Baltimore Harbor Charters, Ltd. v. Ayd

• Decision Date: 12 September 2001
• Docket Number: No. 114,114
• Parties: BALTIMORE HARBOR CHARTERS, LTD., v. Frank Joseph AYD, III.
• Court: Maryland Court of Appeals

780 A.2d 303

365 Md. 366

BALTIMORE HARBOR CHARTERS, LTD., v. Frank Joseph AYD, III.

No. 114, Sept. Term, 2000.

Court of Appeals of Maryland.

September 12, 2001.

Reconsideration Denied October 10, 2001.

C. William Michaels, Baltimore, for petitioner.

Steven D. Shemenski (Turnbull, Mix & Farmer, on brief), Towson, for respondent.

Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL, and BATTAGLIA, JJ BATTAGLIA, Judge.

Petitioner Baltimore Harbor Charters, Ltd. challenges the decision of the Court of Special Appeals, Baltimore Harbor Charters v. Ayd, 134 Md.App. 188, 759 A.2d 1091 (2000), which ordered a new trial on the issue of whether BHC violated the Maryland Wage Payment and Collection Law, Maryland Code, § 3-501, et seq. of the Labor and Employment Article (1991, 1999 Repl.Vol.), with regard to a former employee and former shareholder of BHC, respondent Frank Joseph Ayd, III (hereinafter "Ayd").

I. Facts

In 1983, Ayd, who had a long-standing interest in boating and mechanics, purchased Summer Flight, a fifty-three foot Pacemaker boat. After a five year period of repair and restoration, Summer Flight finally received certification by the United States Coast Guard, permitting it to be used in a charter boat business in the Baltimore and Annapolis area. In 1989, Ayd and a friend, Suzanne Edwards, formed Baltimore Harbor Charters, Ltd. ("BHC"), to which Ayd's new wife, Carol, acceded as a shareholder and board member in 1991. In the same year, pursuant to an informal action of the Board of Directors of BHC, Ayd was "employed to perform management and consulting services on a part-time basis for the Corporation in consideration of the sum of $200.00 per month, payable monthly until terminated by him or the Corporation on ninety (90) days notice."

By 1993, the Ayds began divorce proceedings, precipitating an effort to sell their respective interests in BHC. Additionally, Edwards had resolved to leave BHC. During the same period, Robert Berman, a high school friend of both Ayd and his brother, was attempting to explore new investment opportunities. He purchased all of the outstanding shares of common stock of BHC from Ayd, Carol Ayd, and Suzanne Edwards for approximately $3,500. The purchase of the common stock of BHC, however, did not include use of Ayd's boat, Summer Flight, in the charter boat business.

In the Spring of 1994, Berman purchased a seventy-five foot yacht, The Wrecking Crew, for $365,000 from a boat dealer in Fort Lauderdale, Florida, to be used in BHC. Ayd organized and performed substantial improvements to The Wrecking Crew, later renamed The Royal Blue, in order to bring the vessel within the appropriate standards for Coast Guard certification and prepare it for use in the charter business.

After the purchase of the stock of BHC, Berman became Vice President of BHC, named Ayd as President and Treasurer of the company, and made Rita O'Brennan, Ayd's sister, the Corporate Secretary. Throughout the transition of ownership of BHC, Ayd continued to perform the same managerial and consulting functions he had performed for BHC since the time of the company's formation in 1989. From the winter of 1994 until August of 1996, Ayd was the sole signatory on BHC's checking account. Berman, however, believed that during this time period he was also an authorized user of the account.

Both BHC and Ayd agreed that from the time Berman purchased BHC in February 1994 to the day Ayd resigned from the corporation, Ayd was entitled to compensation in the amount of a $200 captain's fee per charter and a $200 per month administrative fee.¹ Ayd, however, asserted that pursuant to an "Informal Action of the Board of Directors of Baltimore Harbor Charters, Ltd.," which was memorialized on February 25, 1994, he was to be paid the sum of $576.92 per week for management, consulting and other services, as well as for performing his functions as President and Treasurer of BHC.² The original executed document, which was to be placed in the minute book of the corporation following its execution, was not located at the time of trial in this matter. Berman maintained that the informal action of the board on February 25, 1994 never took place. A copy of the executed document was produced by Rita O'Brennan pursuant to a BHC subpoena in November of 1997.³

Under the terms of the informal board action of February 25, 1994, Ayd did, in fact, receive six payments of the $576.92 salary for his services in the winter of 1994. BHC, however, did not have an adequate cash flow thereafter, which resulted in Ayd being paid only sporadically for his administrative services and captain's fees and not receiving any further payments of the $576.92 weekly salary.

