Acker, Merrall & Condit Co. v. McGaw

The Acker, Merrall and Condit Company, a New York corporation, sued George K. McGaw in the Superior Court for Baltimore City. The case was tried before the Court without a jury, and at the conclusion of the plaintiff's case the following prayer was offered by the defendant: "The defendant prays the Court to rule upon the evidence as follows: That the plaintiff not having offered any evidence legally sufficient to support the material averments of the declaration is not entitled to recover in this action, and, therefore, the verdict shall be for the defendant." This prayer was granted, and a verdict and judgment entered for the defendant, and the plaintiff has appealed. The form of the prayer will be noticed later.

It must be borne in mind at the outset that the Court is not to determine whether or not the evidence is sufficient to support the plaintiff's case. We do not decide whether it is or not, and we are not to be understood as expressing any opinion upon that subject. The question raised by this prayer must be determined as if the case had been tried before the jury, and if the case should have gone to the jury, had it been tried before one, the sufficiency in fact of the plaintiff's evidence was a matter exclusively for the jury to pass on. The trial Judge has a certain duty to perform, and the jurors have another and different duty to discharge.

The Judge must say whether the plaintiff has offered any evidence legally sufficient to sustain the cause of action; the jury must say, when all the facts have been submitted, whether they are of sufficient probative force to support the plaintiff's claim. In the case in hand, it was an error to have directed a verdict for the defendant, if the record discloses any evidence legally sufficient from which the breach of duty on the part of the defendant and the consequent damage alleged might have been reasonably inferred by a jury. It would be a serious inroad upon the province of the jury if, in any case, where there is evidence from which the facts sought to be proved might be reasonably inferred, the Judge should withdraw the case from the jury, because, in his opinion, the fact in issue ought not to be inferred. Upon the application of the defendant to take the case from the jury, the evidence adduced by the plaintiff must be assumed to be true, and it must be given the benefit of all legitimate and fair inferences deducible therefrom in its favor. The real question, therefore, before us on this prayer is, not whether the testimony offered proved the plaintiff's case, or whether a jury ought to have so decided had the case been submitted to them, but whether there was any legally sufficient evidence offered by the plaintiff from which a jury could properly find, if they believed it true, that the defendant was guilty of the wrongs alleged in the declaration.

The declaration need not be here transcribed, but the reporter is requested to set it out in the report of the case. It will be seen from an inspection of the declaration that the suit is grounded upon an alleged breach of duty on the part of the defendant as the managing director of the plaintiff by which, it is alleged, it was compelled to pay an increased rental for certain premises located at numbers 220 and 222 North Charles street, in the city of Baltimore, where the plaintiff was conducting business.

A person commits a tort, and renders himself liable to an action for damages, who commits some act not authorized by law, or who omits to do something which he ought to do by law, and by such an act or omission either infringes some absolute right, to the uninterrupted enjoyment of which another is entitled, or cause to such other some substantial loss of money, health or material comfort, beyond that suffered by the rest of the public.Moak's Underhill on Torts, 4. The two essential elements, therefore, necessary to sustain the action are (1) A wrongful act or omission of duty by the defendant; and (2) Damage or loss to the plaintiff in consequence of such act, or omission. If the record discloses evidence tending to show a concurrence of these elements, the prayer should not under the rule stated, have been granted.

We will examine some of the salient facts which the plaintiff contends should have taken the case to the jury. Some of these are undisputed. It is not disputed that on or about the 28th day of February, 1903, the defendant, who had for a number of years conducted a grocery business at 220 and 222 North Charles Street, sold his business to the plaintiff, and that the consideration for the purchase was fully paid; that it was further agreed that the defendant should enter into the employment of the plaintiff, and should devote all his time and best judgment to the conduct and management of the plaintiff's business in Baltimore, should become one of its Board of Directors, and should be paid a salary of ten thousand dollars a year for a period of three years accounting from April 1st, 1903; that the defendant was made the resident and managing director of the plaintiff's business in Baltimore; that the defendant agreed to assign to the plaintiff a lease of the Charles street premises, which he did, and that the lessors of the premises consented to the assignment; that this lease expired on January 31st, 1906, and that on the 24th of October, 1905, the lessors of the premises notified the plaintiff to vacate the property at the expiration of the lease. It is in evidence that the plaintiff in reply to this notice wrote to the lessors saying that its resident director, Mr. McGaw, would take the matter up with them at once. This letter was written from New York on October 25th, 1905, and on the same day the plaintiff wrote to the defendant and enclosed the notices to quit sent by the lessors to it. This letter was written by Mr. H.J. Luce, president of the plaintiff's company, and in referring to the expiration of the lease he wrote "This seems to have been overlooked by all of us, and I have no idea we were so near the end of our lease, or I would have had this matter taken up before." He then suggested to Mr. McGaw the question whether or not they should renew the lease, or whether they should look around and see if they could improve their location. He tells Mr. McGaw that the matter should be attended to at once, and that they should arrive at some definite conclusion as to what they should do. In response to this letter Mr. McGaw wrote that he had been in New York on private business, but did not have time to call upon the plaintiff, but said nothing regarding the lease.

