Cleaves v. Sharp & Dohme, Inc.

• Decision Date: 02 March 1934
• Docket Number: 27.
• Citation: 171 A. 374,166 Md. 546
• Parties: CLEAVES v. SHARP & DOHME, INC., ET AL.
• Court: Maryland Court of Appeals

171 A. 374

166 Md. 546

CLEAVES v. SHARP & DOHME, INC., ET AL.

No. 27.

Court of Appeals of Maryland

March 2, 1934

Appeal from Baltimore City Court; Samuel K. Dennis, Judge.

Action by Lincoln L. Cleaves against Sharp & Dohme, Inc., and another. Judgment for defendants, and plaintiff appeals.

Affirmed.

Argued before BOND, C.J., and URNER, OFFUTT, DIGGES, PARKE, and SLOAN, JJ.

Isaac Lobe Straus, of Baltimore, for appellant.

Vernon Cook and Charles Markell, both of Baltimore, for appellees.

BOND Chief Judge.

The appellant sued the appellees for compensation for services in connection with a consolidation or merger of the properties of Sharp & Dohme, Inc., and a corporation of the state of Pennsylvania known as the H. K. Mulford Company; the trial court, on appellant's demurrers to the defendants' pleas, found the declaration demurrable, and judgment was thereupon duly entered for the defendants. The declaration itself was merely one on the common counts in assumpsit, but it has been amplified by a third amended bill of particulars and, as so amplified, is the subject of inquiry on this appeal. The sufficiency of the cause of action thus particularized is first in question (Nelson v Close, 147 Md. 214, 216, 127 A. 751), and, should the declaration be found sufficient, then the demurrer to the pleas would remain to be passed upon.

The pleader here has not followed the ordinary practice of alleging only ultimate facts to be proved, but has elaborated the bill of particulars to include many circumstances, with much repetition, so that the result, spread over sixteen pages, and itself added to with a prospectus of seven pages is a presentation the sum and substance of which are not easily worked out. To a greater extent than usually it appears necessary to interpret general words used in allegations by events alleged and by the relationship outlined. Only a much-condensed summary can be attempted in an opinion.

The Sharp & Dohme corporation, of the state of Maryland, and the Mulford Company, of Pennsylvania, were two manufacturers of pharmaceutical and biological products. In the year 1928, some forty other organizations in the same business combined their resources and threatened Sharp & Dohme with competition that was new and formidable. The plaintiff, Cleaves, of New York, who was familiar with this business, was, in September, 1928, impressed with the seriousness of the threat to Sharp & Dohme, and conceived a plan of combining that organization with those of certain other business concerns or houses in the same field, including the Mulford Company, and through a Baltimore acquaintance of Dr. A. R. L. Dohme, now one of the appellees, secured an appointment and interview with Dr. Dohme. Dohme was president, director, chief executive, general manager, and majority and controlling stockholder of his corporation, and was authorized and empowered to contract for the corporation as it is alleged he did contract in this case. The plaintiff enlisted the aid of a firm of bankers of New York, and with one of them laid his plan before Dohme and A. Homer Smith, vice president of Sharp & Dohme, who had the same authority to contract for the corporation. The plaintiff's plan was that a new corporation of the same name be formed, with new issues of preferred and common stock, that the stock should be listed on the New York Stock Exchange, and then with the values given it be used to buy stock of the Mulford Company from its stockholders, and retire that stock and the stock of the older Sharp & Dohme corporation. Dr. Dohme was to be secured a controlling interest in the new corporation. Dohme and Smith "instructed, requested and directed" the plaintiff and his associated banker to work out and furnish them details of that plan, and the plaintiff and his associate did so, expending time and labor on it; and Dohme and Smith "approved and agreed" to the plan, and "instructed, requested and directed" the plaintiff to proceed in the effort to effect the combination, and efforts were made accordingly, and they were accepted, adopted, and utilized by the defendants. The associated banker consulted a banker in Philadelphia who was in a position of influence with the Mulford Company stockholders, but the Philadelphia banker finally exhibited an unfriendly attitude. Thereafter, and until May, 1929, the defendants, "continued to support and encourage" the efforts of the plaintiff and his associated bankers, accepting their labors, and Dr. Dohme declared that Sharp & Dohme would be ready to make the combination after the summer vacation.

In July of 1929, the defendants, through a group of bankers of Baltimore, Philadelphia, and New York, with whom the plaintiff had no connection, entered into a combination with the Mulford Company, on the plaintiff's plan, at least to the extent that a new corporation under the name of Sharp & Dohme was formed to acquire the properties of the two corporations. The stock of Sharp & Dohme, the older corporation, was not retired merely upon an exchange for stock in the newer one, but was bought with new stock and $150 in cash for each share. The financial structure on which the combination was based was elaborate. The new corporation was given an authorized capital of 500,000 shares of preferred stock, divided into series, and 2,000,000 shares of common stock, all of no par value. Of one series of the preferred stock, 162,500 shares, and of the common stock, 260,000 shares, were issued for cash, and the proceeds of $13,500,000, together with 225,000 shares of common stock were issued to the stockholders of the older Sharp & Dohme corporation, providing a payment of $150 in cash, as stated, and two and a half shares of common stock of the newer corporation for each share of the older acquired. For acquisition of the Mulford Company stock, 30,400 shares of the new preferred stock and 110,700 shares of the new common stock were converted into $3,709,004 in cash, and that amount, together with 36,186 of new preferred shares and 180,927 of the new common shares providing $61.50 in cash, three and three-fifths preferred shares and three common shares for each share of the Mulford Company. Dr. Dohme did not receive a majority of the new stock, but, along with a large amount in cash, received 26.09 per cent. of the preferred stock and less than 21 per cent. of the common stock. Mr. Smith, who had during fourteen years prior to his connection with Sharp & Dohme been connected with the Mulford Company, became president of the new, combined corporation. The combination is alleged to have redounded greatly to their benefit and to that of the corporation now sued, both in cash and in stock of the new corporation and otherwise. The new corporation, it is alleged, assumed all obligations of the older, including that to the plaintiff.

The pleas of the defendants, now appellees, denied any engagement of the plaintiff, and alleged that his existence was not even known to any other directors of the corporation sued. The objection on demurrer to these pleas seems to be that they amount to general issues.

The principles controlling need not be repeated at great length. An intermediary may, of course, be used in the negotiation of a contract or a dealing of any kind in any one of a variety of ways or upon any terms the principal and the intermediary agent may choose. They may agree merely that the agent shall do work for the principal in an effort to accomplish the result sought, with remuneration to be paid whether the result is accomplished or not. That is a familiar basis of employment of attorneys at law. And it may be arranged by express contract, or the obligation to pay may be implied from circumstances from which an expectation of payment may be inferred. Brantly, Contracts (2d Ed.) 21; Page v. Penrose, 147 Md. 225, 127 A. 748. On the other hand, the arrangement may be that the agent is to earn compensation only by procuring the result. And that is the ordinary arrangement with commission agents and brokers. Commissions to be earned by them are ordinarily to recompense them for all efforts and outlays, and they...