In March of 1994, Ayd's boat, Summer Flight, which also served as his residence, had to go into drydock for repairs. Berman gave Ayd permission to stay onboard The Royal Blue, because Ayd was without funds and needed a place to live. Pursuant to this oral arrangement, Ayd designed and built small living quarters onboard The Royal Blue. Berman never objected to the modifications made by Ayd to The Royal Blue, nor did he ask Ayd for payment for living on the boat. At trial, however, Berman asserted that Ayd's residence on The Royal Blue served as a form of compensation for his services. BHC continued to experience financial difficulties throughout 1995 and 1996. In August of 1996, Ayd received a letter from Berman explaining that Berman would be taking over the financial operation of BHC. Berman stated that he began asking Ayd for the company's books in the Spring of 1996, but perceived that Ayd was stalling him by not turning them over. Ayd asserted that prior to receiving the August 1996 letter, he received no indication that Berman was displeased with his work for the company. In late August of 1996, Berman closed the existing bank accounts for BHC and opened a new account without Ayd as a signatory.

After futile attempts to resolve their differences, Ayd sent a letter to Berman on August 26, 1996, indicating that if the two could not arrive at a mutual agreement by September 9, 1996 at 9:00 pm regarding the future of Ayd's position in the company, then Ayd would resign from BHC. The parties had one meeting to discuss Ayd's continued employment with BHC, with the issue of Ayd's salary being a point of contention. The parties failed to reach an agreement, and Ayd terminated his employment with BHC, as promised, on September 9, 1996. When he left BHC, Ayd took with him his personal effects, tools and other belongings which he had brought onto The Royal Blue from his boat, Summer Flight, as well as materials he had installed onto The Royal Blue from Summer Flight so that The Royal Blue could use the boating slip Ayd rented for Summer Flight.

On July 9, 1997, Ayd sued BHC in the Circuit Court for Baltimore City, alleging breach of contract, quantum meruit, unjust enrichment, and a claim for unpaid wages in violation of the Maryland Wage Payment and Collection Act, (the "Wage Act"), Md.Code, Lab. & Emp. § 3-501 et seq. (1991, 1999 Repl.Vol.). The complaint alleged that Ayd had only been paid a total of $9,861.55 in salary and administrative fees during the period of February 1994 to September 9, 1996. He alleged that he was entitled to payment of the $576.92 weekly salary as specified in the informal action of the board, as well as unpaid tip fees of $40.00 (twenty percent of the crew fee) per charter trip that he captained. Ayd sought a total of $81,187.28 in unpaid wages under his breach of contract claim, treble damages totaling $243,561.84 under the Wage Act, and $300,000 on his claims of unjust enrichment and quantum meruit. BHC filed a counterclaim against Ayd alleging breach of a fiduciary duty, conversion, and trespass to chattels.

On January 13, 1999, a four-day jury trial began. At the close of Ayd's case-in-chief, both Ayd and BHC presented motions for judgment pursuant to Md. Rule 2-519 (1999), which were denied, with the exception of BHC's motion regarding Ayd's claims under the Wage Act. The trial court reserved decision on the Wage Act claim. Prior to instructing the jury, the trial judge ruled on the reserved issue and dismissed Ayd's claim under the Wage Act, stating as follows:

Alright [sic]. The Court is going to dismiss the Count. It's in the Court's view that the statute was not designed to cover the situation as outlined in the Plaintiff's case. The statute contemplates (1) a regular pay period, (2) where an employee is generally paid bi-weekly, and (3) in check or currency. In a light most favorable to the Plaintiff, the facts in this case show, that there was no regular pay periods. The Defendant controlled the, excuse me. The Plaintiff controlled the Defendant's accounts up to and including the date, in 1996, when the Defendant took over the books. He had the, he being the Plaintiff, had the control to write payroll checks himself and to pay himself whenever the cash was available. His testimony is that he voluntarily deferred during the time that he worked with Baltimore Harbor Charters, did not take any commissions or tips which may have been due him, voluntarily. The only thing of value that was consistently used during the period of 1994 to 1996 was a place to stay. That is the charter boat itself, and it is the view of this Court that these are not the facts, the types of situations that were covered by the wage and hour law. Therefore, I'm going to dismiss Plaintiff's Count II.

The jury returned a verdict in favor of Ayd on his breach of contract claim and unjust enrichment claim, awarding him $76,099.33 on each count. The jury returned a verdict in favor of BHC on the breach of fiduciary duty claim in the amount of $4,000.00.

In response to the jury award, BHC filed a motion for a new trial, judgment notwithstanding the verdict, and remittitur. A hearing was held on the motions on February 26, 1999. The trial judge...