On the 28th of October, 1905, Mr. Luce wrote another letter to the defendant, expressing his surprise at the defendant's not coming to see him while in New York, and said; "Now, I am waiting to hear from you regarding the lease, and if necessary I will go down to Baltimore to see what is best to be done about it." Between October 28th and November the 8th, 1905, Mr. McGaw went to New York, and had an interview with Mr. Luce who testified as follows: "We had a general discussion about the business and conditions down here, and I said to Mr. McGaw, now we don't know anything about Baltimore, and the question we have got to attend to is the lease; it is your duty to go down and find out what we will have to pay for the renewal of this lease, and report as to whether it would be advisable to renew this lease and regarding the location, and make a general report to me so I can submit it to my board of directors; all those things have to go before our board; I said, if I can find time, I am very busy, but I would like to come down and spend a day going over the situation with you, but we are willing to abide by your judgment in the matter; he had absolute charge and we paid very little attention to the general management of the business, but it was entirely in his hands so far as the policy of the business was concerned. At this interview Mr. McGaw did not say anything about having taken the lease in his own name. Mr. McGaw in his letter of November the 7th, did not refer to the renewal of the lease; it was just a personal note written in regard to the renewal of our contract with him."

On the 23rd of November Mr. McGaw went to see Luce in New York. He then stated that he controlled the lease, and when asked what he meant by that stated that he was going back in the grocery business, and that he would buy the plaintiff out, and that he had taken the lease in his own name. Mr. Luce testified as follows: "I said, you have taken the lease in your own name? He said yes. I said I want to ask you one more question, what of the employees have you talked with? Do they know anything about it? He mentioned Warden, Hopper and Martin as being the men he talked to, I said, now, George, as president of this company I will not discuss this matter with you further. I want time to think it over." In reply to the letter of Mr. McGaw of November the 7th, 1905, regarding the renewal of his contract with the plaintiff Mr. Luce wrote on the 8th of November saying, "the matter we were talking over, I believe, was the renewal of the lease, and the question of location, now, let us get that matter up first, and clean it up. As far as the other is concerned, we can get together on that without any trouble." Mr. John T. Harwood, secretary of the plaintiff company, testified that he had an interview with the defendant in Baltimore on November 30th, 1905, with a view of securing from him an assignment of the lease to the plaintiff. Mr. Harwood gave the following account of this interview: "I wanted to set before him our reasons for thinking we were entitled to an assignment of the lease, that if we got into a fight with him down here it would be a very nasty one and we desired to avoid any controversy; he said, I told Mr. Luce about it and I would buy out the Acker, Merrall and Condit business and pay them a fair price; I said, as far as that was concerned Mr. Luce had so reported to our executive committee, and they would not consider any question except the assignment of the lease, and I had been sent down for the purpose of procuring it; in reply to a rather long talk from myself in respect of what we thought Mr. McGaw ought to do in connection with the lease, he replied to me he expected the New York end of the Acker, Merrall and Condit Company to look out for itself and George K. McGaw would look out for himself; that he had always controlled the lease, and had been there a great many years; and his relations were very close to the trustees; that Acker, Merrall and Condit Company, or anyone else could have procured the lease without the solicitation of Mr. McGaw."

On the fifth of December, 1905, the plaintiff placed the matter in the hands of Mr. John N. Steele, its attorney, who called upon the defendant, and demanded an assignment of the lease, and was referred to Mr. Thomas M. Lanahan, who informed Mr. Steele that Mr. McGaw would make the assignment which he did on the following day. This new lease to Mr. McGaw, which he assigned to the plaintiff, was executed either on the 24th or 26th of October, 1905, for the term of three years, beginning on the 1st day of February, 1906, at an annual rental of eight thousand dollars, but the terms of this lease had been agreed upon some time before it was executed. On the 6th of December, 1905, Mr. Luce stated that he sent for Mr. McGaw to come to Mr. Steele's office and he there told him he did not see how he could be consistently retained as manager of the company, that he asked him for his resignation; which he gave on the 8th day of December, 1905, two days after the assignment of the lease to the plaintiff. Mr. McGaw terminated his relations as a director of the company on the 13th of January, 1906, and his resignation was accepted,

