. Note.-For other cases, see Corporations, Dec. Dig. $ 456.*]

3. WORK AND LABOR (§ 10*)- INDIVISIBLE CONTRACTS-QUANTUM MERUIT.

If a corporate contract to exchange stock and cash for property and services, void as to the stock subscription was indivisible, the party rendering the services could recover on a quantum meruit for the services actually rendered and accepted by the company before receivership proceedings.

[Ed. Note.-For other cases, see Work and Labor, Dec. Dig. § 10.*]

4. CORPORATIONS ($ 565*) INSOLVENCY CLAIMS-SERVICES.

Under a corporate contract to pay one $10,000 for services, $2,000 down, and $200 a month, on liquidation of the company's affairs after 11 months' service his claim should be allowed for $4,200, less credits, with due proportion of interest, he being entitled to full payment for salary accruing within three months before the receivership proceedings, and a dividend as a general creditor for the balance of his claim.

[Ed. Note.-For other cases, see Corporations, Dec. Dig. § 565.*]

Appeal from Circuit Court No. 2 of Baltimore City; James P. Gorten, Judge.

. Action by Charles F. Miller and others against the Cosmic Cement, Tile & Stone Company. From an order sustaining exceptions to an auditor's account and directing a restatement, plaintiffs appeal. Reversed and remanded.

Argued before BOYD, C. J., and BRISCOE, PEARCE, SCHMUCKER, BURKE, THOMAS, and HENRY, JJ.

Edwin H. Brownley (Martin G. Kenney, of counsel), for appellants. B. B. Shreeves, for appellee.

SCHMUCKER, J. This is an appeal from an order of circuit court No. 2 of Baltimore City sustaining exceptions to an auditor's account, and directing its restatement in a designated manner. The account distributed the assets of the appellee company which had, by a previous order in this case, been placed in the hands of a receiver for liquidation because of its insolvency. The only claim involved in the exceptions is the one filed by Dr. P. B. Wilson, Jr., for a balance of $9,415, alleged to be due on account of salary agreed to be paid to him as chemist. It appears from the record that Dr. Wilson after several years of experimenting had made what was believed to be a new and useful discovery in the production of cement, tile, and stone. During these experiments he had received financial and practical assistance from James F. Morrison and Morrill N. Packard. In July, 1904, the appellee company was incorporated, with a capital stock

of $200,000, under the general laws of the state, by Morrison, Packard, Wilson, and others for the purpose of manufacturing and dealing in cement, tile, and stone, to be made after the formula discovered by Dr. Wilson. About $17,800 of the stock was subscribed for by persons other than Dr. Wilson, and those subscriptions were eventually paid up to the company or its receiver. On July 26, 1904, at the first corporate meeting of the company, Dr. Wilson made to it in writing a proposition to "sell, dispose of and transfer" his discovery, and the secret formula embodying it, with the sole and exclusive right to the use thereof, to be paid for upon the following terms, as set forth in his offer: "The terms upon which I offer to sell and transfer the aforesaid discovery and formula to your company are that I shall receive the sum of one hundred thousand ($100,000) dollars for the same, and that your company shall enter into a contract to employ me in the capacity of chemist for said company at such a salary as shall be determined upon to be fair compensation for my service, taking into consideration the earnings thereof. I agree to take as part payment of said sum of one hundred thousand ($100,000) dollars, ninety thousand ($90,000) dollars worth of the capital stock of your company at its par value, and the balance of ten thousand ($10,000) dollars in such cash payments and as promptly and at such times as will not seriously interfere with the successful operations of your company financially. I agree that said cash sum of ten thousand dollars ($10,000) shall be in lieu as salary as chemist, until said sum has been fully paid, as follows: Two thousand dollars ($2,000) in cash upon the execution of said transfers and agreements and two hundred dollars per month ($200.00) thereafter until said sum of ten thousand ($10,000) dollars has been fully paid, said payments to commence on the first day of August, 1904." It is apparent from the terms of this proposed disposal of the discovery and formula to the company, in consideration, to the extent of $90,000, of the issue by it of its capital stock, as well as from the manner of its attempted acceptance on the part of the company, that the transaction was intended to be a subscription by Dr. Wilson to that amount of its stock to be paid for in property, consisting of the discovery and formula, under the provisions of section 69, art. 23, Code. The proposition thus made was referred by the company to a committee of three directors for investigation, with instructions to report to a meeting of the board of directors to be held on July 28th, "to consider the propriety of making said purchase, and to fix the terms upon which it should be made." At the meeting of the board of directors held on July 28th this committee reported that after having "examined carefully the merits, worth, use,

la offered by Dr. Wilson, both as to its scien. tific and commercial values," they found it to be of great present and prospective value, and they recommended its purchase upon the terms set forth in the offer of sale made by him. The offer was then formally accepted by a resolution of the board of directors, which also authorized the president of the company to do all acts on its behalf requisite to the consummation of the transaction.

The company having failed to pay the bonus tax to the state prior to the meetings of July 26th and 28th, the tax was paid, and the proceedings of the board of directors at those two meetings was formally ratified at a meeting of that board held on September 1, 1904. The record, however, contains no evidence that the acquisition by the company of Dr. Wilson's discovery and formula in return for the issue to him of $90,000 of its stock was ever authorized by its stockholders assembled in general meeting pursuant to a call to consider the propriety of receiving it, as is required by section 69, art. 23, Code (Pub. Gen. Laws 1904), as a condition precedent to the validity of the acceptance by such corporation of any species of property in payment of subscriptions to any part of their capital stock. Neither a written transfer, nor an actual delivery of the formula, nor a disclosure of its contents, was ever made by Dr. Wilson to the company, nor were the $90,000 of stock ever actually issued to him, but the company had the benefit of the use of the process described in the formula in its manufacturing operations, which were conducted under the direction and supervision of the doctor himself as its chemist. The formula remained in a safe deposit box in the Drovers' & Mechanics' National Bank in the joint custody of Morrison, Dr. Wilson, and Packard, where it had been for some time prior to the organization of the company. There was an understanding between the parties interested in the company that no certificates of stock should be issued until after the lapse of a year from its incorporation. The company, having thus obtained the use and benefit of Dr. Wilson's process, established a factory and plant, and endeavored, under his supervision, to manufacture and sell the products to which it was believed to be adapted. The material produced at the factory proved to be unsalable and of no market value, and the company became financially embarrassed, by its manufacturing enterprise, to such a degree that its insolvency supervened, and it was put in the hands of a receiver for liquidation, on the bill of complaint of a creditor, by an order of court passed in this case on June 12th, 1905. During the progress of the liquidation of the company's affairs, Dr. Wilson filed in the case his claim, as a creditor of the company, which forms the subject of the present controversy. That claim is stated upon the theory that the doctor is,