After the lease had been assigned, Mr. Steele prepared an assent to the assignment on the part of the trustees, as their assent was required by the terms of the lease, and under the terms of the instrument prepared by Mr. Steele, Mr. McGaw was released from all responsibility. Before, however, the assignment reached Mr. Willis, Hopper and Warden had made an advance offer for the property, viz: Nine thousand dollars per year, with Mr. McGaw as security for the rent. Thereupon Mr. Willis, one of the trustees, said to Mr. Steele: "You have got to do one of two things; you have either got to get out of there quiet — there was some discussion as to the time, and it was said that thirty days wasn't time enough to move — I said, you will have reasonable time to get out — but you must either let me rent this place to these people who are going to give nine thousand dollars a year, or you will have to pay me nine thousand dollars a year and you will have to give me back that lease I gave to Mr. McGaw so as to let me out entirely, all of which he did, I don't mean to say all of which he did, but he gave me the nine thousand dollars."

At the time Mr. McGaw took the lease, and at the time the offer of Hopper and Warden was made, he occupied a fiduciary relation to the company and must be held subject to the rules applicable to that relation. Mr. Pomeroy in his work on EquityJurisprudence, vol. 2, sec. 1077, after stating that it is the duty of a trustee not to accept any position, or enter into any relation, or do any act inconsistent with the interests of the beneficiary, says that this rule is of wide application, and extends to every variety of circumstances. "It rests upon the principle that as long as the confidential relation lasts the trustee or other fiduciary owes an individual duty to his beneficiary, and cannot place himself in any other position which would subject him to conflicting duties, or expose him to the temptation of acting contrary to the best interests of his original cestui que trust. The rule applies alike to agents, partners, guardians, executors and administrators, directors and managing officers of corporations, as well as to technical trustees. The most important phase of this rule is that which forbids trustees and other fiduciaries from dealing in their own behalf with respect to matters involved in the trust, and this prohibition operates irrespectively of the good faith or bad faith of such dealing." In the case of the Cumberland Coal Iron Company v. Parrish, 42 Md. 605, this Court said, as between trustee and cestui que trust or agent and principal, the rule is inflexible, that the trustee or agent cannot be allowed to take the benefit of a transaction the entering into which was a violation of his duty, or where the benefit claimed and the duty required to be performed are in any respect inconsistent, the one with the other. The rule is founded on considerations of public policy, having in view the great difficulty, which must always exist in such cases, of obtaining clear and satisfactory evidence of the fairness of the transaction, and of the entire absence of all the abuse or advantage taken of the confidence reposed in such trustee or agent. It is now well settled that directors and managers of corporations, and such other companies, are equally within the rule which guards and restrains the dealings and transactions between trustee and cestui que trust, and agent and his principal; such directors or managers being in fact trustees and agents of the body represented by them." And in Booth v.Robinson, 55 Md. 436, the Court, speaking through JUDGE ROBINSON, said: "Directors in joint stock companies are not, in the strict and technical sense of the term, trustees for the stockholders. The property of the corporation is not vested in them, but in the body corporate. They are, however, in one sense, trustees, and they occupy a fiduciary relation to the corporation and its stockholders. They are entrusted with powers which are to be exercised for the common and general interest of the corporation, and not for their own private individual benefit. The confidence reposed in them, and the position they occupy toward the corporation and stockholders, require a strict and faithful discharge of duty, and they are not allowed to derive from their position, either directly or indirectly, any profit or advantage whatever, except it be with the full knowledge and concurrence of the company represented by others than themselves. And if this relation and duty be violated, to the injury of the corporation or its stockholders, the law affords an ample redress for the wrong against the guilty parties."

It is, therefore, clear that if the defendant secured the lease in his own name, under the circumstances mentioned, when he could have secured for the company at the same rental, his failure to do so was a breach of duty, and if loss thereby resulted to the plaintiff he is liable, or if while a director of the company he aided and abetted Hopper and Warden to obtain a lease of the premises, or if he authorized them to make the offer mentioned in the evidence whereby loss accrued to the plaintiff he is liable. That he did, while a director of the company, take the lease in his own name is not denied; that he could have secured it for the same rental for his company might have been reasonably inferred from his relation to the trustees, from his own declaration, and from the testimony of Mr. Willis, one of the trustees. Neither is it denied that he was ready to become responsible for the rent of nine thousand dollars per year in case the offer of Warden and Hopper was accepted. And the testimony of Mr. Willis, a portion of which we have quoted, tends to show that the plaintiff was compelled to pay an additional or advanced rent for the property in consequence of that offer.

Was this offer of Hopper and Warden made for and on behalf of Mr. McGaw? He had determined to go into the grocery business; had offered to buy the plaintiff's business; he wanted the premises in which to conduct that business; had secured the lease in his own name on the premises then occupied by the company, and had been forced to assign the same to the plaintiff; he had talked to Hopper and Warden about his plan; Warden was his brother-in-law and both had been employed by the defendant in the plaintiff's store, and the three had been dismissed from its employment shortly before the offer was made. Warden expected to go with Mr. McGaw when he opened his new business, and Hopper did become a member of the firm of Hopper, McGaw Company which was formed on the 1st of February, 1906. What conclusion would men familiar with the practical affairs of life draw from such facts? Would an experienced business man pledge his financial responsibility to start a rival business to his own? Could it not be well argued from the facts disclosed from this record, in the absence of all testimony to the contrary, that this offer was really made in behalf of the defendant, and might not a jury have so found? We think they might reasonably have so concluded. We are of the opinion that, apart from the excluded testimony, there was evidence legally sufficient to have taken the case to a jury, and for error committed in granting the defendant's prayer the judgment must be reversed.

The declaration, which was not demurred to contains only one count, but embraces two distinct causes of action. But it may be amended before the re-trial, so that each count may embrace only one cause of action, and thus avoid the vice of duplicity which is apparent in the present narr.

We cannot approve of the form of the defendant's prayer, which we have transcribed in full in the early part of this opinion. It is provided by Article 5, § 9, Code 1904, that "in no case shall the Court of Appeals decide any point, or question which does not plainly appear by the record to have been tried and determined by the Court below." This prayer is too general and indefinite. It raises no definite point or question for the decision of the Court. It asserts that the plaintiff had offered no evidence legally sufficient to support "the material averments" of the declaration. What material averments. It points out none. All are supposed to be material. It points out no particular ground essential to the plaintiff's right to recover wherein there has been a failure of proof. It is not a demurrer to the evidence, but is directed to some failure of proof upon some point which it does not disclose. It is too indefinite to present any question for decision by this Court, and should have been refused.

The record contains four exceptions to the action of the Court in excluding certain testimony. The first exception was abandoned. The second and third were taken under the following circumstances. The plaintiff offered to prove by John N. Steele that while negotiations were going on with the trustees and before the lease was executed Mr. Lanahan called him up and asked him to come to see him. He testified that he went to see Mr. Lanahan and that he "told me that the matter of the lease could be adjusted if the Acker, Merrall and Condit Company would either renew its contract with Mr. McGaw, or pay him the balance of his salary from the time of his resignation down to the time — I think it was the first of the following April when his contract expired, that the approval of the trustees to the assignment of the lease at $8,000.00 a year would be obtained." It further offered to prove by John T. Harwood that he called on Mr. Lanahan in reference to the offer made by Hopper and Warden, and that Mr. Lanahan stated "that he thought the Acker, Merrall and Condit Company and Mr. McGaw ought to get together, and not engage in a bad piece of litigation down here in Baltimore, and that if the company would renew Mr. McGaw's contract as manager at $10,000.00 a year that expired in the following April, the offer made to the trustees by the other parties would be withdrawn."

Two facts are here apparent, first, that the offer of Mr. Lanahan was made for the purpose of compromising or settling the existing difference between the parties; secondly, that the statement made by him in that connection and as a part of the offer, and as an inducement to its acceptance, that if his proposition were agreed to the offer made by the other parties would be withdrawn, would if admitted, tend directly to fix a liability upon the defendant under the issues in this case. The statement as to the withdrawal of the offer was made in order to induce a compromise of pending troubles, and must be governed by the general rule which render admissions made under such circumstances inadmissible. In Biggs Company v. Langhammer,103 Md. 102, we said in an opinion delivered by JUDGE PEARCE: "The rule is well settled that "offers by a party with a view to compromise, to pay or to accept a sum of money, or to make deductions, and in general to secure a settlement, are inadmissible, and though there are some cases which hold that such offer is admissible, unless stated to be without prejudice, yet the prevailing rule is that the offer will be presumed to have been made without prejudice." There is an exception to this rule under which admissions of particular facts may be received. This exception is stated and applied by this Court in Calvert v. Friebus, 48 Md. 45, wherein it is held that if an admission of an existing fact be made as a mere concession in order to induce a compromise, it is not receivable in evidence. We, therefore, find no error in the rulings upon the testimony.

There is one remaining question. The four exceptions reserved by the plaintiff have been embodied in one bill of exceptions. The mode of presenting the questions reserved for review while approved in a number of States, has never been sanctioned here, and the presentation of more than one question of law in one bill of exceptions was characterized by this Court in Tall v. Steam Packet Company, 90 Md. 250, "as an unusual and an erroneous way to present such essentially distinct propositions," although the Court did not refuse to consider the case because of this irregularity. We will not dismiss the case upon this ground, but we must express our entire disapproval of the method pursued, and express the hope that it will be hereafter abandoned.

Judgment reversed, and new trial awarded, the appellee to paythe costs.